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PERA Updates Socially Responsible Investment Fund

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In 2019, mutual funds and ETFs with an ESG focus saw an inflow of more than $20 billion nationwide—nearly quadruple the amount these investment products added the year before. ESG funds (funds whose investment strategy includes environmental, social, and governance [ESG] factors) have increased in popularity during the past decade. At the end of 2019, the value of these funds topped $137 billion. While that number represents only one-tenth of one percent of the $20 trillion invested in all mutual and exchange-traded funds, experts expect ESG growth to continue.

PERA members who have a PERAPlus account have had access to the PERAdvantage Socially Responsible Investment (SRI) Fund since 2011. The fund has two parts: an equity sleeve and a Fixed Income sleeve. Each sleeve screens investments for various ESG factors. At the end of 2019, PERA replaced both of these with products that have a wider reach and a lower cost.

“We went through each of the DC funds to see if there’s a better way to construct each. Our goal was to make each more efficient at a lower cost.” – Jim Liptak, Director of Equities at PERA

The change to the SRI Fund was the latest in a series of updates to PERAPlus Funds. “We went through each of the DC funds to see if there’s a better way to construct each,” said Jim Liptak, Director of Equities at PERA. “Our goal was to make each more efficient at a lower cost.” (In December, PERA On the Issues covered changes to the U.S. Small and Mid Cap Stock Fund).

The SRI Fund was particularly well poised to benefit, as the still emerging ESG market is quickly evolving, giving investors more and better options.

Change to the Equity

One challenge when constructing an ESG fund is choosing which investments count as sustainable or responsible. “Some people have specific issues they’re focused on—but those issues are different for everyone,” Liptak said.

Rather than sort through dozens of industries and tens of thousands of companies, Liptak said his team worked to identify a partner that had a sound methodology, good performance, and low costs when evaluating the SRI Fund’s equity sleeve, which makes up about 60 percent of the fund’s total holdings.

PERA found that partner in BlackRock and its product called the MSCI ACWI ESG Focus Index Fund, which tracks the MSCI ACWI ESG Focus Index. This index is designed to maximize its exposure to high ESG factors.

In addition to preferring this methodology, Liptak said this fund gives investors exposure to emerging markets like China, Brazil, and India, something the other fund did not have. In total, the fund invests in nearly 500 companies. Finally, the costs are lower. Much lower. The annual fees for the equity sleeve of the SRI Fund dropped from 0.30 percent of assets invested to 0.08.

Change to the Fixed
Income Sleeve

Like equities, ESG is a relatively new concept in Fixed Income products. Bessie Conty is PERA’s Manager of Fixed Income and said that the bond market is less diversified than the equity market for ESG products. She said it was exciting to find the product they did, the TIAA-CREF Social Choice Bond Fund.

The SRI Fund had been using a J.P. Morgan Government Bond
fund. Conty said the fund didn’t have exposure to corporate bonds. The new fund
does, bringing with it an increased potential return profile.

The TIAA-CREF fund focuses on bonds that can show ESG achievements in their industries. TIAA-CREF states that the TIAA-CREF fund has helped:

  • Avoid 69.5 million tons of CO2-equivalent
  • Reduce 71,000 tons of air pollutants
  • Save 5.6 million megawatt hours of energy
  • Add 74,000 megawatts of renewable energy
  • Build 48 LEED-certified buildings

Sustainable Investing
and PERAPlus

As Liptak mentioned, some investors may wish to target even
more specific ESG factors, or make investment decisions based on some other
metric that isn’t represented in PERAdvantage Fund options. Liptak said the TD
Ameritrade brokerage window presents the opportunity for PERA members to invest
according to their specific preferences. This window allows members to choose
among thousands of investments offered on TD Ameritrade’s trading platform.

But those who wish to invest in ESG funds might find the SRI Fund meets their needs. The fund’s annual cost to investors is 0.26 percent of assets invested, below the industry average of 0.35 percent. At the end of 2018, PERA members had about $23 million invested in the fund.

Fixed incomeSecurities representing debt obligations and usually having fixed interest payments and maturities. Different types of fixed income securities include government and corporate bonds, mortgage-backed securities, asset-backed securities, and may also include money market instruments.


  1. Paul Williams says:

    This is fantastic. Thanks! It would be great if the published “Fund Information” for the PERAdvantage SRI Fund were accurate. The current (9/30/2019) information shows SRI consisting of 90% bonds and 10% cash which is just wrong! And it still reports that SRI includes HLGAX instead of TSBHX! So I like the changes you’ve made to SRI. But I really wish the website would report accurate data for members.

    • PERA On The Issues says:

      Hi Paul,
      I’m sorry you encountered some incorrect information. I viewed the link you included, which shows that the fund is currently 60% equities, 39% bonds, and 1% cash. I believe the fund information sheets were updated yesterday (PERA updates them quarterly). Perhaps there was a glitch during that switch. If you’re still seeing the 90/10 numbers somewhere, please let me know, and I will look into it.

      As to the fund ticker you mentioned: This fund has six different classes, each with its own ticker symbol. HLGAX is the ticker symbol for institutional class shares, which have lower fees than retail-class shares. PERA can access this lower-cost option and pass the savings on to investors. More information on the various classes here:

  2. sex says:

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