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Domini Impact Bond Fund sm

Fund Information

$11.29
Daily Price (NAV)
as of 07/21/2017
Symbol DSBFX
Daily NAV Change $0.02 (0.18%)

Overview

Investor Shares Overview​

Investment Objective

The Fund seeks to provide its shareholders with a high level of current income and total return.  

Investment Strategy

As a primary strategy, the Fund’s investment approach incorporates Domini’s social and environmental standards. 

The Fund normally invests at least 80% of its assets in investment-grade fixed-income securities, including government, corporate, mortgage-backed and asset-backed securities, and U.S. dollar-denominated bonds issued by non-U.S. entities.  The Fund maintains an effective duration within two years (plus or minus) of the portfolio duration of the securities comprising the Bloomberg Barclays U.S. Aggregate Bond Index­­.

Domini evaluates potential corporate debt instruments against social and environmental standards based on:

  • the businesses in which the issuer engages
  • the quality of its relations with key stakeholders, including communities, customers, ecosystems, employees, investors, and suppliers

With respect to noncorporate debt instruments, the Fund seeks to focus on three key themes:

  • Increasing access to capital for those historically underserved by the mainstream financial community
  • Creating public goods for those most in need
  • Filling capital gaps left by current financial practice

In particular, the Fund seeks noncorporate debt instruments that support:

  • Affordable housing
  • Small business development
  • Community revitalization
  • Rural Development
  • Education
  • The environment
  • Healthcare

Domini may determine that a security is eligible for investment even if its profile reflects a mixture of positive and negative social and environmental characteristics. Please see Domini’s Impact Investment Standards for further details.

Management

The Fund is managed through a two-step process designed to capitalize on the strengths of Domini Impact Investments and Wellington Management Company. Domini sets social and environmental guidelines and objectives for each asset class, and develops an approved universe of companies, and Wellington utilizes proprietary analytical tools to manage the portfolio. Wellington Management Company has been serving as submanager of the Fund since January 7, 2015.  Campe Goodman, CFA, is primarily responsible for the day-to-day management of the Fund, assisted by other members of Wellington Management's US broad market team.

Investor Profile

Who Should Invest

  • Investors seeking a high level of current income and total return
  • Investors seeking exposure to the bond market to diversify their portfolio
  • Investors who wish to support the Fund's responsible investment standards 

Who Should Not Invest

  • Investors unwilling or unable to accept fluctuations in share price due to risks associated with the bond market

Performance

Investor Shares Performance

Month-End Returns as of 6/30/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (6/1/00)*
DSBFX2.42%0.37%2.12%1.60%3.67%4.27%
Bloomberg Barclays U.S. Aggregate2.28%-0.31%2.48%2.21%4.48%5.21%

Quarter-End Returns as of 6/30/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (6/1/00)*
DSBFX2.42%0.37%2.12%1.60%3.67%4.27%
Bloomberg Barclays U.S. Aggregate2.28%-0.31%2.48%2.21%4.48%5.21%
Calendar Year Returns
DSBFXBBUSA
20163.44%2.65%
2015-0.46%0.55%
20143.74%5.97%
2013-1.97%-2.02%
20122.50%4.21%
20115.85%7.84%
20104.74%6.56%
20095.77%5.93%
20085.69%5.24%
20076.00%6.96%
20063.38%4.33%
20051.56%2.43%
20042.81%4.34%
20032.31%4.11%
20028.85%10.27%
20018.34%8.42%

Quarterly Returns
DSBFXBBUSA
2nd Qtr 20171.61%1.45%
1st Qtr 20170.80%0.82%
4th Qtr 2016-3.21%-2.98%
3rd Qtr 20161.25%0.46%
2nd Qtr 20162.36%2.21%
1st Qtr 20163.13%3.03%
4th Qtr 2015-0.51%-0.57%
3rd Qtr 20151.15%1.23%
2nd Qtr 2015-2.07%-1.68%
1st Qtr 20151.01%1.61%
4th Qtr 20141.08%1.79%
3rd Qtr 2014-0.09%0.17%
2nd Qtr 20141.35%2.04%
1st Qtr 20141.36%1.84%
4th Qtr 2013-0.39%-0.14%
3rd Qtr 20130.68%0.57%
2nd Qtr 2013-2.24%-2.32%
1st Qtr 2013-0.02%-0.12%

*Average annual total returns.

Annual Expense Ratio: Gross: 1.11% / Net: 0.85%. Per current prospectus. Domini has contractually agreed to cap Investor share expenses to not exceed 0.95% until 11/30/17, subject to earlier modification by the Fund’s Board of Trustees. See prospectus for details. The Funds’ performance would have been lower had these fees not been waived.

Holdings

Ten Largest Holdings as of 6/30/17
ISSUER% OF PORTFOLIO
Fannie Mae TBA 30 YR (3.5% due 8/14/2047)5.1%
Fannie Mae (1.5% due 6/22/2020)3.2%
Fannie Mae TBA 30 YR (3.5% due 7/25/2046)3.0%
Fed Hm Ln PC Pool G08741 (3.0% due 1/1/2047)2.4%
Ginnie Mae II TBA 30 YR (3.0% due 2/20/2047)2.0%
Fannie Mae (5.625% due 7/15/2037)2.0%
Freddie Mac TBA 30 YR (3.5% due 9/15/2046)1.6%
Fannie Mae TBA 15 YR (3.0%% due 7/18/2032)1.6%
Ginnie Mae II TBA 30 YR (3.5% due 8/21/2047)1.5%
Freddie Mac TBA 30 YR (3.5% due 8/14/2047)1.5%
TOTAL23.9%
Sector Weightings as of 6/30/17
SECTOR% OF PORTFOLIO
Mortgage Backed Securities55.1%
Investment Grade Credit30.7%
Commercial Mortgage Backed Securities7.1%
Bank Loans6.7%
U.S. Govt Agencies6.1%
High Yield Credit2.5%
Developed Non U.S. Dollar Denom.-0.1%
Tax Exempt Municipal2.3%
Asset Backed Securities1.0%
Cash & Cash Equivalents-11.6%
Total100%

View the most recent quarterly holdings report filed with the Securities and Exchange Commission.

 

Characteristics

All data as of 6/30/17 unless otherwise noted.

Portfolio Composition by Credit Quality1

Aaa 6.12%
Aa 67.97%
A 9.25%
Baa 16.65%
Ba 7.07%
B 1.72%
Below B 0.25%
Cash & Cash Offsets2 -11.59%
Not Rated3 2.55%

Portfolio Statistics

  DSBFX BUSA4
Total Number of Holdings5 386 9,348
Years to Worst 9.17 7.88
Effective Duration (years) 5.84 5.88
 
1. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Credit-quality ratings for each issue are obtained from Moody's Investors Service (Moody's) and Standard & Poor's (S&P). When two bonds receive different ratings from Moody’s and S&P, we take the lower of the two ratings into consideration.  Ratings do not apply to the Fund itself or to Fund shares. Ratings may change.
2. May include Cash, Cash Equivalents (defined as issued with 1 year to maturity), Trade Receivables/Payables as of the trade date (not settlement date), STIF Instruments, and derivative cash offsets.
3. Securities that are not rated by either agency are listed as "Not Rated."
4. Bloomberg Barclays U.S. Aggregate Index
5. Excludes currency forwards, currency futures, currency options and cash offsets.
 

Commentary

Investor Shares Performance Commentary

The Fund is managed through a two-step process designed to capitalize on the strengths of Domini Impact Investments and Wellington Management Company. Domini sets social and environmental guidelines and objectives for each asset class, and develops an approved universe of companies, and Wellington utilizes proprietary analytical tools to manage the portfolio. Wellington Management Company has been serving as submanager of the Fund since January 7, 2015.

Dowload Commentary as a PDF.

Total Returns as of March 31, 2017

  Jan
2017
Feb
2017
Mar
2017
1st Qtr
2017
YTD One
Year
Three
Year*
Five
Year*
Ten
Year*
Since Inception
(6/1/00)*
DSBFX 0.17% 0.71% -0.09% 0.80% 0.80% 1.10% 2.03% 1.50% 3.45% 4.23%
BBUSA 0.20% 0.67% -0.05% 0.82% 0.82% 0.44% 2.68% 2.34% 4.28% 5.20%

Market Overview

Global bond markets generated solid gains over the first quarter amid heightened political uncertainty. Robust economic data and continued demand for yield-producing assets supported credit markets, and spreads tightened further. In the US, Republicans’ failure to repeal and replace the Affordable Care Act cast doubt on prospects for other policy agendas, reversing some of the post-election selloff in US Treasuries. The UK took the next step in the Brexit process as Prime Minister May triggered Article 50 – setting the stage for the nation’s departure from the EU – and gilt yields declined. Most currencies strengthened versus the US dollar despite the looming risk of protectionist US trade policies and expectations for additional policy tightening from the Federal Reserve.

Monetary policy developments pointed to continued accommodation outside the US. The Fed hiked rates in March and projected two additional hikes this year. Market participants judged the Fed’s statement after its March meeting as dovish, with one dissenting vote and no mention of tapering mortgage reinvestments. Minutes from the Bank of Japan’s January meeting revealed a commitment to maintain a zero-yield policy on 10-year Japanese government bonds. Meanwhile, the European Central Bank announced its intention to continue the pace of bond purchases at 60 billion euros per month through at least December 2017 and pushed back against the notion of initiating rate hikes prior to the end of quantitative easing.

The US economy demonstrated continued strength with solid employment data and confidence surveys, along with a healthy housing market. European data showed broad-based strength across manufacturing and services sectors despite elevated political uncertainty; the Eurozone’s composite PMI rose to its highest level in nearly six years. In Japan, a weak yen helped export growth, manufacturing expanded, and inflation picked up. China’s economic cycle remains strong, led by construction. Surging imports and stable exports led to the nation’s first trade deficit in three years.

 

Performance Commentary

The Fund’s Investor shares modestly underperformed the Bloomberg Barclays U.S. Aggregate Bond Index for the first quarter, returning 0.80% vs. the benchmark’s 0.82% performance.

In the first quarter, the Fund’s subadvisor, Wellington Management, held modest opportunistic interest rate positions, which had a positive impact on the Fund’s relative performance. The Fund was positioned for rising inflation expectations as the Fund’s subadvisor continued to believe that the market was underpricing inflation expectations. This positioning was neutral for relative performance, as inflation-protected instruments modestly outperformed nominal Treasuries, as markets balanced continued economic strength with heightened political uncertainty, both domestically and globally.

The Fund had an overall underweight position in investment-grade credit during the quarter, as the submanager believed there were better opportunities in other sectors. Within investment grade corporate bonds, the Fund maintained overweight positions in US financials, particularly large money center banks, and in taxable municipals, both of which contributed positively to relative performance. The investment grade credit sector outperformed on an excess return basis for the quarter, as corporate spreads tightened on expectations for the new administration’s “business-friendly” policy agendas, including deregulation. Overall, credit positioning was a positive contributor to relative results for the quarter.

The Fund held an overweight to agency Mortgage Backed Securities (MBS)—which also contributed positively to relative performance for the quarter—as the subadvisor believed MBS to be more attractively valued than US Treasuries (Domini’s Impact Investment Standards prohibit investment in U.S. Treasuries). However, the subadvisor also believes this view is balanced by higher interest rate volatility and risks of more imminent Fed balance sheet reductions. The Fund maintained an allocation to Collateralized Mortgage Obligation (CMO) and FNMA Delegated Underwriting and Servicing (DUS) bonds, which the subadvisor believes have attractive income and convexity profiles.

The Fund held an overweight to high quality Commercial Mortgage-Backed Securities (CMBS) based on attractive valuations. New issue CMBS spreads broadly tightened, but there were dramatic performance differences that were primarily based on retail exposure, given the steady stream of negative headlines emphasizing poor sales trends and store closures at some retailers. The Fund’s positioning in high quality CMBS was neutral for performance this quarter.

The Fund’s subadvisor continued to favor bank loans based on attractive valuations and low default expectations, and maintained an allocation to BB rated high yield issuances. Additionally, the Fund’s subadvisor used high yield derivatives as a source of liquidity and to manage overall portfolio risk. High yield generated strong gains despite heightened political uncertainty, declining oil prices, and tighter monetary policy. Bank loans also generated a positive total return, benefitting from their floating rate structure amid expectations for additional Fed rate hikes and rising rates in the near term. High yield positioning was beneficial to relative performance overall.

 

Community & Environmental Impact

In the first quarter, securities Domini characterizes as “high impact” represented 28% of the Fund’s total portfolio. This allocation consists of holdings addressing the following issue areas:
  • Low-income multifamily housing
  • Economic development, public education and healthcare
  • Climate change adaptation and mitigation
During the first quarter, the Fund initiated a number of new invesments in green bonds, including an investment of almost $400,000 in a green bond issued by the Queensland Treasury Corporation. Proceeds from the bond are expected to be invested in any one or more of the following projects in Queensland, Australia: light rail at the Gold Coast, Moreton Bay rail link, electric trains in South-East Queensland, cycleways, and the Sunshine coast solar farm.

Making a Difference

The Domini Impact Bond seeks to have a positive impact across multiple key themes, including affordable housing, education and climate mitigation. In the second quarter, securities Domini characterizes as “high impact” represented 14.7% of the Fund’s total portfolio.

Domini Social Bond Fund Impact (Q2 2016)

The Domini Social Bond seeks to have a positive impact across multiple key themes, including affordable housing, education and climate mitigation. In the second quarter, securities Domini characterizes as “high impact” represented 14.7% of the Fund’s total portfolio, including the following two examples, which were added to the portfolio during the quarter.

Deepening our Impact – Green Bonds

Although our engagement work has historically focused on corporations, leveraging our rights as shareholders, we are also interested in opportunities to deepen the impact of the Domini Social Bond Fund through engagements with issuers and standard setters.  To date, these engagements have focused on green bonds, designed to finance projects and activities that address climate change or serve other environmentally beneficial purposes.

Policy on Firearms Manufacturers

Domini has a longstanding policy to avoid investment in the manufacturers of weapons, including military weapons and civilian firearms. This policy extends to firms that derive a significant percentage of revenues from the sale of firearms. We believe this industry is inherently damaging to society, due to the intersection between a particularly dangerous product and the extraordinary pressures to maximize profits and increase market share—pressures which are exponentially heightened for publicly traded companies. 

Bond Fund Standards

Fixed-income investments provide an important opportunity to create public goods, address a wide range of economic disparities in our society, and to fill certain capital gaps – funding needs that have often received insufficient attention from investors. We seek to address some of these disparities through the investments of the Domini Social Bond Fund, while simultaneously seeking to achieve competitive returns for our Fund’s investors.