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Domini Impact Bond Fund sm

Fund Information

$11.14
Daily Price (NAV)
as of 04/25/2017
Symbol DSBIX
Daily NAV Change $-0.04 (-0.36%)

Key Documents

Overview

Institutional Shares Overview​

Institutional shares are available to qualified endowments, foundations, religious organizations, nonprofit entities, individuals and certain corporate or similar institutions that meet the minimum investment requirements.

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 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

  • The Institutional share class of the Domini Impact Bond Fund is available to investors that meet the minimum investment requirements, have been approved by the distributor, and fall within the following categories: endowments, foundations, religious organizations and other nonprofit entities, individuals, retirement plan sponsors, family office clients, private trusts, certain corporate or similar institutions, or omnibus accounts maintained by financial intermediaries.**
  • 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

Institutional Shares Performance
 

Month-End Returns as of 3/31/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (6/1/00)*
DSBIX0.96%1.40%2.31%1.76%3.45%4.23%
Bloomberg Barclays U.S. Aggregate0.82%0.44%2.68%2.34%4.28%5.20%

Quarter-End Returns as of 3/31/17
YTD1 Yr3 Yr*5 Yr*10 Yr*Since Inception (6/1/00)*
DSBIX0.96%1.40%2.31%1.76%3.45%4.23%
Bloomberg Barclays U.S. Aggregate0.82%0.44%2.68%2.34%4.28%5.20%

Calendar Year Returns
DSBIXBBUSA
20163.66%2.65%
2015-0.17%0.55%
20143.87%5.97%
2013-1.76%-2.02%
20122.89%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
DSBIXBBUSA
1st Qtr 20170.96%0.82%
4th Qtr 2016-3.15%-2.98%
3rd Qtr 20161.24%0.46%
2nd Qtr 20162.43%2.21%
1st Qtr 20163.21%3.03%
4th Qtr 2015-0.53%-0.57%
3rd Qtr 20151.32%1.23%
2nd Qtr 2015-2.00%-1.68%
1st Qtr 20151.08%1.61%
4th Qtr 20141.06%1.79%
3rd Qtr 2014-0.02%0.17%
2nd Qtr 20141.43%2.04%
1st Qtr 20141.36%1.84%
4th Qtr 2013-0.22%-0.14%
3rd Qtr 20130.66%0.57%
2nd Qtr 2013-2.16%-2.32%
1st Qtr 2013-0.03%-0.12%

*Average annual total returns.

Institutional shares were not offered prior to 11/30/11. All performance information for time periods beginning prior to that date is the performance of the Investor shares, which has not been adjusted to reflect the lower expenses of the Institutional shares.

Annual Expense Ratio: Gross: 1.22% / Net: 0.63%. Per current prospectus. Domini has contractually agreed to cap Institutional share expenses to not exceed 0.65% 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 3/31/17
ISSUER% OF PORTFOLIO
Fannie Mae TBA 30 YR (3.5% due 4/13/2047)4.6%
Fannie Mae (1.5% due 6/22/2020)3.6%
Freddie Mac TBA 30 YR (3.5% due 4/13/2047)3.5%
Fed Hm Ln PC Pool G08741 (3.0% due 1/1/2047)2.8%
Fannie Mae (5.625% due 7/15/2037)2.2%
Fannie Mae pool BC1171 (3.5% due 6/1/2046)1.7%
Fannie Mae pool AN4301 (3.15% due 1/1/2027)1.4%
Fannie Mae TBA 15 YR (2.5% due 4/18/2032)1.3%
Fannie Mae Pool 471333 (3.12% due 8/1/2022)1.3%
Freddie Mac TBA 30 YR (4% due 5/11/2047)1.3%
TOTAL23.6%
Sector Weightings as of 3/31/17
SECTOR% OF PORTFOLIO
Mortgage Backed Securities48.8%
Investment Grade Credit30.9%
Commercial Mortgage Backed Securities6.6%
Bank Loans6.4%
U.S. Govt Agencies6.1%
High Yield Credit3.7%
Developed Non U.S. Dollar Denom.2.9%
Tax Exempt Municipal1.8%
Asset Backed Securities1.0%
Cash & Cash Equivalents-8.2%
Total100%

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

Characteristics

All data as of 12/31/2016 unless otherwise noted.

Portfolio Composition by Credit Quality1

Aaa 6.07%
Aa 61.19%
A 7.96%
Baa 21.01%
Ba 7.25%
B 2.80%
Below B 0.27%
Cash & Cash Offsets2 -8.19%
Not Rated3 1.63%

Portfolio Statistics

  DSBIX BUSA4
Avg. Effective Maturity (Yrs.) 8.90 8.02
Total Number of Holdings5 370 10,171
 
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. Barclays U.S. Aggregate Index
5. Excludes currency forwards, currency futures, currency options and cash offsets.
 

Commentary

Institutional 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 December 31, 2016

  Oct
2016
Nov
2016
Dec
2016
4th Qtr
2016
YTD One
Year
Three
Year*
Five
Year*
Ten
Year*
Since Inception
(6/1/00)*
DSBIX -0.86% -2.36% 0.05% -3.15% 3.66% 3.66% 2.44% 1.67% 3.51% 4.25%
BBUSA -0.76% -2.37% 0.14% -2.98% 2.65% 2.65% 3.04% 2.24% 4.35% 5.23%

Market Overview

Bond markets suffered one their largest-ever quarterly losses in the fourth quarter. Global sovereign yields rose, led by US Treasuries, as expectations that then President-elect Trump’s fiscal policies might prove expansionary bolstered inflation expectations. Credit markets gained and spreads tightened amid optimism regarding the prospect of an incoming US Administration and Congress promising to promote tax reform and deregulation.
 
During the fourth quarter, central banks adopted policy that was moderately less accommodative. The Fed hiked rates for only the second time in ten years and, while markets had largely anticipated the decision, the Fed’s post-meeting statement and press conference proved more hawkish than expected. While the Bank of England maintained the pace of its asset purchase program and disappointed by moving from an easing bias to a more neutral stance, the Bank of Japan (BOJ) introduced no additional easing measures and affirmed its target of a zero yield on 10-year Japanese government bonds. The European Central Bank (ECB) indicated that it would reduce its bond purchasing by 20 billion euros per month after March 2017.
 
US economic data released in the fourth quarter signaled continued strength in the labor and housing markets, and domestic consumer spending increased. Even in the face of heightened political uncertainty, European data proved strong amid improved global growth and improving labor market conditions. The industrial cycle accelerated to its fastest pace in five years. Growth in the service sector slowed but remained high, pointing to still-solid domestic demand. In Japan, bank attitudes toward lending remained open, supporting domestic demand growth.
 

Performance Commentary

In the fourth quarter, the Fund’s subadvisor, Wellington Management, held modest opportunistic interest rate positions, which had a negative impact on the Fund’s relative performance. The Fund was positioned for rising inflation expectations as the Fund’s subadvisor believed that over the longer-term markets were pricing in unrealistically low inflation assumptions. This positioning benefitted relative returns, as inflation expectations rose sharply following Trump’s victory, in light of his proposed expansionary fiscal policy at a time of full employment.

The Fund held neutral positioning in investment grade credit (corporate bonds) during the quarter as the Fund’s subadvisor believed there were better opportunities outside the sector. Within investment grade corporates, the Fund continued to be positioned overweight to US financials, and the Fund also held an overweight to taxable municipals. The investment grade credit sector outperformed on an excess return basis for the quarter, with corporate spreads tightening amid optimism regarding proposed fiscal stimulus and corporate tax relief under a Trump administration. During the quarter, the Fund’s positioning in credit detracted from relative results stemming from an underweight within the energy sub-sector. An overweight in the portfolio to taxable municipals was a positive contributor to relative performance.
 
Over the course of the fourth quarter, the Fund’s subadvisor held an overweight to agency Mortgage Backed Securities (MBS), believing MBS to be more attractively valued than US Treasuries. The Fund’s subadvisor continued to favor FNMA Delegated Underwriting and Servicing (DUS) bonds. Agency MBS underperformed on an excess return basis due to a spike in interest-rate volatility. Additionally, lower coupons significantly underperformed higher coupons amid heightened extension worries and investors shedding duration into the back-up in rates. Ultimately, the Fund’s overweight to MBS pass-throughs and exposure to FNMA DUS detracted from relative performance.
 
The Fund maintained a modest allocation to agency debt linked to residential mortgages (agency CRT Deals) based on an improving housing market, though the Fund’s subadvisor reduced the Fund’s allocation to agency CRT securities as valuations appeared rich after much of the sector was rated. The sector posted positive total returns for the fourth quarter—even as most other fixed-income sectors lost ground. Strong housing fundamentals and investors’ drive for yield helped bolster returns in both the legacy and CRT markets during the quarter. The Fund’s allocation to agency CRT deals had a neutral effect on relative performance. The Fund held an overweight to high quality Commercial Mortgage-Backed Securities (CMBS) based on positive commercial real estate fundamentals and attractive valuations. Like other credit sectors, CMBS benefited from the Trump-reflation rally and spreads tightened, led by lower rated (BBB) issuances. The Fund’s positioning in high-quality CMBS was additive to relative results.
 
The Fund’s subadvisor continued to favor bank loans based on attractive valuations and low default expectations and also maintained a modest 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 outperformed most other fixed income sectors amid expectations that Trump’s policy agenda would emphasize pro-growth fiscal stimulus and deregulation. Bank loans also generated a positive total return, benefitting from their floating rate structure amid rising government bond yields and expectations for additional Fed rate hikes. High-yield positioning was beneficial to relative performance as positive results from the Fund’s exposure to bank loans and BB rated high-yield bonds were partially offset by the Fund’s derivative hedges.
 

Community & Environmental Impact

In the fourth quarter, securities Domini characterizes as “high impact” represented 20% of the Fund’s total portfolio. This allocation within the portfolio consisted of holdings addressing the following issue areas:
  • Low-income multifamily housing
  • Economic development, public education and healthcare
  • Climate change adaptation and mitigation
The Fund has a commitment to assisting under-served communities through the purchasing of economic development municipal bonds. In the fourth quarter, we held an investment of over $750,000 (0.5% of the Fund’s portfolio) in a bond issued by the State of California that will be used to finance capital facilities or other voter-approved costs for a wide range of public purposes, including water conservation, coastal protection, children’s hospitals, and public schools.

Making a Difference

The Fund seeks to play a positive role in the economic development of communities, focusing on key themes, including affordable housing, education and climate mitigation. In the fourth quarter of 2015, securities Domini characterizes as “high impact” represented 15.5% of the Fund’s total portfolio. 

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. 

Domini Social Bond Fund Impact (Q4 2015)

In the fourth quarter, securities Domini characterizes as “high impact” represented 15.5% of the Fund’s total portfolio, including bonds to finance affordable housing and high quality healthcare to low-income and at-risk populations. The Fund also purchased a bond issued to finance solar and wind power generation facilities in the U.S. 

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.