Calvert frequently uses standard index funds, Exchange Traded Funds and selective funds employing enhanced passive strategies to provide targeted portfolio exposure to specific stock selection styles, sectors, capitalization sizes, geographies or benchmarks. We believe that it can be an extremely efficient method of assuring asset class returns within the portfolio without having to engage in difficult stock selection. We can literally build portfolios within portfolios.
Dimensional Fund Advisors (DFA) is an illustration of one of the more important mutual funds families that Calvert uses to integrate passive strategies within its equity portfolios. DFA has been built upon the application of academic research on capital market behavior to the practical world of managing investments. The firm’s approach is firmly rooted in the belief that markets are “efficient,” and investors’ returns are determined principally by asset allocation decisions, not market timing or stock selection. Using the results of its extensive research and computer capabilities, DFA carefully screens the entire universe of publicly traded equities, separating them according to size of capitalization and identifying subsets that satisfy value stock selection criteria. Each fund is designed to focus on a well-defined class or category of equities within the universe. Accordingly, the DFA funds represent a form of enhanced passive investing within our portfolios, and their strategies are designed to capture specific dimensions of worldwide asset class returns having independent sources of risk. Their focus on portfolio engineering distinguishes DFA from both active managers and traditional indexers.
DFA does not distribute its products through direct marketing or conventional broker/dealer firms, and Calvert is one of a limited number of advisors in the country authorized to have access to this unique and highly successful group of funds.