Note: The following is Chad Horning's President's letter from the Praxis Mutual Funds 2023 Annual Report.
In business and in our personal lives, the turning of the calendar fills us with introspection about the year that just passed and draws our focus toward the future with hope and expectation. Summarizing an entire year, with its ups and downs across many dimensions, is an impossible task. Is it even fair to declare that a full year was “good” or “bad”?
In the financial world, of course, we often sum up the year by reviewing the investment performance of prominent benchmarks. Stocks, as measured by the S&P 500 Index, rose 26% during the year while bonds, measured by the Bloomberg U.S. Aggregate Bond Index, rose 5.5%. Such strong performance was anything but assured at various points during the year. Recall that in early March, the U.S. banking industry came under heavy scrutiny as Silicon Valley Bank and a few others failed when depositors ran for the exits at the same time. This panic resulted from a quick rise in interest rates that drove down the value of banks’ bond and mortgage portfolios. An assessment of the year from the March vantage point would have been decidedly “bad”.
However, as the year progressed, the fortunes of investors turned positive as large technology companies captured investor enthusiasm. Later in the year leadership spread to other industries, lifted more stocks into positive returns. Bond investors were also rewarded for their patience in the face of interest rate volatility. As late as mid-October, major corporate bond indexes were down more than 3% for the year before surging more than 9% during the rest of the year, breaking a two-year streak of negative returns.
Also on the “good” side of the ledger, investors continued to express their desire to integrate their values into their investments even in the midst of a cultural and political debate on the merits of applying environmental, social and governance factors into investment decision-making. For Praxis Mutual Funds, as we approach the 30th anniversary of the fund family and our flagship Impact Bond Fund, this support played out in the form of near-record net inflows into the funds. It was the tenth straight year that contributions to the funds outpaced redemptions. Inflows into the Impact Bond Fund outpaced the other funds, presumably due to investor expectations that the reset in interest rates in 2022 set bonds up for better prospective returns.
In addition to the investment excellence we strive for, the Praxis team carried your values into our work through the full range of ImpactX strategies we employ. These strategies are intended to ensure that the funds placed with us make a real-world difference to the planet and its people. ImpactX includes screening, corporate engagement, impact bonds, values-driven proxy voting and more with the companies in which we invest. Our goal is to ensure companies understand and address the very real risks of climate change, inequality, and poor governance. This is good for business, for investors, and it’s good for the global community we share with each other.
It would be inaccurate to suggest that nothing challenging happened during the year, but from this vantage point, it was a good year – maybe a very good year – for Praxis Mutual Funds. We are grateful for the steadfast support we’ve received from advisors and shareholders that makes this success possible.
We look forward to continuing to serve you by providing practical investment solutions that make a real-world impact.