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Fund Overview: Objective, Strategy and Holdings

The Social Values Choice Bond Fund (SVCBF) seeks to earn current income while preserving capital by primarily investing in a diversified mix of fixed-income instruments issued by entities that fulfill investor preferences for a heightened focus on corporate environmental and social performance. The fund invests primarily in fixed income securities such as U.S. and non-U.S. government bonds, agency bonds, corporate bonds and securitized products.

The Fund generally does not invest in companies that derive more than 10% of their revenue from gambling or from the manufacture, sale or distribution of alcoholic beverages, tobacco-related products, adult entertainment, weapons, or the management or operation of prison facilities.

Fund Managers

The following individuals are responsible for the selection and monitoring of external asset managers:

Frank Holsteen Image

Frank Holsteen

Managing Director, Investment Management

  • With Wespath since 2012
  • B.A. from Lake Forest College
Connie Christian portrait

Connie Christian, CFA

Manager, Fixed Income

  • With Wespath since 2023
  • B.S. in finance from Xavier University
  • MBA from Xavier University

Management

SVCBF excludes specific companies subject to annual conference resolutions concerning peace in the Middle East. In addition, the Fund excludes companies that derive a significant amount of revenue from involvement in the fossil fuels industry. Both the Fiduciary Committee and UMC Principles Committee of Wespath's board of directors have approved these additional exclusions.

Like Wespath’s other funds, SVCBF does not invest in companies that derive more than 10% of their revenue from gambling or from the manufacture, sale or distribution of alcoholic beverages, tobacco-related products, adult entertainment, weapons, or the management or operation of prison facilities.

External Asset Managers

* Signatory to the United Nations Principles for Responsible Investment

 

Please refer to the Investment Funds Description – P Series for a detailed description of the investment strategies used in managing the Fund.

Fund Performance 1,2,3, Net-of-Fees (as of 12/31/2023)

  3 mo YTD 1 yr 3 yr 5 yr 10 yr
Social Values Choice Bond Fund 6.73% 6.75% 6.75% -2.90% 2.02% -
SVCBF Benchmark 6.65% 6.51% 6.51% -3.00% 1.80% -

Footnotes

Wespath Benefits and Investments (“Wespath”) is a general agency of The United Methodist Church, a 501(c)(3) tax-exempt organization. Wespath administers benefit plans and together with its subsidiaries, UMC Benefit Board, Inc. (“UMCBB”) and Wespath Institutional Investments LLC (“WII”) invests (or provides back-office services for) assets on behalf of benefit plan participants and beneficiaries, plan sponsors and other institutions controlled by, affiliated with or related to The United Methodist Church (the “Church”). For GIPS compliance purposes, the Firm referenced herein is defined to include Wespath, UMCBB and WII (“Firm”).

Wespath claims compliance with the Global Investment Performance Standards (GIPS®). GIPS is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To obtain a copy of Wespath’s GIPS Report, please call us at 1-847-866-4100 or e-mail us at [email protected].

1 The performance shown is for the stated time period only, is computed in U.S. Dollars (USD) and reflects time‐weighted returns. Historical returns are not indicative of future performance. Investment performance is presented net-of-fees. See Risks and Disclosures for more information regarding fees, including how fees are reflected in performance. The investments of the Fund may vary substantially from those in the applicable benchmark. Benchmarks are based on broad-based securities market indices, which are unmanaged, cannot be invested in and are not subject to fees and expenses typically associated with investment funds. Investments cannot be made directly in an index. The bar chart and tables were produced using data from sources believed to be accurate. The bar chart and tables assume reinvestment of dividends, interest and other distributions. This information is for informational purposes only and is not an offer to purchase securities.

2 Please refer to the Investment Funds Description – P Series for more information about the Fund. The investment funds are neither insured nor guaranteed by the government.

3 Benchmark descriptions can be found here.

Allocations

Holdings-Based Sector Allocations as of December 31, 2023
  SVCBF % SVCBF Benchmark % Difference %
U.S Treasuries 27.0% 46.1% -19.1%
U.S. Government -10.3% 1.0% -11.3%
U.S. Corporate 33.2% 25.3% +7.9%
Non-U.S. Government 2.1% 4.8% -2.7%
Non-U.S. Corporate 12.2% 8.8% +3.4%
High Yield 2.6% 5.3% -2.7%
Emerging Market Debt 5.1% 5.6% -0.5%
Mortgage-Backed Securities (MBS) 19.9% 0.0% +19.9%
Asset-Backed Securities (ABS) 3.8% 0.0% +3.8%
Commercial Mortgage-Backed Securities (CMBS) 0.8% 2.4% -1.6%
Term Loans 0.0% 0.0% 0.0%
Affordable Housing - Wespath PSP 0.0% 0.0% 0.0%
Collateralized Mortgage Obligations (CMO) 0.0% 0.0% 0.0%
Other 3.6% 0.7% +2.9%

 

Characteristics

Fund Characteristics as of December 31, 2023
  SVCBF SVCBF Benchmark
Effective Duration 5.72 6.02
Effective Convexity -0.05 0.75
Yield to Worst1 5.07% 4.85%
Effective Maturity 7.79 8.56
Average Quality A A+

1 Does not reflect the deduction of fees.


Fund Distribution by Credit Quality as of December 31, 2023
  SVCBF SVCBF Benchmark
AAA 6.9% 4.8%
AA 32.0% 52.4%
A 18.7% 16.6%
BBB 31.4% 18.1%
BB 5.7% 3.8%
B 1.5% 3.2%
< B 3.8% 1.1%
NR 0.0% 0.0%
Cash 0.0% 0.0%

Fund is rated by the fund manager using the highest available credit rating while the benchmark follows Bloomberg's index rating methodology.

Risks & Disclosures

SVCBF is designed for investors who have a heightened focus on corporate environmental and social performance and seek a greater portion of their investment return from current income, rather than capital appreciation, but exhibit willingness to incur some market risk for the potential of modest capital appreciation.

All investments carry some degree of risk that will affect the value of SVCBF's holdings, its investment performance and the price of its units. As a result, loss of money is a risk of investing in the fund. SVCBF is subject to the following principal investment risks: credit risk, country risk, currency risk, derivatives risk, interest rate risk, investment style risk, liquidity risk, market risk, prepayment risk, security-specific risk and yield curve risk. Additionally, SVCBF is subject to modestly increased diversification risk, as compared to broad-market fixed income funds, because of the exclusion of a significant number of issuers from the investment universe (i.e., the exclusion of companies with fossil fuel reserves used for energy purposes).

The performance shown is for the stated time period only and computed in U.S. Dollars (USD). Historical returns are not indicative of future performance. For further discussion of the Fund’s investments strategies and risks, please refer to the Investment Funds Description – P Series. This is not an offer to purchase securities.

Lending of Portfolio Securities

The fund seeks to earn additional income by lending a portion of its portfolio securities to brokers, dealers and other financial institutions. The loans are secured at all times by cash and liquid high-grade debt obligations. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in the collateral should the borrower fail financially. In addition, losses could result from the reinvestment of the cash collateral received on loaned securities.


Expense Ratio

The expense ratio is a measure of the annual fund operating expenses paid by the Fund expressed as a percentage of the average fair value of the Fund’s assets for the applicable year. The annual fund operating expenses consist of fees paid to subadvisor(s), and the Fund’s pro rata portion of custody fees and administrative and overhead expenses incurred by the overall Wespath Benefits and Investments organization in connection with providing investment, operating and administrative support to the Fund and the other funds available through Wespath Benefits and Investments, and for non-Fund related activities and operations.

The Fund’s actual annual fund operating expenses and the related expense ratio can differ from year to year. Actual annual fund operating expenses may vary depending on, among other things, market events, Fund size, transaction costs, timing of Fund inflows and outflows, and applicable internal costs and third-party fees. 2023 Expense Ratios reflect a recent change to the fee calculation methodology. The methodology for calculating the funds’ Administrative and Overhead Expenses—one component of overall Expense Ratios—was changed (effective July 1, 2023) to better align with the level of resources required by Wespath to administer each P Series fund. This methodology is applicable for the entire year beginning January 1, 2024.

The Fund may also pay transaction costs, performance fees, interest expenses, taxes and fees on uninvested cash held in sweep accounts, which are in addition to the annual fund operating expenses. The annual fund operating expenses and these additional expenses are reflected in the Fund’s unit price and reduce the Fund’s rate of return. For further information about the Fund’s fees and expenses, including the fee calculation methodology change, please refer to the Investment Funds Description – P Series.