Sustainable investors should take time to consider whether they should add midcap companies to their portfolio, according to Parnassus Investments’ Director of Research Matthew Gershuny.
At a time when major changes could potentially happen due to economic instability and environmental concerns, mid-level firms are large enough to weather storms but small enough to provide significant upside to investors, said Gershuny, who runs the firm’s midcap fund.
“Midcaps are sort of in a sweet spot,” Gershuny said in an interview with the Wall Street Transcript. “They can have a lot of the growth characteristics of smaller businesses. And at the same time, midcap companies can have stability and high-quality management systems in place like large-cap businesses.”
Midcaps also feed benefit when larger companies have the cash and need their services. “there’s always an opportunity for midcap companies to be acquired more easily than larger-cap companies,” he said.
The asset manager’s advice comes as more investors are ploughing funds into sustainable investments, he added.
“I believe that, absolutely, environmental, social and governance factors are an important part of the investment process, and I think that other financial services players are starting to become more and more aware of that fact, not only as something that’s important to their clients but also as something that can help generate alpha over the longer term,” he said.
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