How We Invest

Investment Process

The Parnassus equity funds follow a company-specific investment process to evaluate the intrinsic value of the company based on the future relevancy of the company's products or services, sustainable competitive advantages and management. Once we determine that a company's intrinsic value is increasing, we perform a detailed valuation analysis to analyze the underlying fundamentals and economics of the company. This results in a three-year range of outcomes for the stock and an assessment of the risk of permanent loss of capital. We monitor a company's stock price until it falls to a level that generates an acceptable, risk-adjusted expected internal rate of return and initiate a position based on the expected return profile.

Portfolio management sets position sizes according to a proprietary "core" and "opportunistic" capital framework. All positions have a core component, which is based primarily on the risk of permanent loss of capital. For certain positions, opportunistic capital is invested on top of the core position. This approach allows us to take advantage of short-term volatility within our long-term holdings.


Equity Fund Diagram

The Parnassus Fixed Income Fund investment process begins by formulating a macroeconomic outlook for the next three to five years. We then determine the appropriate exposure to both market and credit risk based on our economic and interest rates forecast. Our assessment of market risk leads to the selection of a duration target and yield curve positioning of the portfolio. The final step consists of selecting securities that meet the duration, asset class and sector targets established in the previous steps. We leverage our expertise in fundamental equity research to select individual debt securities, and we apply environmental, social and governance (ESG) screens to our investment universe.


Fixed Income Fund Diagram