Fund Fact Sheet
Parnassus Fixed-Income Fund
As of September 30, 2013, the NAV of the Parnassus Fixed-Income Fund was $16.99, producing a gain for the quarter of
0.11% (including dividends). This compares to a gain of 0.57% for the Barclays U.S. Aggregate Bond Index ("Barclays
Aggregate Index") and a gain of 0.43% for the Lipper A-Rated Bond Fund Average, which represents the average return of the
A-rated bond funds followed by Lipper ("Lipper average"). For the first three quarters of 2013, the Fund posted a loss of
1.97%, which compares to losses of 1.89% for the Barclays Aggregate Index and 2.41% for the Lipper average.
Below is a table comparing the performance of the Fund with that of the Barclays Aggregate Index and the Lipper
average. Average annual total returns are for the one-, three-, five- and ten-year periods. For September 2013, the 30-day
subsidized SEC yield was 1.23%, and the unsubsidized SEC yield was 1.12%.
Performance data quoted represent past performance and are no guarantee of future returns.
Current performance may be lower or higher than the performance data quoted. Current
performance information to the most recent month-end is available on the Parnassus website
(www.parnassus.com). Investment return and principal value will fluctuate so that an
investor�s shares, when redeemed, may be worth more or less than their original principal cost.
Returns shown in the table do not reflect the deduction of taxes a shareholder would pay in
fund distributions or redemption of shares. The Barclays Capital U.S. Aggregate Bond Index is
an unmanaged index of bonds, and it is not possible to invest directly in an index. Index figures
do not take any expenses, fees or taxes into account, but mutual fund returns do.
Before investing, an investor should carefully consider the investment objectives, risks, charges
and expenses of the Fund and should carefully read the prospectus or summary prospectus,
which contain this and other information. The prospectus or summary prospectus can be
obtained on the Parnassus website, or by calling (800) 999-3505. As described in the Fund�s
current prospectus dated May 1, 2013, (as Amended and Restated September 30, 2013),
Parnassus Investments has contractually agreed to reduce its investment advisory fee to the
extent necessary to limit total operating expenses to 0.68% of net assets for the Fund. This
agreement will not be terminated prior to May 1, 2014, and may be continued indefinitely by
the investment adviser on a year-to-year basis.
Third Quarter Review
After substantial increases in the second quarter,
Treasury yields rose and fell within a fairly narrow
range at the beginning of this quarter as investors
digested mixed economic data. Market sentiment
then changed in mid-August as economic data
turned incrementally more positive and Federal
Reserve members began to speak more frequently
about eventually reducing and removing their
bond-buying stimulus program, popularly called
quantitative easing (QE).
Since the last round of QE was announced,
unemployment fell from 8.0% to 7.3% through
August, home prices increased over 12% and
incomes grew modestly. The improvement in
these data points seemed to fall within the Federal
Reserve's goalposts for curtailing QE, therefore
convincing the market that a reduction was
near. Anticipating that monetary support would
be gradually removed from the market, the yield
on the 10-Year Treasury popped higher to nearly
During this time, the Fund performed well due to
its shorter duration. As a reminder, duration is a
measure of interest rate sensitivity and indicates
how much, in percentage terms, a bond price will
move for a 1% change in interest rates. A shorter
duration for the Fund means it is less sensitive to
interest rate movements, and so as bond yields
rose and prices on those bonds fell, the Fund
retained relatively more of its value.
September 18th was a turning point in the quarter,
as the Federal Reserve opted to keep its
quantitative easing program in full effect. Two
main factors drove their decision: first, the
economic risk created by Congressional delays in
addressing both the federal budget and the debt
ceiling; and second, the Federal Reserve's desire to gauge the economic impact of the higher interest rates that emerged over the summer. Over the last two weeks of the quarter,
the 10-Year Treasury yield fell to approximately 2.60%, as expectations about QE were realigned, and bond prices soared,
with mortgage-backed securities leading the way. Due to the Fund's shortened duration and relatively small investment in
mortgage-backed securities, it did not benefit as much as its peers from the upward shift.
Outlook and Strategy
The economy will always face headwinds from a variety of sources, but
perhaps the largest headwind facing the economy today is the
uncertainty created by Congress. However, I'm confident that the
economy can overcome these headwinds over the long-term, just as the
manufacturing and housing sectors have risen above the short-term
impacts of the Sequestration earlier this year. While the Federal
Reserve's surprise announcement delayed the market's sense of timing
around their stimulus reduction, as well as my own, I continue to
believe a reduction will occur over the coming two quarters.
Over the past few months, the Fund has become more diversified, and
as part of our effort to institutionalize this process, the Fund's
Prospectus was updated on September 30th to allow greater investments
in mortgage-backed securities and pools. Investment-grade mortgages
comprise approximately 30% of the benchmark index and are a
meaningful asset class in the market. Perhaps most importantly,
mortgages trade differently and have different characteristics than
corporate or Treasury bonds. Therefore, inclusion of these assets into the
Fund will diversify its income sources and risk profile.
I continue to believe that growth will be fairly steady and that, over the
long-term, rates will rise to historically normal ranges. As a result, the
Fund continues to have a shorter duration than the Barclays Aggregate
Index, making it relatively less sensitive to interest rate fluctuations.
Volatility will likely continue in the bond market over the coming
quarters as a new Federal Reserve Chair is nominated and confirmed, as
monetary policies evolve, and as Congress debates fiscal policy. Despite
this volatility, I remain focused on our mission of providing capital
preservation and income and will continue to position the portfolio
Thank you for your investment in the Parnassus Fixed-Income Fund.
Thank you for your investment in the Parnassus Fixed-Income Fund.
Samantha D. Palm
The information above represents the Letter from Parnassus Investments, management's
discussion and analysis of fund performance, and Responsible Investing Notes as
excerpted from the Report. Please click on the "Full Report" link above to view
the Report in its entirety.