Faith-based funds outpacing industry

October 22, 2006|By Becky Yerak | Becky Yerak,Chicago Tribune

Earlier this year George Schwartz penned a public letter mentioning "abortion on demand" and the "debauchery that has poisoned the culture."

But the Bloomfield Hills, Mich., man wasn't writing as a politician, or a member of the clergy, or even a private citizen.

Schwartz was performing his duties as the president of a five-year-old family of mutual funds that bases its investment decisions on the core teachings of the Roman Catholic Church.

Schwartz's goal: Continue to build on Ave Maria Mutual's roster of 15,000 shareholders who have invested about $450 million in funds that screen out companies that facilitate abortion, pornography and non-marital partner benefits.

"We're hoping our assets get into the billions," said Schwartz, who saw his investor ranks grow by 40 percent in 2005. That way, Ave Maria would be able to influence practices at companies such as Eli Lilly, which the fund sold after the company began offering benefits to unmarried partners of employees.

Size yields power

"If we were the size of Fidelity then maybe they would have listened to us," Schwartz said.

He's not the only mutual fund manager who has struck a nerve among investors who are as concerned about hot-button issues as they are about hidden loads.

While faith-based funds represent only a sliver of the mutual fund industry the value of assets in religious-based funds has risen from $2.37 billion in 2000 to $16.03 billion at the end of July, according to estimates by Morningstar Inc., the Chicago investment research company.

The overall mutual fund industry has grown less quickly. Mutual fund assets have grown from $6.8 trillion at year-end 1999 to $9.4 trillion at year-end 2005, according to the Investment Company Institute, the trade group for the industry in the United States.

And investors do not always have to sacrifice performance. Some of the funds have earned recognition from Morningstar or Lipper as high-performing funds.

The interest appears to be multi-denominational.

Assets in Amana Mutual Funds, which invest according to the principles of Islam, have grown from $30 million in 2003 to more than $330 million.

Pro-life investing

The Timothy Plan is a pro-life, pro-family, biblically based group of nine funds whose assets have grown from $31 million in 1999 to more than $400 million. In April, Timothy said its large/mid-cap value fund was honored by Lipper, a mutual fund research company, for its 2005 performance.

Founded in 1999 and built on the heritage of the Presbyterian faith, New Covenant Growth Fund has assets of $926 million, up from $788 million at year-end 2000.

"There are more faith-based mutual funds out there than five years ago, and the ones that have been around have gathered a lot of assets," Morningstar mutual fund analyst David Kathman says. "There has been an upswing in religious feeling in this country, with the culture wars and a lot of people trying to emphasize their religion more in the current political climate, and one of the ways to do that is through investing."

As for the funds' performance, Kathman said it is difficult to generalize, noting that there are both liberal and conservative Christian funds with differing views on issues ranging from the environment to defense spending.

Muslim funds such as Amana eschew interest-based institutions such as Bank of America; that's an exclusion that many Christian funds are unlikely to make. And each fund family has numerous funds, such as growth and income.

In August GuideStone Funds marked its fifth anniversary, with assets of $8.56 billion, up $1.56 billion from its debut in August 2001 as a registered mutual fund.

Previously it was solely the retirement plan (consisting mostly of non-registered funds) of ministers and workers of Southern Baptist churches and related institutions.

GuideStone in 2004 opened itself up to like-minded evangelical churches and claims to be the nation's biggest Christian-based, socially screened, registered mutual fund company.

Christian Anabaptists are among the other religious groups with a fund family. Its MMA Praxis Mutual Funds have grown from three funds with $154 million in assets in 1997 to five funds with more than $800 million in assets.

In a way, trends in faith-based investing seem to run counter to religion's perceived influence on American life.

In a recent survey by the Pew Forum on Religion and Public Life, 59 percent of respondents say religion is losing influence on American life, while 34 percent say that it is more influential.

But the good news for people like Ave Maria's Schwartz is that, overwhelmingly, poll respondents favor more, not less, religion in the country. Of those who say religion's role is declining, 79 percent believe that's a bad thing. Of those who feel religion's influence is growing, more say it's good than bad, by a margin of almost 2 to 1.

Investing trends also mirror what is going on in other economic sectors, with devout consumers also dishing out more dollars for material things.

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