Religious-based funds finding believers
Disillusioned by the accounting scandals that helped squelch stock prices, more investors are seeking comfort in mutual funds that match their religious values while offering respectable returns.
The number of religious-oriented funds has more than doubled in the past three
years, from 16 in 1999 to 38 this year, according to Thomson Wealth Management.
The funds' total assets jumped 21 percent to $4.42 billion, compared with 11
percent growth for the average fund, while returns have averaged a 0.5 percent
annual loss since 1999. That's better than the average mutual-fund loss of 5.9
Examples include the Ave Maria Catholic Values Fund, the Mennonite MMA Praxis
Mutual Funds and the Dow Jones Islamic Index Fund.
"The troubling times of the last year have had the effect of forcing many
Americans to confront the way in which they lead their lives," said Rusty
Leonard, founder and CEO of Stewardship Partners Investment Counsel. "This soul
searching has resulted in a new generation of religious investors."
Religious investing remains a tiny movement, representing less than 1 percent of
the $4.82 trillion in total assets for all mutual funds. Analysts say that's
because religious-oriented funds have several disadvantages — from unpredictable
returns to sometimes uneven application of their investment criteria.
Religious funds are part of the broader category known as socially responsible
funds, which screen their investments to meet core religious or social
principles. The investment criteria can be found on fund Web sites and
For example, Catholic-oriented funds typically avoid health-care and drug stocks
for their connection to abortion and birth control.
But the investment guidelines are not absolute.
A fund opposed to military spending might avoid top defense-related stocks but
invest in a company that sells computers to the Pentagon. Or it might divest
drug manufacturers but not retailers that sell the companies' products.