Funds cater to the faithful

Mar 31, 2013 @ 12:01 am

By Jason Kephart

Advisers who have clients with strong religious beliefs have a variety of mutual funds to choose from, including ones focused on Catholics, Southern Baptists and Muslims.

Religious funds make up just over one-third of the universe of socially conscious funds.

"SIN' NO MORE

The religious funds typically screen out so-called “sin” stocks, which go against investors' sacred beliefs. The Ave Maria Funds, for example, are governed by a Catholic advisory board. George Schwartz, president of Schwartz Investment Counsel Inc., the Ave Maria Funds' adviser, screens out companies that run counter to the board's moral criteria.

That means no health care companies involved in abortion services, or companies that donate to nonprofit Planned Parenthood Federation of America Inc. The fund also cannot invest in hotel companies, because they offer adult films.

Gambling company stocks, however, are allowed. “The Catholic Church has long been big on bingo,” Mr. Schwartz said.

Screening companies eliminates approximately 150 companies from the benchmark Russell 3000 Index.

SOME STANDOUTS

Despite the negative screens, religious funds have fairly typical performance numbers when compared with peers' — although several have stood out.

The $376 million Ave Maria Rising Dividend Fund (AVEDX) has been among the top 10% of all large-cap mutual funds in terms of performance over one, three, five and 10 years, according to Morningstar Inc.

The $2.2 billion Amana Growth Fund (AMAGX), which invests according to the principals of Islamic Shariah law, also ranks among the top 10% over 10 years.

GuideStone Funds, which are available only through a Southern Baptist Evangelical church, won the Lipper Award for best overall small fund group in 2012 — the first socially conscious fund to win a group Lipper award.

“You don't have to give up your values to get performance,” said Timothy Head, spokesman for GuideStone.

jkephart@investmentnews.com Twitter: @jasonkephart

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