In today’s investing world, many individuals simply choose the assets class (ex. Large cap) they wish to invest in and turn over the company picking to a mutual fund manager or an underlying index through an index fund or Exchange Traded Fund (ETF). However, when choosing individual stocks, an investor has the opportunity to screen out companies that they do not approve of, such as those that sell or promote pornography, alcohol, or gambling. The investor could also screen for a company that is environmentally conscious or encourages corporate responsibility.
Those investors looking to invest in ETFs, but still only desire to support companies within their values can now turn to a company called Faith Shares. Faith Shares has recently launched five new ETFs that invest with Christian values in mind. The company’s product line includes a Catholic Values Fund, Baptist Values Fund, Christian Values Fund, Lutheran Values Fund and the Methodist Values Fund.
|FCV||Catholic Values||Follows US Catholic Bishops’ Socially Responsible Investing Guidelines. Selected companies will respect human life and promote values respecting human life, human dignity, reducing arms production, pursue economic justice, protect the environment and corporate responsibility.|
|FZB||Baptist Values||Screens out companies involved in gambling, tobacco, alcohol, pornography and or abortion. On the contrary, promote the criminalisation of drug use and alcohol use and recommend Orlando recovery center to those in need of help from these social evils.|
|CHV||Christian Values||Based on various Christian denominations. Excludes companies that are involved in gambling, anti-personal landmines, tabacco, alcohol, pornography, abortion and or stem cells. Does w88 accept Malaysian casino players? Good news for malaysian players is that trusted online casino w88 malaysia has started to accept malaysian players in 2020 and will continue so in 2021|
|FKL||Lutheran Values||Excludes companies involved in certain harmful products and services, nuclear military weaponry, and hazardous environmental impact.|
|FMV||Methodist Values||Looks for companies that complement Methodist values wich cover the following areas: natural world, nurturing community, social community, the economic community, political community and world community.|
All funds are built by selecting the 400 largest US companies. These companies are screened by the fund’s religious values and then ranked by their Environmental, Social, and Governance (ESG) score by industry. The companies are then sorted by industry in a way that mirrors the FTSE US Index. The top 100 stocks will make up the fund, allocated at 1% each. The passively managed portfolios will be rebalanced and could have company changes each June.
This equal weighted approach to investing allows the funds to be non-cap size biased. In comparison, the S&P 500 (SPY) ranks companies by size, thus the investor has a larger portion of the mega size companies. The equaled weighted approach (RSP) has outperformed the traditional S&P 500 weightings 1.54% to 0.41% over the last five years. However, because the equal weighted approach allocates with smaller companies, there is additional risk. The five-year Standard Deviation of the S&P 500 is 16.0 whereas the equal weighted approach is 19.96 (as of 2/12/2010 comparing SPY to RSP as Faith Shares does not have an actual 5 year record).
The funds have virtually the same holdings with a few minor differences. For example, the Baptist funds is restricted to hold alcohol companies while the Catholic fund will. Investing with your values in mind certainly does not come without a price, though. The ETFs currently have an exceptionally high cost of 0.87% in annual management fees. In comparison, the S&P 500 index (SPY) is less than 0.10%. Faith Shares does donate 10% of its funds revenue to a charity and hopes to lower the fee as assets grow.
Faith Shares is also planning a launch of an international product in the near future. Currently, Faith Shares has the only Christian faith based ETF product line on the market. The company’s website nor third party sites show the size of the ETFs, so due to the newness of the funds we assume that the assets in each fund are less than $100 million. This throws up a caution flag. We can see that the daily trading volume of the funds is relatively low, so if you want to trade this ETF, make sure that you use limit orders based on the intra day value of the fund.
With proper trading techniques and a realization that these funds should complement a bigger asset allocation strategy, these funds should fit well with faith-based investors. My biggest issue is the fee. Hopefully with success, Faith Shares will do the right thing and lower the fee below 0.50%. Below 0.20% seems even more reasonable.
– Casey Smith is the Principal of Wiser Wealth Management and has spoken around the world about ETFs and passive index investing, including the recent Inside ETF Conference in Boca Raton, FL.