Religion-Based ETFs May Be Hard to Believe In

Since the JETS Dow Jones Islamic Market International Index Fund (JVS - commentary - Trade Now) launched earlier this year, a number of other firms have shown interest in providing Islamic investors access to instruments that comply with Sharia laws. JVS' launch was unique in that it is the first instrument to track a specific religion. Excluded from these instruments' indices are firms that provide alcohol, conventional financial services, casinos and gambling, pornography, tobacco, pork-related products and weapons.

With an average volume of 500, JVS has failed to garner any popularity since its launch. However, this lack of interest has not deterred one company from unveiling its own religion-specific exchange-traded funds.

Oklahoma's FaithShares recently filed registration paperwork with the SEC to launch a family of five ETFs designed to reflect the tenets of the largest Christian denominations in the U.S. According to the FaithShares Web site, The FaithShares Baptist Values Fund, the FaithShares Catholic Values Fund, the FaithShares Methodist Values Fund and the FaithShares Lutheran Values Fund will track equal-weighted baskets of 100 large cap companies that reflect the specific tenets of the respective religion.

The index provider for the initial funds' underlying indexes is FTSE/KLD Research and Analytics. However, with no specifics released, it is hard to comment on how well these funds will perform. However, it is likely that these instruments will be not only be similar to one another but to other socially responsible ETFs, such as Barclays iShares KLD Select Social Index (KLD - commentary - Trade Now). If that is the case, I would advise investors looking for social responsibility to stick to funds with proven track records.

It is likely that nothing new will be gained from the introduction of the FaithShares instruments.

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At the time of publication, Dion had no positions in securities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.