Sinners, Saints & Stocks: Gotta Have Faith

Some scandal-weary investors are trusting their money to a higher authority: Faith-based investing.

Between scandals like Bernard Madoff's $50 billion Ponzi scheme and the rash of settlements a number of major securities dealers reached with regulators over shoddy marketing practices ahead of the collapse of the auction-rate securities market, general distrust of the brokerage industry is high these days.

Fund manager Chad Horning, of the MMA Praxis funds said socially responsible and faith-based advisors are seeing an increase in interest in this environment. The MMA Praxis funds were originally created for Mennonite investors, but are open to investors of all faiths.

Religious funds have suffered the same fates as standard equity funds in the market downturn, as many have posted negative returns. According to Morningstar, total assets under management of faith-based funds dropped from $34.3 billion at the end of 2007 to $23.7 billion at the end of 2008, due to the decline in asset prices. Net total cash flows were a negative $280 million for 2008.

However, secular socially responsible funds actually saw an increase of $1.2 billion in net total cash slows for 2008.

The Mennonite funds focus on peace, freedom and environmental stewardship. They don't avoid companies with principles they disagree with, but instead choose to engage those companies in dialogue for change. One example is credit card companies such as Discover Financial Services and American Express. Horning said they are very involved with making sure credit card practices are in the best interest of shareholders.