Investors' Faith in Mutual Funds Is Rewarded

BOSTON (TheStreet) -- Religion and politics may not mix, but it seems religion and investing does.

With their own brand of social activism, investment funds based on religious principles have outperformed benchmark indexes such as the S&P 500 Index of the largest U.S. companies. Success may lie in the fact that their guiding values steer them away from securities laden with debt, derivatives or toxic assets. Put simply, there are no complex investment schemes to be found in the Bible or Koran.

Religious-based investments are a relatively small subset of Socially Responsible Investing, which encompasses an estimated $2.71 trillion of a $25.1 trillion marketplace in the U.S., according to the Social Investing Forum, an SRI trade organization. From 2005 to 2007, social investing enjoyed a growth rate of 18%. There are about 100 faith-based mutual funds holding a value of $31billion.

For Catholics, there is the Ave Maria Mutual Funds, which invest as much as $500 million in assets among companies as diverse as Sherwin-Williams(SHW Quote) and Halliburton(HAL Quote). The Ave Maria Catholic Values Fund(AVEMX Quote) has risen 35% so far this year, beating the 23% gain of the S&P 500. One of the fund's best performers is General Cable(BGC Quote), which has surged 137% in the past year.

The LKCM Aquinas Funds, like the Ave Maria Mutual Funds, embrace companies that support Catholic values and shun any connection, even tangentially, to abortion.

For the more conservative and evangelical, there are the Timothy Plan Funds, which often gain notoriety for the companies they refuse to invest in. Its online "Hall of Shame" singles out such companies as Aetna(AET Quote), American Express(AXP Quote), Borders(BGP Quote), Coca-Cola(KO Quote), Pepsi(PEP Quote), General Electric(GE Quote) and Microsoft(MSFT Quote) for their connections, often tenuous, to alcohol, pornography and tobacco. If a company supports so-called alternative lifestyles or offers domestic-partner programs, it will be blacklisted. The funds, pre-recession, were generating average annual returns of about 16%.