Religion-Based ETFs Find Going Slow

Investors aren't flocking to religion-themed ETFs so far.

Earlier this month, the FaithShares Baptist Values Fund(FZB), FaithShares Catholic Values(FCV), FaithShares Christian Values(FOC), FaithShares Lutheran Values(FKL) and FaithShares Methodist Values(FMV) joined the ETF universe.

On Monday, Dec. 21, the Catholic and Christian funds led the pack with 2,825 and 2,305 shares traded respectively. The Baptist, Lutheran and Methodist funds all had fewer than 200 shares of trading volume.

The indexing strategies for these funds involve picking the 400 largest U.S. stocks and then eliminating companies that have behavior that is objectionable to the religion in question. Depending on the fund, companies involved with tobacco, gambling, alcohol, weapons and pornography are left out.

After applying additional screens, like respect for the environment, treatment of workers, and community involvement, the underlying basket for each fund is whittled down to 100 stocks.

For example, the top two holdings in the Christian fund are Brown Brothers Sweep and Nordstrom(JWN). The top two holdings in the Catholic fund are Brown Brothers Sweep and Capital One (COF).

While the FaithShares funds are the latest ETFs to "track" a set of beliefs, they are not the only ETFs to do so. On June 29, newly minted issuer Javelin Exchange Traded Shares, launched the JETS Dow Jones Islamic Market International Index Fund(JVS) on the New York Stock Exchange Arca platform.

JVS' objective is to track a group of Shari'ah-compliant securities. The underlying indexing strategy seeks to select the most liquid companies that comply with Shari'ah, or Islamic law.

What comprises a Shari'ah-compliant ETF? When it comes to JVS, what's excluded is perhaps more important. This ETF's underlying index cannot contain businesses involved with alcohol, conventional financial services, casinos and gambling, pornography, tobacco manufacturers, pork-related products and weapons companies. Companies classified in other industry groups may also be excluded if they are deemed to have material ownership of or revenue from the businesses mentioned above.