) -- 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
Ave Maria Catholic Values Fund
has risen 35% so far this year, beating the 23% gain of the S&P 500. One of the fund's best performers is
, which has surged 137% in the past year.
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
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%.
Amana Mutual Funds Trust
is a fund that operates within Islamic beliefs. Administered by Saturna Capital of Bellingham, Wash., its major holdings include such companies as
Procter & Gamble
Johnson & Johnson
, all of which have been deemed, in its eyes, to be clean of any dealings with gambling, alcohol, pork and pornography.
In keeping with Islamic tradition and a belief that debt is a corrupting influence, its managers avoid companies that profit from lending and interest, including banks and insurance companies.
For the past decade, the
Amana Trust Growth Fund
, with an annualized return of about 12%, has outperformed the S&P 500 by as much as 5 percentage points. Although it fell 17% in 2008, the S&P 500 dropped 26%, dragged down by banks, which needed a governmental intervention to survive.
MMA Stewardship Solutions is a group of affiliated entities that includes Mennonite Insurance Service, the Mennonite Retirement Trust and
MMA Praxis Mutual Funds
. MMA is an acronym for Mennonite Mutual Aid. The religious underpinning comes from Anabaptism, a Protestant Christian reform movement in Europe during the 16th century that currently includes the Mennonite, Brethren and Amish church groups.
"When we launched the mutual fund, we were really one of the first, on a very short list of people, who were entering the space with a faith-based focus," says David Gautsche, MMA senior vice president of products and services.
Those managing the funds pride themselves with activism and education. For the credit industry, advocating for consumer rights has been a cornerstone of its outreach efforts this year.
Gautsche says that even though MMA had long warned of deceptive and dangerous practices in the financial markets, that foresight wasn't enough to stave off the damage.
"The whole industry has suffered from the market downturn of last fall," he says. "It has put stress on every aspect of the industry, and we are not immune to that. The excesses of the market, specifically with the big banks and some of the issues that put the economy over the tipping point last year, were things that we had been talking about and identifying for several years as issues. The mortgage issues and the lending practices were things that we were talking about several years before the mess hit the marketplace."
Gautsche says faith-based funds strive to strike a balance between what is good for faith and prosperous for business.
"You have to take a long-term perspective," he says. "As a bank or an investment firm, you can make short-term profits. But if, in the end, the investments fail and you have to have these defaults, it was a bad business move. From an ethical and religious standpoint, people into debt they can't afford, buying things they can't afford and probably don't really need isn't in clients' best interest and doesn't create a healthy, fulfilling life. Ultimately, causing bankruptcy or having people lose their homes are not business practices we want to be associated with."
-- Reported by Joe Mont in Boston.