Faith Based Investing is starting to get some press and investment companies are hearing the call, creating funds to meet that demand. While I am Christian (Greek Orthodox to be exact) I am not a hardcore religious guy, so I don’t really get the desire to have a faith based portfolio, but more importantly, I don’t think the investment even meets those goal of someone that would have that desire
What is the Definition of Faith Based Fund Investing?
Faith based fund investing is investing your money with funds that allegedly follow your faith’s guidelines. Which leads to our first problem, what if you, personally, are a little bit more liberal than your religion? Despite being fiscally conservative, I am pro-choice, and for same sex marriage; I doubt most religions would agree my particular views on those subjects (I did find out in pre-marriage meetings with my Priest that Greek Orthodox don’t take the same “you are going to hell” view as the Catholic).
Next there are two types of funds, those that just claim to be a faith based investment and those that line up exactly with a specific faith. If we are talking about the former, there are contradictions which can’t be overcome – despite the similarities between Judaism and Christianity there are smaller rules which just can’t be lined up. It is a small one, but how about Kosher rules for one?
Ignoring those rudimentary issues, my real problem is understanding how the holdings of a particular mutual fund is or isn’t “faithful” to your particular religion?
Examples of Faith Based Funds
A recent Smart Money article Titled, “Divine Intervention: God and Your 401(k)” provides a few examples from the LKCM Aquinas Funds, who, according to their website,
The LKCM Aquinas Funds practice socially responsible investing within the framework provided by the United States Conference of Catholic Bishops Socially Responsible Investment Guidelines. The LKCM Aquinas Funds follow these guidelines by using an approach that focuses on Catholic values screening of portfolio companies, proactive dialogue with those companies whose practices conflict with the guidelines, and potential exclusion of those companies that are unwilling to alter their practices over a reasonable period of time.
LKCM monitors portfolio companies selected for each LKCM Aquinas Fund for policies on various issues contemplated by the guidelines, including:
- embryonic stem cell research
- weapons of mass destruction
- human rights
- economic priorities
- environmental responsibility
- fair employment practices
In monitoring portfolio companies, LKCM utilizes screening services provided by third parties and other independent research resources.
If an LKCM Aquinas Fund invests in a portfolio company whose policies are inconsistent with the guidelines, LKCM may attempt to influence the company’s policies through, among other things, proactive dialogue and other efforts. If LKCM’s efforts are unsuccessful over a reasonable period of time, LKCM may sell the company’s securities or otherwise exclude future investments in such companies.
Admirable goals, but how is that even possible in today’s world? Take for example LKCM Aquinas Value Fund (AQEIX). Their top ten holdings are:
- Akamai Technologies, Inc. (AKAM)
- CBS Corporation B (CBS)
- Lazard, Ltd. (LAZ)
- Kohl’s Corporation (KSS)
- J.P. Morgan Chase & Co. (JPM)
- Federated Govt Obligs Instl
- ResMed Inc. (RMD)
- American Express Company (AXP)
- EMC Corporation (EMC)
- Brocade Communications Systems, Inc. (BRCD)
Right off the bat, I can tell you that number 6 should raise a red flag because the Federal Government’s goals and objectives especially under President Obama is not in line with Catholic beliefs.
Next, JP Morgan is one of the largest banks in the world, you don’t think they have their hands in lending money for embryonic stem cell research or to contraceptive manufacturers? None of these HUGE companies provide same-sex domestic partner benefits? Do the tech companies (EMC and Brocade) actively turn down business from adult websites? Kohl’s has had its trouble with alleged sweatshop abuse, did the fund own it during/before those allegations?
Is every for-profit company perfect? Absolutely not, but I would hate for someone to buy a single share of any mutual fund just because they believe, without property vetting, that the fund follows their religious goals and views.