Jun. 15--Put your money where your heart is.
That's an investment concept that is finally getting respect in the investment world as a number of socially conscious mutual funds have proved they can perform on par with their anything-goes counterparts.
And now, a handful of investment firms are taking the concept even further, launching a small crop of highly specialized investment products designed to be consistent with particular religious tenets.
"The Baby Boom generation is looking for ways to invest according to their conscience, and the religious targeting of people, based on denomination or faith, is just one part of that whole big explosion," said Diane Bratcher, a spokeswoman for the Interfaith Center on Corporate Responsibility, an association of 275 Protestant, Roman Catholic and Jewish institutional investors.
To be sure, the movement is very small, just barely on the radar screens of the firms that track mutual funds, but the rate of growth in recent months has been tremendous.
And while the socially conscious domain tends to be dominated by liberal agendas, the religious offerings are more of a mixed bag. Among the entries are funds aimed at liberal-leaning Catholics and at more conservative Catholics, fundamentalist Christians, and Muslims, to name a few targeted investor groups.
In the last year, 12 new faith-based funds have sprouted, bringing the total of such offerings to about 30. Also, two faith-based market indexes intended for use by religious institutional investors were launched just last week: the Carlisle Catholic U.S. Market Index and the Carlisle Catholic Small Cap Index.
Still a small showing, perhaps, in a universe of nearly 6,000 stock and bond funds, but one that observers say may have some staying power in a nation that cherishes freedom of religion and freedom of expression.
"There's growing awareness of socially responsible investing generally, and as people find out about it and what it entails, and that they don't have to give up returns to get into it, it may very well continue to grow," said Catherine Hickey, an analyst with investment research firm Morningstar Inc.
The appeal lies not only in having your investments in sync with your beliefs but in the idea that your choices could make a difference in how the world operates, noted Donald Cassidy, senior research analyst with fund tracker Lipper Inc.
"This has become such an impersonal world, and sometimes people wonder if what they do makes a difference," he said. "And this gives them an opportunity to express themselves with their money."
That certainly was the motivation for Thomas Monaghan, founder and former owner of Domino's Pizza and former owner of the Detroit Tigers.
He was the driving force behind the May 1 launch of the Ave Maria Catholic Values Fund by Schwartz Investment Counsel Inc., based in Bloomfield Hills, Mich. He and his philanthropic foundation, the Ave Maria Foundation, provided most of the start-up money for the fund.
"It's something maybe I can have an impact on, and I can't do it alone," said Monaghan. "But maybe it can start something, get Catholics thinking before they make investments."
He says the fund differs from existing Catholic-oriented offerings because it places top priority on moral issues.
"First and foremost, we avoid investment with companies with any direct involvement in abortion, and our definition is probably broader than some other people's," said portfolio manager Gregg Watkins.
Not only does the fund exclude manufacturers of abortion-inducing drugs and contraceptives, but it also excludes distributors of those products, hospitals where elective abortions are performed, insurers who provide coverage for elective abortions and companies that use shareholder funds to make donations to pro-choice groups, such as Planned Parenthood.
One of the fund's top five holdings is Kerr-McGee Corp., an energy producer with a history of environmental problems that would bounce it off the investment lists of many environmentally screened investments.
"We do not screen on an environmental basis but on a moral basis as it relates to the Catholic Church's core teachings, and there is no core teaching against producing energy," said George P. Schwartz, chief executive of Schwartz Investment Counsel.
Yet Kerr-McGee was deleted from the Carlisle Catholic indexes, which screen not only on abortion, contraceptives, pornography, alcohol and tobacco, but also on a range of social justice issues, from protection of the environment to protection of human rights.
"Taking care of God's creation is really important," said Jeffrey Petersen, president of Carlisle Social Investments, based in Kennewick, Wash. The firm says its index approach attempts to follow the Socially Responsible Investment Guidelines of the 1991 National Conference of Catholic Bishops.