Mutual funds and indexes geared toward religious investors have surged over the past several years. A study released today by MMA Praxis Mutual Funds found that the number of religious mutual funds has increased 121% since 1999, from 34 funds to 75 in 2002.

The number of mutual funds overall has increased just 16% in the same time period.

"U.S. mutual fund investors are finding religion," said John Liechty, president of MMA Praxis Mutual Funds, a group of mutual funds that invests according to Anabaptist principles. He said American investors are beginning to understand that "investing is about more than just money."

A religious mutual fund is a fund that takes certain religious beliefs into account when selecting investments. Religion-based investing is a subset of the broader trend known as socially responsible investing, a growing category of funds that screen investments based certain social parameters. A typical socially conscious mutual fund may avoid investing in the tobacco industry or in companies that aren't environmentally-friendly. The MMA Praxis study covered only funds that are affiliated with a particular religion.

The range of religion-based mutual funds in the U.S. includes several Catholic fund families, the Mennonite fund group, a Lutheran fund, the Timothy Plan for conservative Christians, and a burgeoning group of Islamic mutual funds. Religious funds typically screen out companies that do not abide by their particular faith's values. These screens often rule out companies involved in industries like gambling and defense.

The Ave Maria Catholic Values Fund, for example, bases its investments on the principles of the Catholic Church and therefore screens out any companies with a direct link to abortion or whose policies the fund determines to be anti-family. The fund, launched by Thomas Monaghan, former owner of Domino's Pizza, and managed by Schwartz Investment Trust, does not invest in hospitals where abortions are performed or in companies that donate to groups like Planned Parenthood.

Other religion-based mutual funds include Amana Mutual Funds

, which advocates "halal investing" and screens companies whose profits are built on charging interest and products like alcohol, pornography, and gambling; the Noah Fund

, which screens according to Christian biblical principles; and Carlisle Social Investment

for Catholic investors.

The MMA Praxis study found that the amount of assets managed by religious funds has also increased. Assets under management by religious mutual funds increased from $3.65 billion in 1999 to $4.42 billion in 2002, a 21% rise. According to the study, U.S. mutual funds as a whole saw an 11% increase in assets managed during this same period.

Howard Rusty Leonard, founder and CEO of Stewardship Partners Investment Counsel, a group that promotes Christian-based financial decisions, said investors were beginning to let go of the stigma often attached to religious investing. He said investors tend to think, "If you're doing good, you're going to get bad returns." But that perception has begun to change, as more investors realize that socially conscious investing can result in good financial returns in the long run.

This trend in religious investing follows similar trends in socially conscious investing

in general. "There's been a large increase in socially responsible investing in the last ten years," said Todd Larsen, Media Director for the Social Investment Forum, a nonprofit that promotes socially and environmentally responsible investing. He said that the number of socially conscious mutual funds, including religious-based funds, increased from 1999 to 2001. The Forum now tracks the performance of 230 funds.

The 2001 Report on Socially Responsible Investing Trends in the United States

found that between 1999 and 2001, assets in socially screened investment funds rose 36%. The same study found that nearly one of every 8 dollars under professional investment management in the U.S. is in a socially responsible fund. Larsen said that a growing number of "investors [are]looking to combine their ethics with their investment portfolios, and more employers are offering options for socially conscious investing in 401K plans.