God and Mammon are being welcomed on Wall Street as never before. As the U.S. stock market advances, the growth of mutual funds guided by Christian ethics is also on a historic up swing. For instance, the Noah Fund, which began three years ago, has seen its assets quadruple to $8.5 million from the start of 1999. The $28 million Timothy Plan, which in 1994 started as a fund that invests in smaller companies, launched three new funds in July.
While these funds vary in their investment strategies, their common goals are to achieve the best possible returns while avoiding companies deemed to be involved in unchristian practices. Most, if not all, of such funds avoid well-recognized “sin” stocks related to gambling, tobacco, and alcohol. Many also re fuse to invest in companies connected to the abortion industry. After that, the screening criteria vary from fund to fund.
For example, the Mennonite Mutual Aid’s three Praxis Funds, which total $250 million, also shun weapons manufacturers and nuclear power companies.
“Scripture says a lot about responsibility, stewardship, and the money God has entrusted to us,” says Arthur Ally, president of the Timothy Plan, based in Winter Park, Florida. “We’ve been brainwashed by the world” into thinking that a profitable return is all that matters. Ally says it is more important to ask, “Where is that money being invested?”
The Timothy Plan screens out about 400 firms from roughly 8,000 publicly traded U.S. companies, or about 5 percent of the field. Among enterprises the fund avoids is Walt Disney Company, which many evangelicals believe has promoted an anti family agenda through its movie subsidiaries and its policies toward homosexual partners of employees (CT, Oct. 6, 1997, p. 84). Ally also tossed out Hospital Corp oration of America because it performs abortions.
To allow Christian investors a wider choice, the Timothy Plan added three new funds in July: a large-cap value fund, a fixed-income fund, and a money market fund. Its five-year-old Timothy Plan has been renamed the Timothy Small-Cap Value Fund. The name is inspired by 1 Timothy 5:8, which condemns those who do not provide for their relatives, and verse 22, which warns against sharing in the sins of others.
Mutual funds with religious guidelines are one corner of a broader category of socially responsible funds. About 180 of these funds exist today. While they do not use religious criteria in investment decisions, many of them avoid the same kinds of companies that religious funds do.
RATING PERFORMANCE: Does such screening influence performance? The evidence is in conclusive. Social Investment Forum research shows that socially screened funds re turned an average of 13.1 percent per year during the past three years, compared to 10.1 percent of nonscreened funds in the same period.
The Noah Fund was one of last year’s star performers, soaring 51 percent, putting it among the top 10 percent of large-cap growth funds. This year, however, it has risen only 5 percent through the end of July, compared to the 9 percent increase in the benchmark Standard & Poor’s 500 Index. The Timothy Fund has lagged as well, gaining only 2 percent this year, compared to the 7 percent rise in the Russell 2000 Index of small companies.
“If there’s a fund that meets my moral objectives, I should be willing to take a lower return,” says Ron Blue, a Christian author of several books on money and president of Ron Blue & Company, a financial counseling firm in Atlanta with $2 billion under management. “That’s a faith-based decision.”
The tricky issue in such moral-based investing, Blue says, is where to draw the line in determining whether a company is involved in unbiblical activities. Should the criteria be limited to the direct business of the company, or should it extend to its internal policies, pension plan investments, and corporate contributions?
Bill Van Alen, president of the Noah Fund, solves the dilemma by sticking with the main business of the company. Though he would avoid a maker of a drug used in abortions, he would not necessarily avoid a distributor of the drug. But what about the products that can be used for good or ill? Should a fund manager avoid Microsoft because its Web browser makes cyberporn more easily accessible? Perhaps. But Van Alen says, “You have to stop somewhere.”
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