The number of mutual funds operated by religious groups has risen dramatically in the past five years, and more are expected to be introduced to meet the demand of consumers who seek to align their investing with their beliefs.
From 1993 to 1998, the number of religious mutual funds increased 4.6 times, from six funds to 33, according to Wiesenberger of Rockville, Md. Assets in religious mutual funds rose by 191 percent, from $1.5 billion to $4.5 billion from 1989 to 1999, faster than all funds, Wiesenberger said.
The 33 funds include those in the following religious fund families: Lutheran Brotherhood Funds (21 funds), Aquinas Funds (4), MMA Praxis Funds (3), Timothy Funds (2), Amana Funds (2), and the Noah Fund (1). All are Christian-based except Amana, which is run by an Islamic organization.
The figures were released during a telephone conference sponsored by the Mennonite Mutual Aid Praxis Mutual funds last month. People were invited to call in to discuss religious funds and their outlook for the future.
The conference was held "to draw attention to the fact that there is a very energizing, rapidly growing subset of the social responsible investing community, which has, at its core, religion and faith principles," said John Leichty, president of MMA Praxis Funds.
The top five religious funds in terms of growth, for the year ending March 31 were Noah Fund, which was up 50.57 percent, Lutheran Brotherhood's Y Shares, up 17.9; Amana Growth, up 14.78; MMA Praxis International, up 8.71; and Aquinas, up 7.15, according to Wiesenberger.
Religious funds trail all equity mutual funds by a slight margin in five and 10-year returns, however. Religious funds had a five-year return of 13.57 percent, compared to 14.78 percent for all equity funds. Ten-year returns were 12.87 for religious funds and 14.45 for all equity funds.
Apparently the most recently introduced religious mutual fund group is The Catholic Funds, which are managed by Catholic Financial Services of Milwaukee, Wis. Catholic Financial Services is owned by three Catholic fraternal organizations in the midwest. The three funds were introduced on April 30, said Joe Wreschnig, director of mutual fund operations.
The fraternal groups, which had sold insurance since the turn of the century, decided to start the funds to meet the needs of today's investors, Wreschnig said.
"In the 1880's, the need was insurance," Wreschnig said. "As times changed, we realized that there is now a new need for savings and investment because people are being faced with the possibility of living until 80 to 90 years old. It's a real concern out there."
The three funds are the Equity Income Fund, Large-Cap Growth Fund and Disciplined Capital Appreciation Fund. All will be available for sale to the general public, although the primary means of distribution will be through agents from the fraternal organizations.
The Shepherd Funds, based in Nashville, Tenn., have also been recently introduced. Its large-cap growth and market-neutral funds became available in March, said Steven Bolt, president of Shepherd Financial Services. The funds will be sold through financial advisors and will be promoted aggressively through print, radio and television advertising.
The firm is also planning to announce joint partnerships with two major Christian media groups soon, Bolt said.
The firm believes that there is a tremendous market for such funds and is planning to introduce 10 other funds, said Bolt. It will soon have an insurance series trust fund that will be available for inclusion in variable annuities and variable universal life products.
Bolt, who worked for both the Aid Association for Lutherans and the Lutheran Brotherhood said that those two organizations have about $70 billion in assets, despite having only about 2,500 captive agents working in a small market.
"The reason for the success of those organizations is not the quality of their product or their superior field forces but the fact that the investment adviser, product manufacturer and the consumer share the same values," Bolt said.
Executives of religious mutual funds that have existed for at least three years, said they have experienced substantial growth in the last year, despite the fact that they have limited resources for advertising and marketing.
By the end of March, the MMA Praxis Funds had about $235 million in assets under management, Leichty said. This year, it broke a record for the amount of assets attracted in one week - $2 million for the week ending April 30.
MMA will be introducing a new money market fund in July which will be unique in that it will not invest in U.S. treasury bills, in keeping with the Mennonite belief in pacifism, said Leichty.
"In light of what is happening in Kosovo, it's prompting a lot of people to think about the military machine in the U.S. and some won't want to invest in treasuries because treasuries fund the defense department," Leichty said.
The market for religious mutual funds is growing, said Gary Moore, a writer and investment advisor based in Sarasota, Fla. Moore is an advisor to religious organizations and the author of four books, the latest of which is, Spiritual Investment: Wall Street Wisdom from the Career of John Templeton, published by Templeton Foundation Press of Radnor, Pa.
There are many managers in the mainstream mutual fund world, like Templeton, who follow their spiritual values when they make investment decisions, Moore said. Thus, the number of religious mutual funds is probably small in comparison to the number managed by people who actually follow their faith as they work.
"The universe is much, much larger," he said. "My feeling is that all the major denominations will have something of their own in a year or two, or have marketing agreements with independent organizations."
William L. Van Alen, president and CEO of the Noah Fund, which invests primarily in large-cap growth stocks and opened in May 1996, said that in Jan. 1, 1998, the fund had only $1 million in assets under management. Now it has about $6.8 million. In the month of April alone, the fund brought in $450,000.
"We're just getting more and more money," Van Alen said. "If you have a set of values that corresponds with ours, and you can get the same or better returns as any other mutual fund, wouldn't you invest with us?"
The Noah Fund, which is no-load, relies on direct marketing, limited advertising and word-of-mouth referrals for distribution.
The Aquinas Funds, a Catholic fund family based in Dallas, touts a strategy of shareholder activism, said Frank Rauscher, president and CEO. Since the funds were started in 1994, they have amassed $200 million in assets. So far this year, they have brought in $25 million, Rauscher said.
Rather than screening out investments based on whether they meet their socially-responsible investing criteria, the funds invest in a company, then use their power as shareholders to influence corporate policy, Rauscher said. For example, the Aquinas Funds sought to persaude GE Electric to promote a woman to the level of operating management and the company did so within eight months.
Like the other religious fund executives, Rauscher thinks that the religious mutual fund market will continue to develop.
"We think the movement will grow, just like a snowball," Rauscher said. "People will see an opportunity to take their dollars and put their money where their values are."
