Facebook. apple. alphabet. What do these big tech companies have in common, other than high-growth FAANG stocks?
All of these are included in a new exchange-traded fund that uses the U.S. Conference of Catholic Bishops' Socially Responsible Investing Guidelines to select companies. That means avoiding companies involved in abortion, contraception, pornography, human cloning, and weapons of mass destruction.
The ETF is the first from Dallas-based Faith Investors Service and is managed by the Connecticut firm Knights of Columbus Asset Advisors.
“Dallas is a good place for business and there are a lot of people of faith throughout Texas, so it was a no-brainer for us,” said Michael Skillman, CEO of Faith Investor Services. he said.
According to the Pew Research Center, more than 80% of people living in Dallas-Fort Worth, also known as the “Buckle of the Bible Belt,” identify as religious.
Buying baskets of stocks through ETFs is a nearly $9 trillion global industry. However, not many people follow a faith-based investing philosophy.
Faith Investors Service, a company with four full-time employees, wanted to bring faith-based investing beyond the organization. This is the company's first ETF, but it hopes to launch a second ETF focused on broader Christian values by the end of the year.
“I've managed socially responsible portfolios in the past, but not mass-market ETFs,” said Skillman, who was CEO of Boston-based Cadence Capital Management. “It was,” he said. “I wanted to bring this company to more people.”
We are encouraged by a Pew Research survey that found 28% of Americans reported that their personal faith has strengthened during the coronavirus pandemic. Inspire Investing, an Idaho-based leader in faith-based ETFs, grew assets under management 107% to $1.3 billion in 2020.
Socially conscious investing has grown in popularity over the past decade and has come to be referred to as environmental investing, social investing, or governance investing. The FIS Knights of Columbus Global Belief ETF, which trades under the ticker symbol KOCG, is known as a value-based investment, as well as an ESG investment.
Young investors are particularly enthusiastic about this new approach.
“People want to make a change. How can they take action other than writing letters and protesting?” Skillman asked. “It's a way to invest your money. People are starting to realize that it's empowering.”
In addition to the three FAANG stocks, Faith Investor Services' funds include Microsoft, Alibaba, Visa, PayPal, and Nvidia. The fund was established on July 14 and has up to $21.4 million in assets. The company's marketing approach is centered around digital advertising, including social media platforms.
This fund has an annual fee of 0.75%. That's on the pricier side, considering the ETF's median fee is 0.49%, according to Morningstar data. This means the fund is in the 81st percentile. However, when open-end funds are added to the mix, the fund's expense ratio becomes even more attractive, at the 39th percentile.
Morningstar ESG analyst Alyssa Stankiewicz said ESG-based funds in the early 2000s sometimes required investors to give up high returns, but this has now improved significantly. said.
“I can't say that all ESG funds will outperform the market, but it's not a clear trade-off, especially now that there are more options,” he said.
A report comparing a global stock index and a group of highly rated ESG companies found that the two companies performed similarly from 2011 to 2020.
While Faith Investor Services is a start-up, the Knights of Columbus has been around since the 1800s, when the Catholic Brethren was founded with a charitable mission. Anthony Minopoli, chief information officer at Knights of Columbus Asset Advisors, said the firm has nine Catholic funds and well over 400 clients.
Although the company's core business is managing funds for Catholic institutions, it is in discussions with Faith Investors Service about three to four ETF families, he said.
Minopoli said companies with products or policies that conflict with the values of Catholic teachings will not join the Knights of Columbus.
“We don't create Catholic doctrine, we follow it,” he said.
The Knights of Columbus is well known and respected for its work, said La Juana, a social impact investor and CEO of San Antonio-based Tacit Growth Strategies. Chambers-Lawson said. There aren't many religion-oriented ETFs, he said, because it's difficult.
“ESG investing is a murky field, because you might want to invest in a particular company, but later you look into what that company is doing and realize it doesn't necessarily match up.” she says.
The Faith Investors Service Fund stands out because it's not limited by market capitalization, Lawson said.
“It's very encouraging to see people willing to take risks and invest in companies, regardless of market capitalization, because it shows a real commitment to changing the world,” she said. .
