Advisers, investors put faith in Catholic funds

The market may be drifting, but many of America's 60 million Roman Catholics are sure of the investment path they have chosen: mutual funds guided by Catholic ethical and moral principles. Ave Maria Mutual Funds, which invests according to these principles, has seen its assets grow by $100 million in the past two years to $600 million. Assets in the funds are expected to exceed $3 billion by 2013 as a result of the retirement of Catholic baby boomers, said George Schwartz, president of Bloomfield Hills, Mich.-based Schwartz Investment Counsel Inc., which manages the funds. "As people get older, they tend to start thinking about the eternal, the afterlife," he said. Investments in all religiously driven mutual funds have grown to more than $17 billion, from $500 million, in the past decade, according to Chicago-based Morningstar Inc. One force driving the Catholic investment marketplace is the nation's growing Hispanic community, which is largely Catholic, Mr. Schwartz said. He said his firm may produce Spanish-language applications and prospectuses to target this market. In an effort to get the word out to other investors and financial advisers on the availability of "morally responsible investing," Schwartz Investment Counsel is stepping up its marketing efforts with advertisements in various Catholic magazines and on radio stations, as well as participation in faith-based trade shows. Assisted by its Catholic Advisory Board — led by CNBC personality Larry Kudlow; Tom Monaghan, founder of Ann Arbor, Mich.-based Domino's Pizza LLC; and Lou Holtz, a former coach at the University of Notre Dame in South Bend, Ind. — Schwartz Investment Counsel screens for companies that violate religious principles. This includes connections to birth control, abortions and stem cell research. "Morally responsible investing is going to continue among Catholics for some time," Mr. Schwartz said. "We're just scratching the surface." Another firm involved in Catholic-oriented investing is Trinity Fiduciary Partners LLC of Fort Worth, Texas. In March, the firm changed the investment strategy of its Epiphany Core Equity Fund to track the Faith and Family Values 100 Index, a sector-neutral market-cap-weighted index comprising the 100 largest U.S.-based companies that meet the company's moral and ethical standards. In addition, the fund changed its name to the Epiphany Faith and Family Values 100 Fund. It manages $1.5 million in assets, said Adam Auteen, chief investment officer. Other asset managers devoted to Catholic investing are Luther King Capital Management of Fort Worth, which manages the $100 million LKCM Aquinas Funds, and Christian Brothers Investment Services Inc. of New York, which manages $4.2 billion in assets. A keen interest in investing based on religious principles is evident among defined contribution participants, said Stephen Schott, whose Schott Group Investment Consulting, a division of Tampa, Fla.-based CapTrust Advisors LLC, caters exclusively to Catholic institutions. Catholic colleges, foundations and dioceses are receiving requests from 403(b) participants asking for a screening tool so they can exclude companies that contradict their beliefs, said Mr. Schott, who manages $55 billion in DC assets. As a result, he avoids companies that produce contraceptives, for-profit medical institutions that perform abortions and manufacturers of weapons of mass destruction and land mines. "Individuals are asking for ways to invest in areas that are consistent with their own ideals and beliefs," said Mr. Schott. "It's a growing request." At least one adviser is devoting his practice to this niche.
"I've been blessed to be able to bring my faith into my work," said John Vleko, president of Planning Resources Inc. and a devout Catholic. "People come to me because of these [value] issues." About three-quarters of the Southfield, Mich.-based firm's $30 million in assets are invested according to religious principles. E-mail Andrew Coen at acoen@investmentnews.com.