These Funds Follow Markets and Commandments
Ackermann, Matt, American Banker
Independent mutual fund groups that manage "morally responsible funds," which screen companies by socially conservative measures of several kinds, are receiving increased visibility and distribution.
Unlike the better-known "socially responsible funds," which are meant for liberals, these are built for religious groups such as Roman Catholics, Muslims, conservative Christians, Christian Scientists, and Seventh-Day Adventists.
The various morally responsible funds screen out companies that, for example, provide benefits for same-sex partners and condone abortion.
Large banks and brokerage houses are starting to notice such funds, said Peter D. Kinder, the president of KLD Inc., a Boston firm that tracks socially responsible investments.
Community banks in regions where religion plays a particularly prominent role in everyday life are finding these funds attractive offerings, Mr. Kinder said. For example, a conservative Christian fund could excel at a southern community bank, but it may not find many investors at a similar bank farther north, he said.
"It is all about putting the right products in the hands of the right customers," Mr. Kinder said.
One of the oldest morally responsible fund companies is the eight-year-old Timothy Plan of Portsmouth, N.H., which says its funds follow conservative Christian principles. It now has $80 million of assets under management in eight funds, which are available through 250 broker-dealers.
Its investment philosophy includes zero tolerance for companies that support gay rights, abortion, pornography, or "anti-family entertainment" -- entertainment that depicts gay characters in a positive light or includes sex or excessive violence.
Stephen Ally, the national director of marketing for the Timothy Plan, pointed out that its funds do not buy stock in companies such as Walt Disney Co., which gives money to Planned Parenthood, provides same-sex benefits, and produces controversial films through its Miramax division.
Mr. Ally said it also will not sell its funds through companies that it would not own, such as American Express, which has a history of contributing to pro-choice groups and offers same-sex benefits to its employees.
He conceded that this limits the company's distribution capabilities. "Sure, we'd love every broker-dealer to be able to sell us, but that just isn't possible," Mr. Ally said. "We are not going to compromise."
Last month the Timothy Plan teamed up with 1Point Administrative Services of Nashville to offer a morally responsible 401(k) plan to small businesses in the Southeast. "If customers want morally responsible funds, brokerages are going to offer them," said Barry Stokes, the president of 1Point.
Capstone Asset Management Co. of Houston has $475 million of assets in its six Serv Funds. (The name stands for "socially ethical religious value."). The funds, which adhere to the tenets of the Seventh-Day Adventist Church, screen out companies with interests in gambling, alcohol, tobacco, pornography, meatpacking, and caffeinated beverages.
The funds are available through securities brokers and independent broker-dealers that serve financial planners.
Aquinas Investment Advisors, which was launched in 1994 by the Dallas-based Catholic Foundation, manages $190 million of assets in six Aquinas Catholic Values Mutual Funds. …