‘Values investing’ catches fire
‘Main Street America’ eager to back companies that reject LGBT lifestyle
Ideology-driven exchange-traded funds are coming to the bond market.
Inspire, the Hollister, Calif.-based firm with two ETFs that target companies with so-called biblical values, plans to launch the first religiously focused fixed-income fund within the month.
The Inspire Corporate Bond Impact ETF will be based on the Inspire Corporate Bond Impact Index, which has roughly 250 investment-grade, intermediate-term bonds issued by companies with market capitalizations of more than $5 billion. The index has returned nearly 5 percent over the past year, according to a fact sheet Inspire prepared on the gauge.
“A lot of institutional money managers have been beating the door down for it,” said Robert Netzly, Inspire’s chief executive officer. “We’re raising capital right now and are pretty close.”
Inspire launched its equity funds in February. Since then, its Global Hope Large Cap ETF, which uses the symbol BLES, and its Small/Mid Cap Impact ETF, ticker ISMD, have accumulated a combined $60 million in assets, placing them among the most successful launches of 2017, according to Eric Balchunas, an ETF analyst at Bloomberg Intelligence. Over the same time frame, BLES has posted a 5.2 percent return and ISMD has lost 2.3 percent, compared with a 1.8 percent gain in the SPDR S&P 500 ETF, which goes by SPY, and a 0.6 percent loss in the iShares Russell 2000 ETF, symbol IWM.
The funds’ success at gathering assets underlines an increasing interest coming from retail buyers, in addition to institutional investors. In particular, BLES and ISMD have a strong presence within the Kingdom Advisors network, the largest Christian financial adviser network in the country, Netzly said. The average purchase is about $150,000.
“Those advisers have really latched on and have been pleading for products like this,” Netzly said. “They’re serving the end client, which is Main Street America, retirees and normal folks who want to invest in these values.”The holdings of these funds are determined by the “Inspire Impact Score.” The gauge evaluates securities based on what the firm sees as their “alignment with biblical values and the positive impact the company has on the world through various environmental, social and governance criterion.” The methodology in particular removes any company that participates in certain activities, including support for abortion and “the LGBT lifestyle.”
“LGBT is one of the many areas that we screen for,” Netzly said.
Another issuer, Global X Management Co., made inroads into the religious ETF space last year with its S&P 500 Catholic Values ETF, symbol CATH. The S&P 500-based fund’s methodology involves strippingout names that are not aligned with the Responsible Investment Guidelines of the U.S. Conference of Catholic Bishops. It now has nearly $100 million in assets and has returned more than 15 percent since its inception in April 2016.
Global X also has thematic funds that target health and wellness, the elderly and millennials. CATH was specifically created for a money manager of Catholic institutions who’d been attempting to invest in these kinds of companies on his own.Jim Hofheimer of Rothschild Investment Corp. in Chicago, owns the Global X Conscious Companies ETF, known as KRMA, which focuses on firms with strong environmental, social and corporate governance characteristics. He manages money for some of the Catholic endowments in Chicago, and said there’s a growing demand for these types of vehicles since it’s much easier to create an ETF than a mutual fund for a specific demand.
Still, sustained performance will remain a key determining factor in the success or failure of the funds.
“I once had a very conservative pension plan and they said, ‘Do you think we care about that?’ ” Hofheimer said. “They want to see the numbers.”