Sins, sinners and investment plans
‘Biblically responsible’ funds serve a market trying to keep faith with its beliefs
Like other employees at his job, Eric Randall takes advantage of the deferred tax break as well as the company match when he contributes to the retirement savings plan provided by his employer.
But he and his wife, Sue, have chosen a more stringent approach to investing for their Roth IRA and the college savings accounts they started for their four children. They want to make sure the assets are in alignment with their Christian beliefs.
Their non-workplace investments are being managed by Timothy Plan, a Maitland, Fla.-based mutual fund operator that promises to avoid buying shares in any publicly traded corporation that profits from activities that it believes “do not honor God.”
Portfolios managed by Timothy Plan promise to steer clear of companies whose products or business activities do not line up with the fund’s reading of the King James version of the Bible.
The plans’ operators define that as businesses that manufacture drugs used in abortions, sell alcohol or pornography, use slave labor in their supply chain, or donate money to groups that lobby for equal treatment for lesbians, gays, bisexual and transgender people.
Mr. Randall, 45, a mechanical engineer who lives in Highland Park, and his wife, a 48-year-old horticulturalist at the Pittsburgh Zoo, have been investing in the plan since 2002.
“Life is busy,” he said. “You’ve got a job, a marriage, kids and all these things you are trying to do.
“It’s nice, in the middle of all that busyness, to be partnered with a mutual fund like Timothy Plan, where my wife and I don’t have to do all the heavy lifting to filter out the companies that are engaging in industries that aren’t consistent with our values.”
A different niche
Biblically responsible investing has some overlap with socially responsible investing, which monitors companies working toward social and environmental progress, as well as other faith-based investment strategies.
The major difference is that biblical investors are opposed to certain issues that may be very different from the values being supported by investors who identify as socially responsible and are looking for, say, green businesses or fair labor practices.
The investment mix may even reflect opposing ideas in light of the “hate the sin, but love the sinner” approach that some groups of Christians embrace, said Howard “Rusty” Leonard, CEO of Stewardship Partners, a Matthews, N.C.-based Christian-oriented investment management firm founded in 2001. As of late August, the company manages about $105 million in client assets.
“Our largest holding at Stewardship Partners is a small Canadian drug company that makes two drugs that help people with HIV,” Mr. Leonard said. “So, while we screen out companies that actively support homosexuality due to the Bible labeling homosexuality as a sin, we are happy to invest in a company that saves the lives of those most at risk from HIV.”
‘Shift in our culture’
The impact that biblically responsible investing has had on encouraging companies to modify their business activities is unclear. Some players in the industry take credit for small victories such as getting certain hotel chains to stop offering X-rated movies in rooms.
But more than a few commentators have questioned how such investors can guarantee that the companies they choose aren’t doing something that wouldn’t fit with their interpretation of Jesus’ teachings.
Still, the practitioners hope they’re making a difference.
“If everybody began to think in terms of biblically based investing and cleaned up their portfolio to reflect that idea, we would see a dramatic shift in our culture,” said Joe Guenot, owner of Moral Wealth Strategies LLC in Julian, Centre County.
Mr. Guenot has been a “Christian” financial adviser since 1992. It wasn’t until 2005 when he and his wife attended a course on biblical stewardship that it dawned on him that he was doing everything all the other financial advisers were doing. The only difference was that he was calling himself a Christian wealth planner.
“That was a turning point for me,” Mr. Guenot said. He began moving his clients’ money out of stocks and mutual funds into Timothy Plan — with their approval.
The broker dealer he worked for at that time tried to reverse the trades. He and his wife suffered financially for months after he joined another firm that agreed with his strategy.
Today, he works for his own company, which he founded in 2006. Moral Wealth Strategies has 777 clients who invest according to his interpretation of the Christian Bible.
Screening out 10 percent
Compared to the mainstream mutual fund market with a $19 trillion total market value, biblically responsible investing is about the size of a mustard seed. Timothy Plan, the largest operator, only recently crossed the $1 billion mark for assets under management after 24 years in business.
Other Christian mutual funds include GuideStone Funds, Eventide Funds, Ave Maria Mutual Funds and Crossmark Steward Funds.
Despite the strict bar set for investments, Timothy Plan President Art Alley said there are plenty of qualifying companies.
“There are about 8,000 domestic companies large enough for us to invest in,” Mr. Alley said. “Out of that, we screen out about 10 percent.”
The main tool that Christian funds use to screen companies is called the eValuator. It was created by a subsidiary of Timothy Plan. Five fulltime employees research companies to identify their corporate practices.
Based on eValuator’s assessment, many leading U.S. companies are off-limits, including Walt Disney, Microsoft, Apple, Amazon, Boeing, Allstate, Johnson & Johnson and Pepsi.
Performance issues
Nearly a generation after biblically responsible investing hit the scene, some mutual funds that came into the market in the early years have survived. Others are pushing up daisies.
All five of the faithbased ETFs launched in 2009 by FaithShares, an Oklahoma City firm, were on the list of ETF casualties by 2011 due to lack of investor interest.
Timothy Plan’s 13 mutual funds posted impressive returns in 2017, but many of the funds have not done as well this year. For instance, the smallcap value fund returned 13 percent last year but has returned 9 percent so far this year; the large mid-cap value fund returned 17.5 percent last year but 5.5 percent so far in 2018.
The Israel Common Value Fund was the best performer last year with a 27 percent return. This year the fund has lost 0.8 percent. The Emerging Markets Fund posted a return of 24.4 percent in 2017 but has lost 13.5 percent so far in 2018.
“Sometimes we are better or worse than the S&P 500,” Mr. Alley said. “However, our investment style leans very conservative in our funds. We are subscribers to the Will Rogers philosophy that we’d rather have the return of our money than return on our money.”