Amanda Lawson is a Writer and Content Coordinator for Faith Driven Media. She is also a Research Associate in the John W Altman Institute for Entrepreneurship at Miami University in Oxford, Ohio, where she works in the L.I.F.E. (Leading the Integration of Faith and Entrepreneurship) Research Lab.

Prior to this, she completed a Master’s degree from Miami University in Foreign Relations History, during which time she was published in several academic journals. She currently serves on the Board of Directors of Living Hope Mission, a faith-based 501(c)3 in Cap Haitien, Haiti, dedicated to empowering children and families by partnering with local church leadership to develop physically, emotionally, and spiritually healthy communities.

Born and raised in Lima, Ohio, Amanda made her way to Southwest Ohio after stints in Columbus, Ohio and Herforst, Germany. She lives in a small town surrounded by corn fields and spends most of her time in the woods or the local coffee shop.

The Faith Driven Investor movement stands on the shoulders of those who have come before us. John Siverling and the Christian Investment Forum are just one of the groups who have led this conversation, and we’re grateful to feature their contribution to the movement here.

Christian faith should not be an excuse for less than our very best effort.  Instead we are called to be the best we can be as we seek to glorify God in our thoughts, words and deeds.  In the financial investment management field, we are stewarding God’s gifts to the clients we serve, which can bring on an extra burden to achieve competitive returns.  Our ultimate scorecard of success is not the same as the rest of the world’s measuring stick, but we can make our culture better by being competitive with our performance.  This can lead more investors to use their assets for human flourishing, or as Eventide Funds has taken to saying, “investing that makes the world rejoice.”    

One of the ways CIF strives to build up and grow Faith Driven Investing in the public equities space is to counter the arguments used against Faith Driven Investing, such as that FDI causes underperformance, by providing both data and stories to financial advisors and investors.  We love telling and reading stories about successes in the Faith Driven Investing space.  Stories captivate and offer encouragement to others.  What stories often lack is the empirical evidence to support the foundation of those stories.  That is where our research becomes a necessity to support and defend our belief that Faith Driven Investing is not watered down investing compared to funds that don’t include faith values.   

In 2015, CIF completed a study into the performance of funds using Faith based investing criteria managed by CIF members.  That study provided evidence to support the position that using faith based values in the investment making process does not directly cause under-performance.  

Five years later, CIF decided to re-analyze the data and extend the analysis further by looking back 15 years and comparing the averages of CIF funds with the industry averages from Morningstar.  The 2020 research study on Faith based funds performance looked at all mutual funds that were managed by members of CIF, and compared the performance of those funds against the category averages over the last 15 years.  The fifteen-year history allows for data from the recession of 2007-2008, the slow recovery and the long bull market we experienced until the end of 2019.    Here are some highlights from the 2020 study.

Highlights

The study looked at return data for 44 Christian Faith based Funds in both equity and bond categories over a 15-year period ending December 31, 2020, and found that the performance of an average of those funds compared favorably against the benchmarks for each category, particularly in the equity funds categories.    The results were consistent over different time periods of 1 year, 3 years, 5 years, 10 years and 15 years.  The full 15-year period includes both bull markets and bear markets, including the 2007 – 2009 Great Recession. 

The CIF Equity Fund Composite average, with an annualized return of 7.1%, outperformed the similar Benchmark weighted average return, which had an annualized return of 6.3% over the 15-year period.  There were 35 funds included in the Composite across 16 categories.

The CIF Bond Fund Composite average, with a 4.2% annualized return, outperformed the weighted average Benchmark return, which had an annualized return of 3.8% over the 15-year period.  

The CIF Composite, which included 9 funds in 5 categories, performed relatively equal in the 2007-2009 Recession and has slightly out-performed in the nearly 10-year bull market that ended shortly after the December 2019 end of the analysis period.

Across six categories of equity and bond funds, each of which included at least 3 funds from the CIF Funds pool, the average of those funds outperformed the category benchmark average in four of the six, and in two categories the funds averages slightly underperformed the benchmark.  More analysis of the 1 year, 3 year, 5 year and 10 year time periods and risk metrics is included in the study detail.

These results support the business case that including faith based value criteria in the investment selection process can provide reasonable and competitive returns, allowing Christian investors the opportunity to invest according to their values while also acting in a financially sound manner.  This dispels some of the long standing perceptions that incorporating faith based criteria in addition to traditional investment criteria is correlated to underperformance.

Author’s Note

This study collected and analyzed financial data for a 15-year period ended December 31, 2019.  Given the volatility of the financial markets since February 2020 following the COVID-19 pandemic, the authors elected to review the year to date financial performance data for the CIF Funds and the related category benchmarks through May 31st, 2020 for any material or significant changes to the conclusions of this report.  The 15-year annualized return for the CIF Equity Composite Average dropped to 6.5% and the Benchmark weighted average return dropped to 5.7%, but the difference between the two remained the same at 13%.  Regarding the Bond category, the CIF Composite remained the same at 4.2% while the Benchmark weighted average increased to 3.8%, but again the difference remained the same at 9% outperformance for the CIF Funds Composite.  

Based on this updated analysis, we do not believe the results and conclusions from the full report require any disclaimer or modification.

Originally posted on Christian Investment Forum with permission to republish

The Faith Driven Investor movement stands on the shoulders of those who have come before us. John Siverling and the Christian Investment Forum are just one of the groups who have led this conversation, and we’re grateful to feature their contribution to the movement here.

The Christian Investment Forum completed a study on BRI Funds performance to further advance the knowledge of the correlation of values based investing and investment return.  The purpose of this study is to review the performance of the mutual funds managed by member firms of the Christian Investment Forum (CIF) over time relative to their respective Morningstar categories.  This study is not meant to identify or rate individual mutual funds or managers, or their unique approaches to Christian faith based investing (frequently described as Biblically responsible investing, or BRI).  Instead, the study seeks to analyze the broader relationship between performance and the use of BRI criteria in the investment decision making process.  It is the hope of the Christian Investment Forum that others may follow with additional academic research in this specific area of investing.

The use of Biblically responsible investing by CIF Members varies in the methods used and the priorities placed on each of the foundational aspects of BRI – Screening, Governance, and Advocacy.  Some firms and asset managers focus mostly on exclusionary screens of the investment pool, while others use both exclusionary and inclusionary screening.  Some firms also place a priority and focus on governance issues and shareholder engagement in addition to screening.

Previous research from other firms has shown that incorporating screens for social, environmental, and governance issues has a positive relationship to performance – said another way, funds that incorporate screening on average slightly outperform the market.  A review of four of these research documents is included in this paper in a following section.

These cited research studies focused largely on socially responsible investing (SRI) funds and their performance relationship to the industry averages.  Socially responsible investing criteria are similar to those used by faith based funds, and in fact the SRI databases usually include faith based funds in the universe studied.  Thus it is reasonable to view the findings of these studies as good proxies for the performance of faith based funds relative to the industry, but the direct relationship between faith based funds and performance may be hidden within the larger universe studied.

This study by the Christian Investment Forum focused only on Christian values based investing and the funds that follow this approach.  The goal was to test if this smaller segment of the broader socially responsible investing market had the same positive relationship to performance.

Based on the analysis of historical performance data from the funds managed by members of the Christian Investment Forum, the results did in fact corroborate the expectation that return performance was not reduced due to incorporating BRI, and in fact there was a general outperformance compared to the industry averages.   Over the last 5 years, a composite of the returns from all of the equity mutual funds within the Christian Investment Forum outperformed the industry average by 77 basis points (bp) on an annualized basis.

This broad equity composite is an easy summary to communicate, but it lacks the specificity of individual asset classes that is more valuable for analysis and for actual implementation.  Looking closer at specific categories, similar results were shown.  Categories were chosen which had at least 4 CIF funds in order to reduce individual fund overweighting of results.  In the Mid-Cap Growth category, the CIF funds composite outperformed the industry average 11.89% versus 9.21% on an annualized average return basis.  For the Large Blend category, the CIF Funds had a composite return of 8.87% compared to the average of 7.16%.  In the Intermediate-Term Bond category, the returns were very close, with a slight edge to the CIF Fund composite – 4.26% to 4.04% for the industry average.

Following the review of other Academic Research, we provide the details of the results for each asset class listed in the above chart – Mid-Cap Growth, Large Blend, and Intermediate-Term Bond.

In conclusion, the results of the prior research and this study of funds from CIF Member Firms reinforces what has been communicated by CIF on the advantages of BRI and the competitive performance of portfolio managers from firms in the Christian Investment Forum.  More research is warranted to further what has been done to date, and as longer time periods become available to analyze.  As is frequently pointed out, historical results are not predictive of future performance.  This is also true for perceptions or expectations of under-performance for BRI funds based on some prior experience.  With this study and others, we hope to re-engage with investors and advisors so they can review the current performance results of these BRI funds relative to the industry.

The results of this analysis are not meant to suggest that BRI funds will result in outperformance.  The most important reason to incorporate BRI funds into an overall investment portfolio is to better align investments with an investor’s values.  For investors and their advisors, considering funds that can align with their Christian faith need not be a choice between values and performance.

Link to Review of Academic Studies

The Faith Driven Investor movement stands on the shoulders of those who have come before us. John Siverling and the Christian Investment Forum are just one of the groups who have led this conversation, and we’re grateful to feature their contribution to the movement here.

The Faith Driven Investor movement stands on the shoulders of those who have come before us. John Siverling and the Christian Investment Forum are just one of the groups who have led this conversation, and we’re grateful to feature their contribution to the movement here.

According to new survey research done by the Christian Investment Forum in 2013, the level of Biblically Responsible Investing has seen strong growth with advisors who have used BRI in their practice, with 25% of them indicating their level of BRI assets has grown by over 20% in the last year and only 4% had a decrease.  This in part may be the result of the high level of interest from both advisors and investors.  80% of advisors said they would like to recommend BRI funds to their clients, and only 10% felt faith should not play a role in investing.  Not only are advisors interested in BRI, but they view it as credible and comparable in performance to other investing practices.

The survey also illustrated opportunities for continued growth in BRI assets.  The market share of BRI assets remains significantly below what would be expected based on both investor and advisor interest.  Responses from the survey suggest that knowledge of BRI, the investment choices, and the performance of BRI funds and portfolios needs to be improved in order to increase the usage of Biblically Responsible Investing.

From that survey data, following are the key takeaways:

Key Takeaway #1 – Awareness is Needed

The AWARENESS of the breadth of funds that use BRI is not as high as could be expected among advisors that are pre-disposed to a faith based advisory approach, though there is a general understanding of the core features associated with Faith Based Investing.

Key Takeaway #2 – Knowledge can Improve

The level of satisfactory KNOWLEDGE in BRI lags behind the awareness of the concept with financial advisors.  While they believe it is a credible approach, they seem uncomfortable to more widely implement it due to that lack of education.

Key Takeaway #3 – Usage will Follow

The USE OF BRI strategies, and investments into funds that use BRI falls significantly lower than the level the financial advisors indicated they would like, what they indicated their clients would prefer, as well as what other surveys have suggested is desired by investors.

The opportunity to fill the gap of awareness and knowledge can result in meeting a significant unmet need in the marketplace for funds and investing strategies that align with investor’s faith and values, similarly to how the socially responsible investing movement has grown.

According to the Forum for Sustainable and Responsible Investment, $3.31 Trillion of US domiciled assets were invested using SRI practices and held by 443 institutional investors and 272 money managers.  Removing the institutional market from the analysis, they estimate there were 720 SRI funds with a total of just over $1.0 Trillion in assets under management in 2012.  Based on a total market of $14 Trillion, SRI funds account for roughly 7% of total assets under management

The best estimates indicate there were approximately 89 religious mutual funds in 2006 with total assets of $17.7 Billion.  This estimate includes all religions, including non-Christian.  Research by independent wealth managers has identified approximately 50 Christian Faith Based Investing funds.  Based on the interest levels expressed by both advisors and investors, and using a current low average allocation of a 10% allocation to BRI funds, the potential market for Christian Faith Based Investing is approximately $1.6 Trillion, or 100 times greater than where we are today.  That suggests a long way to go but a great deal of opportunity.