Article originally posted here by Ronald Blue Trust

by Ron Blue

The meteoric rise and fall of stocks like GameStop and other favorites on Reddit captured everyone’s attention earlier this year. No one imagined that mostly amateur investors could drive a beleaguered retailer’s stock price up more than 1,000% in a week, without any notable reason for renewed optimism in the company’s prospects. The stock soared as large crowds of mostly individual investors rallied around the idea of fighting back against Wall Street by purchasing stocks that hedge funds had placed large bearish bets on. Incredibly, these individuals succeeded in causing some hedge funds to exit their bearish positions at large losses, which fueled the rally further. (This event is known as a short squeeze.)

As GameStop surged, the S&P 500 sold off while hedge funds de-risked their portfolios and concern grew that this manic investor behavior might indicate a broader stock market bubble. However, within a couple of days GameStop’s stock price retreated, almost as quickly as it rose, and the stock market rebounded.

While the speed and size of the speculative rally that GameStop (and other stocks) briefly enjoyed were unprecedented, we do not believe this or other “micro bubbles” should concern long-term investors. More specifically, we don’t believe the surge in speculative trading activity by individuals pose a systemic risk to the financial system. Instead, we believe the GameStop scenario is symptomatic of two things: the current macroeconomic environment and technological innovation.

The macro backdrop is characterized by high debt levels, which are restraining economic growth. Slower growth has driven interest rates down, and lower interest rates have caused valuations of financial assets (like stocks and bonds) to increase. Consequently, the future returns for almost every asset class are below long-term averages. Additionally, because ownership of financial assets is uneven, wealth inequality was exacerbated by the surge in asset prices. This combination of lower prospective future returns and wealth inequality set the stage for opportunistic risk-taking.

When the virus came along it made matters worse by shutting down businesses and spreading the economic pain in a more acute and uneven way. As the government distributed relief checks, consumer savings actually increased–something we’ve not seen before in a recession. Fiscal stimulus has helped stocks go higher, lending credibility to the belief that stocks (or “stonks” as many jest) only go up. Although we know that is a flawed perspective, it is the fuel driving participation of some investing crowds today.

At the same time, technology has increasingly equalized access to financial markets. Trading fees have gone to zero, in many cases, removing one of the hurdles to frequent trading. Fractional share trading has given even the smallest traders access to expensive investments. Trading apps like Robinhood have socialized day trading and empowered the masses to feel comfortable making investment decisions. Social forums like Reddit, where the GameStop narrative germinated, serve as breeding grounds for pile-on investors.

The powerful combination of this technological and macro environment created the opportunity that culminated in the dramatic rise and fall of GameStop. There’s no doubt that pockets of irrational exuberance will continue to exist in the market and play out in unpredictable ways. However, we don’t believe these events threaten the larger market structure.

In the days ahead, investors will face many opportunities to abandon their well-reasoned investment plans in favor of speculative reward. We believe investors should remain vigilant and focused on a disciplined investing approach that is time-tested and reflects their own financial goals. Suitable investment opportunities remain for those who pay heed to valuations, diversify for various economic outcomes, and maintain an appropriate level of market exposure.

[ Photo by energepic.com from Pexels ]

by Amanda Lawson

God’s Kingdom is advancing where commerce happens. Much of this marketplace transformation is happening through entrepreneurs and investors. They shape the internal culture of a company, the economy of a city, and even the society of a country. When like-minded investors are strapped to the mast with entrepreneurs, they can weather the fiercest storms and sail into blue oceans filled with opportunity. 

For faith-driven investors, Marketplace offers access to a network of faith-driven entrepreneurs—founders who are seeking like-minded investors as partners in bringing the gospel and the glory of God to every industry, office-space, and board room. Regardless of asset class, Marketplace helps investors connect their capital with excellent and passionate entrepreneurs, engage in a community centered on biblical encouragement, and provides investors with a space to intentionally build their portfolios through coaching sessions, access to the best deals, and the Faith Driven Investor Conference.

The mission behind Marketplace for faith-driven investors is to help bring the kingdom on earth. It is a global movement and we need your help to reach our full potential. We’re looking for 100 Accredited Investors to Beta Test this with us. We’re looking for those that will be eagerly committed to making the platform better while putting real capital to work. You can learn more about Marketplace at the Faith Driven Investor Conference and hear from several of the participating members. Even better, you can hear from and connect with faith-driven entrepreneurs who are looking for opportunities to partner with investors like you, for the glory of God and the sake of the gospel.

The mission behind Marketplace for faith-driven entrepreneurs is to help bring the kingdom on earth. It is a global movement and for the first 12-18 months, it is free to join. You can learn more about Marketplace at the Faith Driven Entrepreneur Conference and hear from several of the participating members. Even better, you can hear from and connect with faith-driven investors who are looking for opportunities to partner with entrepreneurs like you, for the glory of God and the sake of the gospel. 

Article originally posted here by Jeff Haanen

by Jeff Haanen

A Model for Faith Driven Investors

“You know that those who are regarded as rulers of the Gentiles lord it over them, and their high officials exercise authority over them.  Not so with you. Instead, whoever wants to become great among you must be your servant, and whoever wants to be first must be slave of all. For even the Son of Man did not come to be served, but to serve, and to give his life as a ransom for many.”

-Mark 10:42-45

Investing for the majority of Christians is a puzzle for at least two reasons. 

First, investing is incredibly de-personalized. How many of us have actually gone into our 401(k)s or IRAs, looked at what mutual funds we own, then taken the additional step to research those fund’s top ten holdings – and then learned something about the companies we actually own a share in? In my experience, almost nobody. For everyday investors, most simply want to put the quarter in the vending machine, press “buy,” and get a bigger coin back out. In a heavily financialized economy, investing is complex and veiled under layers of lingo, financial instruments, and specialized professionals. Seeing an investment as caring for a group of people operating a business never crosses our minds. 

Second, most of us feel powerless. With total investable assets in the US at an estimated $42.1 trillion – which are often controlled by mammoth institutions like Vanguard, Blackrock or sovereign wealth funds – what impact can my widow’s mite tucked away for retirement really have? Wall Street is a powerful system that is beyond our control; even many” powerful” asset managers feel powerless, ever at the whim of market forces and corporate titans that seem almost trans-human.  

And yet, most of us don’t feel completely powerless when we go to work and engage in business. Business is a set of human relationships between investors, management, employees, and customers that most of us do have some say-so over.  We can’t – and shouldn’t – wash our hands of responsibility for why, how and what we do working in a business; can the Christian really claim that the provision of capital for that same business doesn’t also carry at least some moral responsibility? 

If investing is simply ownership over a share of a business, Christians might say that we’d prefer to both invest in and work in businesses that better reflect the kingdom of God rather than the kingdoms of this world. This tricky business because, of course, every business we invest in is a mix of good and evil, sinners and saints, redemptive products and depraved practices. No business (like no person) is perfectly, fully situated in the kingdom of light or the kingdom of darkness.

Yet I believe the New Testament gives us a way to understand what kinds of business better reflect (though not completely embody) God’s will for human relationships, business, and investing. The key, I believe, is wrapped up in a single idea: power. 

Upside-Down Investing

It’s been said that all models are wrong, but some are useful. This one is no different. However, I believe we can contrast business and investing activities that function in two different paradigms: the kingdom of the world versus the kingdom of God. One is characterized by power accumulated; the other, by power given. 

In this world of business, investors exercise power over managers, managers wield power over employees, and employees have power over customers. Simply put, “the rulers of the Gentiles lord it over them, and their high officials exercise authority over them.” It’s the way the world functions. Those with the most money exercise power over those with the least. In the ancient near east they were called “Benefactors.” Today, we’d simply call them investors. 

Yet over all of these people, another Power seems to be at work. Sometimes the power is “money,” or “the market,” or a corporation that is so large no one human can control it. They are nameless, faceless powers that seem to be controlling even the lives of the powerful men and women. 

The New Testament can be shifty speaking about these powers. They’re sometimes called principalities, thrones, or authorities. Some see a hierarchy of angels and demons. Others seethem as powerful institutions. But what’s clear is that they wield enormous control over human affairs, they’re generally associated with darkness, and Christ “disarmed” and “subjected” them through his death and resurrection (Romans 8:38, Colossians 2:15, Ephesians 6:12, 1 Peter 3:22). And they’re invisible. You can’t see the “powers,” but something certainly seems to be “there.” 

As it relates to the economy, those inside this system tend toward power-seeking and using others to gain more power. Investors extract money from companies, management uses labor for profit goals, and employees manipulate the desires of customers, ultimately decreasingtheir freedom and agency. Dominance of others and fear of losing power characterize this economy. 

It should be noted that these powerful systems are impersonal and faceless. Again, whether that be Mammon or the economy or a multinational corporation or “market returns,” people serve powerful systems that seem to have a super-human life of their own.  Even the “customer” is often made into faceless avatar, holding even a seat on the board of one of the world’s most powerful companies.  

Ultimately, in this system, power itself rules, and each person serves others who wield more power than they do. 

In contrast, God’s kingdom functions principally by pushing power down a system. The Christian gospel begins here, with the Incarnation of God himself, taking on human flesh as baby in a manger. God empties himself of his immense power, and for the sake of lost sinners, he takes on the nature of a servant (Philippians 2:6-8). 

In God’s kingdom, power is given away sacrificially for the benefit of others. It progressively lifts up “neighbors” with less power, particularly those in close proximity. It functions on an upside down logic, where the last become first, you find yourself by losing yourself, and servants are greatest of all. 

A “love your neighbor” ethic for business is most obviously seen, I believe, when investors give power to managers, managers to employees, employees to customers, and ultimately customers buy goods and services that raise human potential. Business here becomes an engine of human blessing, a way God provides for the needs of his people and lifts up the poor. The self-giving love of the Trinity is best displayed, economically speaking, when each person first looks to the good of the other. 

In stark contrast to the faceless and nameless powers and principalities, God’s kingdom is always personal. God is a person (actually, three persons), and he summons people to know and love people. Rather than fear and dominance, God’s kingdom is characterized by joy and service. 

Money is dethroned as a power that controls human affairs and instead repositioned as a part of the created world to be used, enjoyed, and given (1 Timothy 6:6-10; 17-19). 

Inspired by Jeff’s insights into godly investing? You’ll find even more voices on the FDI Youtube page. Subscribe today!

Love is an active force in God’s kingdom.  Whether it be managers lifting up employees, or employees working for the well-being of customers, love – defined as actively working for the good of your neighbors, and even your enemies – is central to God’s kingdom. It’s also the center point of a healthy economy. Desire in this kingdom is ultimately not for power, but for Christ himself who gives of himself for others. 

Again, the problem with both of these models is that we lived in a “mixed” reality, caught between God’s kingdom and the kingdoms of this world.  And it’s not just on a social level. Each of our hearts is a battleground between good and evil.  Some days we’re self-dealing, other days, we’re self-less. Some days I bow the knee to Jesus; other days, I bow the knee to Myself. Unfortunately, there are no perfectly clean lines between a business that is fully redeemed or fully depraved. We’re living perpetually on Holy Saturday, somewhere between Good Friday and Easter Sunday. 

And yet, I do believe we can notice signs that a business or economic system is moving toward the kingdoms of this world or the kingdom of God. For instance, I’ve noticed management can often “skip over” or use employees in route to giving a customer whatever he or she wants. Rather than empowering employees to serve customers, they’re often treated as expendable inputs that can be changed out at will. Companies with perpetually low wages, low employee satisfaction, and high turnover often fall into this pattern. Indeed, there are ways to be highly profitable, both through lifting up employees or oppressing them. 

Or, think of investors with no other ends than high returns. This naked focus on profit at all cost is often veiled with excuses like, “I have to. I’ll lose my own investors if I don’t maximize profit and give them what they want.” This passing on of responsibility for others – rather than taking responsibility for the well-being of others – is characteristic of systems built around the nameless, faceless powers. 

This power-accumulating approach also applies to the types of products and services that are created in business. There are many ways to make money, including by manipulating the customer’s more base desires. I’d argue that the rise in sports gambling, for instance, while it may be very profitable, does not serve a genuine human good. It preys often on those who are the most vulnerable – a key characteristic of a fallen world (Isaiah 3:14). 

In contrast, we can also see signs when business is moving closer to God’s kingdom. Good jobs that incrementally lift up the poor; products and services that meet real human needs; companies that restore the planet through thoughtful environmental stewardship; money invested sacrificially, which takes into account economic as well as social, spiritual, and cultural goods – business as God intended it is indeed a part of God’s will for his creation and can be a part of life in his Kingdom.  

Movement toward the kingdom of God looks like power used for the well-being of others. When proximity is brought back to investing, the practice of business itself begins to heal. Co-founder and former CEO of Southwest Airlines, Herb Kelleher once said, “We take great care of our people, they take great care of our customers, and our customers take great care of our shareholders.”  Indeed, when investors serve managers, managers serve employees, and employees serve customers – when each serves their economic “neighbor” – business itself can be a noble activity. 

The Faithful Investor 

How, then, should a Christian invest? 

First, Christians serve God and not the market, money, or any other power. Because this is true, all Christians should minimally begin conversations about investing with “What is good for people in and around this business?” and not only “How do I maximize my returns?” Christians, who follow a Suffering Servant above all, have the reason to persistently ask questions around moral and relational dynamics of business, especially those we invest in. 

Second, Christians can start to pay attention to the power dynamics even in the businesses in which they work. Is my company moving toward a system where power is hoarded or given, where people are served or used? The first step in noticing the tremendous impact of faith and investing is by paying attention first to your own workplace, and allowing the Spirit to re-shape relationships around the core principle “whoever wants to be great among you must be your servant.” 

Finally, Christians can lead the way in re-humanizing investing – even in public equities like stocks or bonds – by knowing, praying for, and finding ways to serve management. If the first “neighbor” an investor has is management, which I believe to be the case, Christians ought to first, learn what companies you own, and second, learn who leads those companies. This may occasionally result in shareholder activism; it also may result in divesting yourself of some equities and buying others. But if an investor’s first job is not to realize returns, but instead to serve, we can only serve people we know. 

When we take this simple step of knowing and caring for the managers of the companies in which we invest, we take a first step toward transforming investing. In doing so, investing is no longer de-personalized, and we are no longer powerless. We are people with real decisions to make, made in the image of the Son of Man, who “did not come to be served, but to serve, and to give his life as a ransom for many.” 

Our job, in short, is to turn investing upside down. 

This article was written and originally published by Jeff Haanen, a writer and entrepreneur. He is the founder of Denver Institute for Faith and Work, an educational organization that creates content and experiences around topics related to faith, work, the economy, and modern culture. He’s the author of An Uncommon Guide to Retirement: Finding God’s Purpose for the Next Season of Life as well as two forthcoming books from InterVarsity Press on work, spiritual formation, and the American working class. He lives with his wife and four daughters in Denver, Colorado, and attends Wellspring Anglican Church.

Article originally posted here by Access Ventures

by Access Ventures

If you have been a follower of Access Ventures for any amount of time, you have likely heard of our one-pocket investment approach. If you are new to the concept, a one-pocket mindset places your mission at the center of your investment strategy, thus aligning all of your assets to the values that drive your foundation. In contrast, traditional thinking believes in order to do the greatest good, you first need to make the most return—that good work and charitable contribution comes from the overflow of financial return.

In practice, the two investment mindsets are fairly similar. Both seek to optimize a portfolio of assets for the highest return possible given a certain level of risk appetite. You can think of portfolio construction like you would the building of a house. A house has certain basic goals that can be met through any number of combinations of design, materials, and construction. Many investment managers utilize the modern portfolio theory as a framework for constructing the right portfolio for a given set of circumstances. 

A one-pocket mindset places your mission at the center of your investment strategy, thus aligning all of your assets to the values that drive your foundation.

The fundamental difference between investment mindsets is that a one-pocket portfolio will be tilted towards investment options that reflect its value set. The challenge here is to find an optimal mix of investments that reflect values without causing the portfolio to take undue risk. I have described this process in detail previously with the key takeaway being it’s difficult but not impossible. Over time Access Ventures has sought to find efficient solutions to this complexity within each asset class. In this post we’ll walk through our Public Equities solution.

How Values Drive Portfolio Construction

In addition to a conviction to invest our capital in line with our values, we also believe that companies scoring well on environmental, social, and governance metrics offer above-market returns in the long run. However, mindful of the risk in pursuing this strategy we turned to market experts to craft our public equity portfolio.

Access Ventures utilizes the Ethic platform to invest in domestic and developed non-US public equities. Working with their team we have created a public equity index that remains true to our organization values while also pursuing risk-adjusted, market-rate returns. In a nod to our one-pocket framework we also invested directly into Ethic to help them build out their platform and bring it to market.

If you are unfamiliar with index investing, it is a passive strategy that attempts to generate similar returns to the broader market. There are many variations of an index fund but the general idea is that a fund will purchase a certain percentage of all stocks within a particular market and use algorithms to buy and sell securities in a fashion that mimics overall market conditions. Many investors prefer this approach because it offers low fees and meets or exceeds the performance of an active strategy where someone is picking individual stocks with the intent of generating superior returns.

A distinct advantage of using Ethic, as opposed to buying an off-the-shelf index fund, is that you are able to define the range of acceptable returns compared to the underlying index (which is called a ‘tracking error’). With a typical index fund this tracking error range is determined by the fund manager and may or may not fit within your personal risk profile.

The Access Ventures public equity index portfolio is comprised of many organizational values. Below are descriptions of just a few of those values:

Labor Policies and Practices

Firms with poor labor policies and practices contribute to a wide range of negative societal impacts and are prone to labor disputes, litigation, and worker unrest.

Predatory Industry

Operators of private prisons, payday lending businesses, and gambling facilities have disproportionately negative effects on vulnerable communities.

Operational and Social Failures

Poor relations between a company and its employees, its community, or its supply chains are major sources of legal and reputational risk.

How Values Impact Investment Performance

The performance of our portfolio is measured against comparable, publicly-available index options. Our US equity index tracks the IVV iShares Core S&P 500 ETF and our developed non-US index tracks EAF iShares MSCI EAFE ETF.

The driving values of Access Ventures have led to the divestiture of 205 companies in the US and 620 outside the US, with operational and social failures being a chief reason. One may think removing options from a portfolio works against the benefits of diversification and leads to greater risk. In fact, the risk in each of our portfolios has been considerably less than their respective indices over the last four years.

One may think removing options from a portfolio works against the benefits of diversification and leads to greater risk. In fact, the risk in each of our portfolios has been considerably less than their respective indices over the last four years.

So how has our portfolio performed? Put simply: better than the market.

Over the last four years ended August 31, 2019 our US index outperformed by a modest 0.02% on an annualized basis while our developed, non-US index came in with an impressive 0.41% positive variance (net of fees). Of course we are unable to predict whether this performance will continue, we are satisfied with the results to date.

Why are we sharing this information? It is our hope that you are encouraged by this disclosure and would explore how your foundation may construct a portfolio in line with its values. If you are interested in taking the next step, we are happy to share our thoughts and introduce you to our friends at Ethic.

by John Siverling

Hear the powerful story of successful Kingdom impact investing and community development in Philadelphia from Leonard Dow of Everence Financial presented at the 2019 CIF Leadership Summit.

by Stella Tai

Community development investing is one way that faith-based investors can use their investments to make a real impact on the communities where they live and work. 

Investing in community development finance institutions provides aspiring entrepreneurs with the resources they need to launch businesses and services that many underserved, low-income and minority communities might be lacking. Since generally CDFIs and borrowers are members of the community, they have a better understanding of what would benefit the community than an outsider might. This makes it easier for the most critical needs to be met in the communities where they are based.

The COVID-19 pandemic exposed some of the unique challenges faced by Black, indigenous and entrepreneurs of color in underserved rural and urban areas when it comes to access to capital. This capital is the funding necessary to operate and grow these entrepreneurs’ small businesses. The uneven access to the federal government’s Paycheck Protection Program (PPP) loans and other emergency financial assistance highlighted a clear funding gap that traditional banks have not filled.

To meet these needs, some borrowers have turned to alternative sources of capital such CDFIs, Community Development Credit Unions, community loan funds and other non-predatory lenders who have proven that they can creatively and efficiently deploy capital, tailored technical assistance and other support systems to help them recover, thrive and grow. 

Post-COVID pressures continue

As small businesses — particularly those in underserved, minority and low-income communities — have slowly emerged from the COVID-19 winter, the reality of rising inflation has brought new concerns, but these concerns come without the COVID relief valves available at the height of the crisis.

Many businesses that took big hits during that time now face three major concerns: First, they must grapple with increasing interest rates and the resulting higher costs of borrowing. Second, mounting fears of reduced consumer spending arise as customers adjust to lower disposable incomes due to increased costs of living. Finally, these small businesses face hiring challenges due to the continuing tight job market, when all businesses are fighting to retain employees.

Investors can be part of the solution

It is no surprise that impact investors are particularly interested in small businesses that are important drivers of the economy. These small businesses support neighborhoods and communities by creating meaningful jobs and driving innovation and competition. 

Through investments in CDFIs, investors can support mission-driven alternative lenders that help maintain momentum in the recovery of diverse and low-income entrepreneurs. These institutions are nimble and innovative in reaching minority communities in a way traditional lenders are not. Located in the communities where their borrowers are, these lenders offer funding for businesses and services that are critical to the local community, such as loans to support new affordable housing initiatives, increased access to health care and access to clean water. 

A simple way for individuals or institutions to support businesses in underserved and underrepresented communities is to identify investment products that channel a portion of assets to CDI. For example, at Praxis Mutual Funds®, a fund family of Everence®, we invest 1% of our managed assets to investments in Calvert Impact Capital, an impact-investing institution that helps people across the country and around the world.

Closing thoughts

CDFIs have what it takes to address financial inclusion at scale despite their challenges. They have processes in place to mitigate risk and can deliver capital in a more cost-efficient way, making it a win-win for the investors and the borrowers. Investing in CDFIs can help move us closer to a more equitable and inclusive economy.

Praxis Mutual Funds is a leading faith-based, socially responsible family of mutual funds designed to help people and groups integrate their finances with their values. Praxis is the mutual fund family of Everence Financial, a comprehensive faith-based financial services organization helping individuals, organizations and congregations. To learn more, visit praxismutualfunds.com and everence.com, or call 800-348-7468.