CIF Fund Performance Study 2020
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.