Religious funds have performed relatively well during this down market and may make decisions not based on overtly religious reasons, such as shunning investments in companies seen as having excessive CEO pay or taking undo financial risk.
NEW YORK — Sam Saladino’s mutual fund wasn’t even a year old when the stock market began slipping. But even through the punishing run in stocks this year, he’s managed to attract investor dollars and beat his benchmark.
His Epiphany Fund, which invests according to Catholic principles, is among those that use religion as a guidepost and that could grow more popular as investors look to distance themselves from the excesses that led to an overheated housing market and an unsustainable climb in stocks.
Saladino has been surprised by the interest in his fund and gives some credit to the stock-market pullback that started in October 2007 and the recession that began soon after. He said investors not only have a new distaste for risky investments but also a yearning for back-to-basics investing.
“We still get people who call and thank us for the sacrifice we made to start this. I don’t know if that happens at Fidelity, but I doubt it,” Saladino said.
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The button-down approach of many religious funds isn’t necessarily in keeping with Wall Street’s brand of conservatism, which could simply mean putting money in safe holdings like government bonds.
Instead, these funds might select stocks of companies that aren’t seen as supporting or profiting from things like abortion or alcohol. The funds can also rely on standards that are less overtly religious. They might shun investments in companies seen as having excessive CEO pay or taking undo financial risk.
Religion aside, the results of this weeding-out can be impressive for investors. Saladino sold a stake in American International Group after it ran afoul of one of the fund’s routine reviews. The sale came before the government bailed out the company and AIG shares tumbled.
The fund, which will be 2 years old next month, recently was down 33.5 percent for the year compared with a 40 percent slide in the Standard & Poor’s 500 index. Funds that are new can attract money quickly, but that’s harder to do in a volatile market. Epiphany fund’s assets have doubled since June to $2 million.
Other funds guided by religion also are staying ahead of the market.
Saturna Capital’s Amana funds comply with Islamic law and avoid investments in financial companies. The fund sidestepped the plunge in these stocks after bets on mortgages and other debt began to sour. The company’s income fund recently was down 24 percent this year.
Amana funds have drawn new investor dollars each month this year. Even with the market’s tumble, assets stand at about $1.2 billion, up from $1 billion in November last year.
Of course even a well-intentioned fund isn’t much use if it doesn’t perform.
David Kathman, mutual-fund analyst at Morningstar, noted that expenses on some religious funds can be higher than average. And it’s important for investors to evaluate the funds as they would any others.
“They need to apply the same level of rigor, looking at expenses, the track record, the management,” he said. “Presumably if you’re buying a fund like that you have certain religious standards that you want to apply and you want to make sure the fund adheres to that.”