Report: 'State of Play for Faith-Based Investment Strategies in Public Markets'

Here’s a statement from the website of BrightLight – a team of EverSource Wealth Advisors LLC, a Registered Investment Advisor in the US – that we can get behind: 'We believe you don't have to choose between profit and principles. Faith-driven investors can have both.'

Back in 2024, BrightLight put out a research report worth looking at today: Faith-Based Options in Public Markets. The report provides an overview of the state of faith-based investing in public markets, which will be of particular interest to faith-based asset owners (FBAOs) considering these kinds of readily investable vehicles.

The report finds that faith-based mutual funds and ETFs are growing, with assets in these products passing $100B for the first time. The total size of the faith-based market is significantly larger than that, exceeding $130B. Though this is indeed a large figure, the report notes that these assets represent just 0.35% of the total US mutual fund and ETF market of $28.8T – which suggests to us there is plenty of capacity and room for growth from FBAOs! 

There is certainly a wide range of choice for faith-based investors, with 231 products and strategies being managed by 27 different managers, though there is significant concentration, with the top five largest managers running 82% of the assets.

There are also ample areas to choose from for exposure across the major asset classes, with public equities representing 53% of the total, 24% in fixed income strategies, and the balance in diversified approaches, cash, and even some alternatives.

The performance of these products affirms a position that faith-based investors have heard from us before, (most recently in our just-released report Faith-Consistent Investing, Challenging the Performance Penalty Myth),  finding that over the 5-years studied, ‘the performance of faith-based funds is on average similar to that of the broader market’. Caution is advised in that ‘pockets of persistent outperformance and underperformance occur', which emphasises the need for careful selection and ongoing monitoring of faith-based investments, (as with all investments). Fees should also be carefully considered, with passive approaches charging significantly less than active ones.

In a further cautionary note, the report finds that one third of the funds studied may have ‘implementation gaps’ between their stated screens and their portfolios; as we’ve posted about in the past, faith-based investors are strongly encouraged to work closely with their asset managers to ensure that their investments reflect and promote their organisation’s ethical values.

Our recent post Faith-based due diligence: questions every faith-based investor should ask their asset manager can help you frame discussions with your asset managers, and we're happy to help with customised versions too, just drop us a line at info@faithinvest.org.

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