Flocking to Faith-Based ETFs

Another mutual fund shop is taking a leap of faith into the ETF business.

Faith-based asset manager Praxis Investment Management launched its first ETFs this month, a pair of strategies similar to two of its mutual funds. It’s the latest addition to the faith-based category that, while growing, advisors don’t talk about as much as some clients would like, according to a survey by Eventide Asset Management last year. Less than 40% of those who work with financial advisors said they had heard about faith-based investing.

“Research shows that investors want advisors who understand and engage with their faith-based investing preferences,” Benjamin Bailey, the company’s vice president of investments, said in an announcement. “Our new ETFs provide practical solutions for advisors looking for lower cost, liquid, tax-efficient, values-driven investment options to serve these clients.”

Praxis What You Preach

The new funds, which trade on NYSE, are the Praxis Impact Large Cap Growth and Impact Large Cap Value ETFs. The products use quantitative equity strategies similar to those in the $580 million Praxis Growth Index Fund and the $470 million Praxis Value Index Fund. Both of the ETFs charge 36 basis points. Praxis, which started in 1994, is an Anabaptist asset manager that incorporates “work for peace, justice, compassion, and spiritual transformation” into its impact strategies.

More and more Christian- and Islamic-themed ETFs have come to the market over the past few years, and they have been attracting assets from investors who want to put their money where their faith is. Such funds tend to avoid investing in alcohol, tobacco, weapons, gambling, and adult entertainment, as well as anything associated with abortion, contraceptives, and stem cell research. Data from Morningstar Direct show:

• There are 34 Christian ETFs and seven Sharia-compliant ETFs, up from 18 and four in 2020, respectively.
• Christian ETFs represented a total of $5.7 billion as of March, up from $2.3 billion in April 2020.
• Sharia-compliant ETFs held $2.3 billion as of March, compared with $71 million in April 2020.

Investing at a Crossroads: Advisors may be taking notice. An estimated 2.6 billion people are Christian, representing nearly a third of the world’s population, and another 2 billion are Muslim. Eighty-eight percent of Christians who say their faith is important to them also want their investments to align with their values, per the Eventide data.

“By incorporating values-based investing into their offerings, advisors have the opportunity to differentiate themselves, foster deeper client relationships, and potentially gain a competitive edge in attracting and retaining clients across generations,” that firm’s head of marketing and advisor sales, Mark Wambolt, said in a statement at the time.