ETF Focus: Should Wall Street let God guide stock-market investments?

The latest entrant to the exchange-traded fund universe takes its cues from the Good Book as much as the balance sheet, excluding companies that “do not align with biblical values,” as the prospectus puts it, and favoring ones with “Christian-themed products or services” or which otherwise operate along the tenets of the Christian faith.

The Inspire Global Hope Large Cap ETF BLES, +0.00% —which made its debut on Tuesday, along with a small and midcap fund ISMD, +0.28% with an identical strategy—was designed for religious investors looking to have their portfolio holdings align with their personal beliefs.

“The goal of the fund is to create a meaningful impact in the lives of people all around the world. We endorse companies that are doing amazing things like curing cancer, providing clean water, which operate with the highest level of integrity, and which are blessings to their consumers and employees,” said Robert Netzly, chief executive officer of Inspire Investment.

“We’re meeting a demand from investors with conservative values, and one of the things they want to support is traditional marriage.”

Robert Netzly, chief executive officer of Inspire Investment

The fund doesn’t invest in companies that fail to meet its moral criteria, including ones in the alcohol, gambling, or pornography sectors. It also excludes companies that are supporters of Planned Parenthood and which “advance” same-sex marriage approval.

“We’re meeting a demand from investors with conservative values, and one of the things they want to support is traditional marriage,” Netzly said. “Our investors don’t want to be involved with gay marriage.”

Religious investing has a long history on Wall Street, with a number of mutual-fund providers offering Christian or Islamic products that adhere to the particulars of those faiths. Shariah-compliant funds for Muslim investors, for example, don’t invest in banks because the religion forbids charging interest.

Among ETFs, there is the Global X S&P 500 Catholic Values ETF CATH, -0.21% which was launched in April 2016 and is built around the investment guidelines of the U.S. Council of Catholic Bishops. Those guidelines prohibit investing in companies based on their services—including ones that provide abortion, weapons, or which work with embryonic stem cells—or other practices. It bars companies that discriminate on the basis of race or gender, and it doesn’t include screens for sexual orientation.

Apple Inc. AAPL, +0.04% whose chief executive Tim Cook is openly gay, is the top component of the Catholic Values fund; it is not a holding of the Inspire ETF.

The Global X fund dipped 0.2% on Tuesday, though it is up 5.9% thus far in 2017, slightly better than the 5.6% rise of the S&P 500 SPX, -0.26%

For the Inspire funds, the large-cap ETF ended flat on the day while the small-cap version rose 0.3%. Both were extremely thinly traded, with only three trades occurring on each during the regular session, according to FactSet data.

Based on data about the underlying index, the equally weighted fund’s top holding is Mead Johnson Nutrition Co. MJN, -0.07% though it only comprises 0.31% of the portfolio. Other top names include Idexx Laboratories Inc. IDXX, +0.93% U.S. Steel Co. X, +1.39% and Invesco Ltd IVZ, -1.41% The fund has heavy overseas exposure. While 46.3% of its composition is U.S. names, an additional 20% is from Great Britain (9.1%), Australia (7.8%), and China (3.5%). The remaining third is from “other” countries.

Despite the limited record of the ETFs, the Inspire Global Hope Large Cap Equal Weight Index, which the fund tracks, has shown good performance. Since the start of 2016, it has handily outperformed the S&P 500.

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