Thursday, June 30, 2011

FaithShares Catholic Values: The Only Catholic ETF Out There

So you've read my series on the US Conference of Catholic Bishops' investment guidelines and figured you are just a little too lazy to go through all of that research.  Or you've done all the research and made your picks (good for you!), but you wanted to hedge your bets and buy something that performs a little more like the market.  Well, do I have something for you!  It is the only Catholic ETF out there: the FaithShares Catholic Values ETF (Ticker: FCV).

First of all, if you don't know what an ETF is, the acronym stands for "Exchange Traded Fund".  What that means is it is like a mutual fund where it's run by a fund manager and has many different holdings, but it trades like a stock, where you can buy and sell it within fractions of a second on the open market.  There are also no sales loads, redemption fees, exchange fees, etc.  In other words, it's got all of the advantages of a mutual fund, but not many of the disadvantages.  It does have management fees, however, but really, what funds don't?

I did not feel like boring myself with reading its prospectus (you should if you're thinking about buying it), but I did take a peek at its fact sheet.  From there, I found out what their strategy is.  They take the 400 largest US stocks and apply a screen of them based on the USCCB investment guidelines.  This filters out a number of companies that violate the guidelines.  They then rank the remaining "good" companies based on the same USCCB guidelines.  Once they have a ranking, they take those stocks, and perform sector allocation so that the fund matches the MSCI USA Index, which, for all intents and purposes is equivalent to the S&P500 index.  In short, the FCV mimics the market but invests only in companies which have been screened for Catholic values.

Figure 1: FCV's Performance (Blue) Compared to That of S&P500

Looking at Figure 1, it appears FCV mimics the S&P500 index pretty well.  If you're looking for market returns but want to adhere to Catholic values, this ETF is for you!

I also looked at its top holdings and was quite happy to see 2 of my 4 holdings, Google (Ticker: GOOG) and First Solar (Ticker: FSLR).  My other two, Synaptics (Ticker: SYNA) and True Religion (Ticker: TRLG) were too small to even make it on the radar for the fund to consider.  I had written earlier that I was concerned by Google's leanings to the political left.  I had eventually worked that out and concluded that it was likely ethically acceptable to invest in Google.  I'm glad I've gotten confirmation here.  I will sleep well tonight!

Another thing to mention is that FaithShares donate 10% of the fund's net income to a Catholic charity/organization.  This is excellent!

Overall, I think this ETF is not a bad investment vehicle for those who are lazy, but ethically conscious, or for those who want to hedge their bets.  Do be aware that someone is making an investment decision on behalf of you, and he/she may be wrong!  Factor that into your investment decision.  Lastly, if you're not Catholic, FaithShares does have other Christian oriented ETFs as well.  Do check them out!