For Christian Fiduciaries: Understanding the Nuances of an Investment Policy Statement
By: Richard Todd
Investors are responsible for the elements of a portfolio that will determine its design, including portfolio objectives such as time frame, distribution needs, and liquidity. With the advice of an experienced fiduciary advisor, an investor is also responsible for determining the other key elements of a portfolio, including asset allocation, manager/product selection, ongoing monitoring, and portfolio rebalancing.
How should Christian investment guidelines be set? We believe that setting Christian investment guidelines is a spectrum of decisions.
Below are three examples along the spectrum (we are not making a values judgement):
Mid-West Christian Foundation
This foundation invests in low-cost secular index funds without regard to Christian social screens. They are not trying to “make a point” with their portfolio; they are striving to make the best returns to further their Christian grant-making mission.
Catholic Schools Endowment
Taking the United States Conference of Catholic Bishops (USCCB) investment guidelines into account, this organization uses products and strategies that screen out “sin stocks” pertaining to abortifacients, contraception, embryonic stem cell research, and pornography. However, in some asset classes, such as hedge funds, floating rate corporate loans, and private debt, the organization makes exceptions due to the lack of quality managers and the diversification benefits of the strategies.
Western Catholic Foundation
Using the tenets of the USCCB investment guidelines, this foundation screens out objectionable companies from their portfolio, employs some positive screens such as company culture, and considers impact investing. In addition, they also evaluate the values of the investment firms that manage funds within the portfolio. Numerous companies can manage a Catholic screened portfolio, but many support organizations that are antithetical to Catholic moral teaching.
Should you care about your advisor’s and investment manager’s values?
Most believe that the answer is yes. As an investment consultant, part of our due diligence process goes well beyond the routine investment research, due diligence, and performance analysis of money managers. At Innovest, we also scrutinize the values and cultures of these organizations. This analysis can be shocking. In fact, a manager who invests hundreds of millions in Christian dollars told us that part of their motivation in working with Christian organizations was to offer their progressive ideology to the “backward” Christian thinking.
It’s important to understand where the boundaries are to create and maintain a well-suited, values-aligned, and solid-performing investment portfolio.