Tom Phillips has spent the last 33 years as a money manager and a lifetime as a Christian. Those two have come together in FaithShares which puts a decidedly biblical spin on investing.
The Oklahoma City-based company creates funds based upon the established tenets of different denominations so investors can see their money is going to companies aligned with their values.
“I’ve been in business for a long time and for over the last 20 years I’ve worked with Christian foundations,” Phillips explained in a telephone interview with Everyday Christian. “No matter how big the foundation may be, there is always tension and debate over how to invest without investing in sin stocks.
“I’ve had a couple of money managers turn down working with a Methodist foundation because it was too restrictive. In this business, that’s still shocking to me that someone who does this for a living would turn down the opportunity to manage a fund.”
However, having reservations and restrictions on where investment dollars are funneled is precisely what FaithShares is about.
The firm operates a series of Exchange Traded Funds, or ETFs. ETFs are created by a pool of stocks being gathered together and having screening tests applied to them based on different value sets. The ETFs are then bought and sold on the New York Stock Exchange like individual stocks.
The differences between ETFs and traditional mutual funds which make up standard 401(k) offerings are twofold, Phillips explained. First, ETFs are fairly static in the companies they invest in as opposed to the shifting which occurs within mutual funds solely to maximize dividends. Secondly, ETFs have a greater degree of transparency, which is precisely why investors are attracted to them.
“You could have an ETF which bundles stocks from a particular country, like China, or in a particular industry such as the tech sector,” Phillips said.
In this instance funds are aligned with social values. For example, there are funds which bundle alternative energy stocks or companies which are viewed as environmentally friendly. Phillips said FaithShares is the first Christian ETF. Islam is the only other faith currently represented by an ETF.
“It is part of a whole trend toward socially responsible investing,” Phillips said.
Funds are decided upon, too, by their ESG scores – environmental, social and governance factors – while they are run through the value screens.
“We actually don’t spend a lot of time predicting what will be in and what will be out,” Phillips said. “The ESG score has over 2,000 data points which it works through.”
So then how would your investment portfolio look different if you invested in one of FaithShares’ funds over another?
Quite a bit.
Consider alcohol as a screen test. The Lutheran and Catholic funds would allow investments in firms connected to alcohol-related businesses on a case-by-case basis. The Methodist Values fund is restricted in alcohol investments as long as the firms don’t have a majority of their revenues come from alcohol. The Baptist and Christian funds forbid investments in alcohol.
The makeup of the individual funds therefore differs in what specific stocks construct their portfolios. Take the Baptist Values Fund. It features easily recognizable companies such as AFLAC, Heinz and American Express. By way of comparison, the Catholic Values Fund contains all three of those companies but excludes Johnson & Johnson, which is part of the Baptist fund.
On a personal note, FaithShares allows Phillips to live out his own faith in the world of finance, which has rewards which can’t be quantified by dollar signs.
“It is a marvelous opportunity to get faith in marketplace and a proactive way to get God in the discussion,” Phillips said. “Obviously it is going to be controversial when it comes to religion. It’s not one size fits all, it’s one size fits one. My expression of faith is going to be different than yours or my wife’s expression of faith. This gives people an opportunity to live their faith in a unique way.”