IFA Radio's Episode 30

IFA Radio
Monday, July 26, 2010

 

Mission Responsible
Among individual investors and institutions, the question often arises: How can we invest in a manner that is consistent with our faith? And a further basic consideration quickly falls on the heels of that question: How much return must we sacrifice to invest in a socially responsible manner?
Mary Brunson, Vice President of Investing for Catholics (IFC) a division of Index Funds Advisors, Inc. (IFA), is the driving force behind a movement that the United States Conference for Catholic Bishops has encouraged and asked to share with Catholic individuals and institutions throughout the country. Essentially, IFC has two goals:
1.      To educate the Catholic community on the benefits or passive investing.
2.      To dispel the myth that social filters mar the returns of portfolios, when in fact the portfolios with social filters have the ability to capture similar returns to traditional index funds.
The foundation of IFC is built from IFA’s passive investment strategy and principles. The process of socially responsible investing begins with the traditional index portfolios. A third- party corporation then applies the outlined social values as a filter to the index funds, creating socially responsible index funds. In this way, IFC remains an advisor for passive investment strategies to ensure that optimal returns are accomplished. Often, tying the investor to the mast is the strategy that benefits the investor in the long run. The process of screening thousands of securities and companies is not complicated, yet aggressive enough to extensively and properly evaluate the stocks before placing any investments. In the end, investors enjoy peace of mind when invested with socially responsible funds because they can achieve optimal market returns without unneeded expenses or excuses.
Harry Markowitz, Nobel Laureate and IFA consultant, also weighed in on the issue of social filters disbanding the diversification accomplished by worldwide index funds. Teaming with IFC Vice President, Mary Brunson, Markowitz and Brunson produced an academic paper theoretically and empirically reinforcing the notion that investors can in fact invest in a socially responsible manner while expecting little or no sacrifice to returns. Using 82 years of back-tested performance data, both were able to confirm the similarities of returns from both strategies. In truth, socially responsible investors are afforded the ability to invest in a manner adhering to their values. 
IFC’s questions to you: Are you a socially responsible investor? Do you like achieving the expected market rates of return? Do you want to adhere to your values when investing? Now you can take the first steps and discover the world of passive investing geared towards social responsibility.

 

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