Ave Maria Funds Deliver Heavenly Returns

“There’s no SRI going on here at all,” George Schwartz, CFA and president of Schwartz Investment Counsel, bluntly stated at the outset of the interview. “We do MRI.”

For those wondering, SRI is obviously socially responsible investing, but MRI?

“Morally responsible investing,” Schwartz said.

Although Schwartz (left) is the manager of the Ave Maria Mutual Funds, he gets quite a bit of input, much of it from notable names. The funds’ advisory board is a who’s-who of high-profile Catholics; retired football coach Lou Holtz, Larry Kudlow of CNBC, pundit Phyllis Schlafly and philosopher Michael Novak are just a few.

The direction they give is what you’d expect with a fund that invests according to religious prescripts.

“We screen for a narrow focus,” Schwartz explained. “Abortion is a big one, so any company that performs abortions or donates to abortion providers is prohibited. That includes dug companies that make abortifacients and hospitals that perform them. Investment is prohibited in any company that donates to Planned Parenthood, for instance.”

Investment in embryonic stem cell research is also prohibited, though Schwartz was quick to point out that adult stem cell research is not.

“Lastly, any company that makes and distributes pornography is screened out,” he added.

Does that include companies like HBO and some of the racier content they sometimes air?

“We have a number of screening service providers the board has approved that make those determinations.”

He noted that companies screened out account for around 150 companies out of the benchmark Russell 3000, so the impact is not great, but it’s nonetheless strict. The board’s direction provides less room for movement on the issue than even that allowed by United States Conference of Catholic Bishops. That organization states no more than 5% of a company’s revenue can come from the mentioned topics in order to invest; for Ave Maria, it’s zero.

“Some might say it’s operating with one hand tied behind my back,” Schwartz argued. “I don’t see it that way at all. For me, it’s needed direction. And some of those companies we wouldn’t invest in anyway; they’re just lousy businesses with poor fundamentals.”

And to the ongoing argument that investors must sacrifice returns for their conscience when investing in SRI —er — MRI companies?

“We’ve experienced a 9.6% average return each year with our largest fund for the past five years, versus 6.1% for the index. So that 350 basis points of outperformance each year for the past five years.”

Other items of interest to which Schwartz pointed:

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Check out Does Catholic-Friendly Investing Lead to Earthly Rewards? on AdvisorOne.