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September 12, 2003
Ave Maria Funds Promote Catholic Values Through Morally Responsible Investing
    by William Baue

Ave Maria Mutual Funds, which screen abortion, pornography, non-marital partner benefits, and Planned Parenthood contributors, represent another side of SRI.

Socially responsible investing (SRI) encompasses a diverse palette of investment philosophies that run the gamut of social values. While most people associate SRI with progressive environmental and social beliefs, the movement's foundation in ethics-based criteria means that the SRI umbrella also covers more conservative ideologies.

Many SRI mutual funds reflect a specific religious dogma. One such fund family is Ave Maria Mutual Funds, the largest and fastest-growing Catholic mutual fund family in the country. In addition to the Ave Maria Catholic Values Fund (ticker: AVEMX), the largest Catholic fund at $130 million in assets, the company also offers the Ave Maria Growth Fund (AVEGX) and the Ave Maria Bond Fund (AVEFX).

"I consider our funds morally responsible investing (MRI), a subset of SRI," said George Schwartz, president of Schwartz Investment Counsel, the investment advisor for Ave Maria. "SRI funds are generally interested in criteria such as environmental impact or the number of women on the board--most of the SRI funds are tree huggers."

"Some of them have positive screens for companies that have favorable employment practices toward homosexuals," Mr. Schwartz told

The Ave Maria Funds operate from the opposite end of that spectrum, screening out companies that offer non-marital partner benefits, regardless of whether they are same- or opposite-sex partners.

"Our Catholic Advisory Board believes that marriage between a man and a woman is a sacrament instituted by God, therefore when a company offers to put a non-marital union on par with marriage, it's a slap in the face to the Catholic Church and such companies should be screened out," said Mr. Schwartz.

"Some Catholics are critical because we don't screen enough things out," he added.

For example, Ave Maria does not screen out companies such as Wal-Mart (WMT), Cracker Barrel (CBRL), and Lockheed Martin (LMT). These companies have added sexual orientation nondiscrimination to their Equal Employment Opportunity (EEO) policies.

The Catholic Advisory Board, which determines all four of the funds' screens, is chaired by former Major Baseball League Commissioner Bowie Kuhn. Pro-family advocate Phyllis Schlafly and former Domino's Pizza chair Thomas Monaghan also sit on the advisory board, and Cardinal Maida, the Bishop of Detroit, serves as ecclesiastical advisor.

The funds' other three screens include abortion, pornography, and contributors to Planned Parenthood.

"The Catholic Advisory Board feels that Planned Parenthood is an evil organization that promotes and finances the murder of unborn children," said Mr. Schwartz.

Mr. Schwartz maintains that the screens do not adversely affect the funds' financial performance. The Catholic Values Fund is up more than 24 percent so far this year, outpacing its benchmark, the S&P 500, by more than 9 percentage points, according to Lipper.

"On a cumulative basis since the inception of the Catholic Values Fund on May 1, 2001, we're up about 20 percent and the S&P 500 is down about 15 percent," said Mr. Schwartz.

The top three holdings of the Catholic Values Fund are Automatic Data Processing (ADP), Genuine Parts (GPC), and Ross Stores (ROST). The top three holdings in the Ave Maria Growth Fund, Eli Lily (LLY), Patterson Dental (PDCO), and Factset Research Systems (FDS), will probably shift by the beginning of next year. Eli Lily, whose 11 main competitors offer non-marital partner benefits, recently announced it would do so as well as of January 1, 2004.

"If they do in fact implement the policy, we're going to have to sell the stock on January 2," said Mr. Schwartz.

Ave Maria, which owns $3.5 million of Eli Lily stock, wrote the company about its intention to divest.

"If we were the size of Fidelity and owned ten percent of Eli Lily, maybe they would be more receptive to our protestations, but since we only own a fraction of one percent, they didn't pay us much heed," said Mr. Schwartz.

Aquinas, the next largest Catholic fund family with about $150 million in assets in six funds, practices shareowner action by purchasing shares in companies to persuade them to adopt policies that uphold Catholic doctrine.

"That's the problem that Aquinas has; because they're smaller than us, they're really fighting an uphill battle trying to get companies to change their corporate behavior," concluded Mr. Schwartz. "It's a business model that we have not felt is worth pursuing."


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