June 16, 2007
MMA Now Offers Small Cap and Growth Index Funds
by Anne Moore Odell
Leading faith-based investment company MMA Praxis Mutual grows its offerings with two new screened
Praxis is the translation of an idea into practice. The goal of MMA Praxis Mutual is the translation of the ideas
of the Anabaptist faith tradition into the management of financial resources. Started by the
Mennonite Mutual Aid (MMA) in
1994 with headquarters in Goshen, IN, MMA Praxis works with MMA's mission of leading people "toward
a greater practice of biblical principles of holistic stewardship." Toward that end, MMA Praxis has
recently added two new funds into their family of socially screened funds: a Small Cap Fund and a
Growth Index Fund.
"MMA's approach to financial decision making holds in tension a
responsibility for the productive use of financial resources and a deep-seated concern for the
individuals, communities, and environments that our investment choices affect," said John L.
Liechty, President, MMA Praxis Mutual Funds and MMA Senior Vice President of Financial Services.
"The approach is heavily oriented toward positive screening, active shareholder engagement, and
community development investing where possible and appropriate."
All of MMA's funds are
screened according to their six investing core values: respect the dignity and value of all people;
build a world at peace and free from violence; demonstrate a concern for justice in a global
society; exhibit responsible management practices; support and involve communities; and practice
MMA Praxis has named Luther King Capital Management (LKMC), of Forth Worth, TX, sub-advisor of the Small
Cap Fund. The Fund will have a small-cap core management style that will allow the managers
flexibility to tilt the portfolio toward either a growth or value direction.
"There is a
dearth of small cap SRI actively managed funds," said Liechty. "We felt that this particular space
in the SRI fund world was not crowded, and through market research received strong support for
adding a small cap fund to the MMA Praxis family of funds."
2000 Index will benchmark the Small Cap Fund. The Fund's portfolio includes small cap companies
between $400 million and $2 billion at time of purchase. As stocks reach $3 billion in market cap,
they are trimmed in the portfolio and when they reach $5 billion in market cap, they are sold from
the portfolio. The Fund will hold a portfolio of approximately 80 to 90 common stocks.
Luther King Capital is co-managed by J. Luther King, Jr., founder and CIO, and Steven R.
Purvis, Principal, and day-to-day Manager of the Small Cap Fund. The firm has been managing
socially responsible portfolios since the early 1980s. The firm utilizes KLD Research and
Institutional Shareholder Services (ISS) in its screening process for companies meeting SRI
"The overall objective of LKCM's small-cap strategy is to provide superior
returns relative to the firm's benchmark with a lower level of risk or volatility," explained
Purvis. "Focusing on the criteria set forth in LKCM's investment philosophy such as competitively
advantaged companies, high returns on invested capital, and strong balance sheets, the analysts and
portfolio managers perform in-depth primary analysis on companies between $400 million and $2
billion. The process is composed of 80% fundamental analysis led by the analysts and 20% macro
factor analysis performed by the portfolio managers."
The newly launched MMA Praxis
Growth Index Fund is constructed to complement the MMA Praxis Value Index Fund, which was launched
six years ago. Chad M. Horning of MMA Capital Management manages both the new Fund and the Value
Index Fund. The MMA Praxis Growth Index and MMA Praxis Value Index funds were designed to represent
the growth and value styles of investment. There are some overlapping holdings, but their market
weight is split between the two funds on the basis of their value-style or growth-style attributes.
"Strategically, the Growth Index Fund will allow the investor who desires a passively
managed, growth-style oriented SRI fund to achieve exposure to the large and mid-cap range of the
domestic US equity market," Leichty explained. "When combined with the MMA Praxis Value Index Fund,
it will enable an investor to gain broad exposure to the entire large and mid-cap space."
The Growth Index Fund is managed using the custom MMA Growth Index, which is calculated by
Morgan Stanley Capital International (MSCI),
based on MMA's unique screens. The MMA Growth Index is a subset of the MSCI US Prime Market Growth
Index. The MSCI US Prime Market Growth Index represents the growth companies of the MSCI US Prime
Market 750 Index, a universe of large and medium capitalization companies in the US equity market.
"Stocks are chosen for the fund with the purpose of matching the performance of the MMA
Growth Index, and as such, there are no active portfolio management aspects to the Fund," said
Horning. "However, we do use optimization techniques to manage the fund with fewer than the total
number of stocks that are actually in the MMA Growth Index benchmark while still retaining very low
Both new funds are open to any interested investors, inside or outside of
the faith community. Minimum investments for the A and B shares are $500. Institutional shares
start at $1 million. The MMA Praxis Small Cap Fund and the MMA Growth Index Fund were both seeded
with $1 million. The tickers for the new MMA Praxis Small Cap Fund are A Share (MMSCX), B Share
(MMSBX) and I Share (MMSIX). The Growth Index Fund's tickers are A Share (MGNDX), B Share (MGDEX)
and I Share (MMDEX).
"We view faith-based investing to be a significant subset of
socially responsible investing. Both SRI and faith-based investors may end up making very similar
investment decisions," said Liechty. "The primary difference is motivation. Faith-based investors
are prompted to act by their religious convictions, seeing themselves and their investment managers
as co-stewards of the resources entrusted to them by God," Liechty added.
Last fall, MMA
added a full time position to further expand its efforts in social research, shareholder advocacy,
and reporting and communication. Earlier this month, MMA launched "In Good Faith," its first blog, hosted by Mark
Regier and Chris Meyer. The blog will explore the practical challenges and opportunities of
faith-based, socially responsible investing.
As of March 31, 2007, MMA Praxis has more
than $869 million under management.