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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 funds.


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 environmental stewardship.

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."

The Russell 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 guidelines.

"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 tracking error."

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.


 

 
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