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September 18, 2002
Religious Mutual Funds Multiply in Numbers and Assets
    by William Baue

Faith-based mutual funds represent a fledgling but fast-growing movement in the socially responsible investment field.

Today, Mennonite Mutual Aid (MMA) Praxis Mutual Funds released an analysis that found the number of religious mutual funds on the market has grown 121 percent since 1999, while the number of all other mutual funds grew by only 16 percent. Also of significance, the amount of assets invested in religious mutual funds rose by 21 percent as compared to growth of 11 percent for all other mutual funds. Thomson Financial's Wealth Management Group conducted the analysis, continuing identical research it conducted in 1999. In the analysis, religious mutual funds are defined as those that make investment decisions according to faith-based precepts as identified in the funds' prospectuses.

"The number of religious mutual funds has grown almost eight times faster than all mutual funds since 1999," said MMA Praxis Mutual Funds President John L. Liechty. "The amount of [assets] invested in religious mutual funds is growing almost twice as quickly as the rest of mutual funds. These findings clearly show the growing link between faith values and finance decisions."

The analysis reveals that the number of religious mutual funds in the U.S. grew from 34 in 1999 to 75 in 2002, while the number of overall mutual funds in the U.S. grew from 6,366 to 7,379. The amount of assets in religious mutual funds rose from $3.65 billion in 1999 to $4.42 billion in 2002; the amount of assets in all mutual funds grew from $4.3 trillion to $4.8 trillion. For the data on the overall mutual fund universe, Thomson drew on information provided by the Investment Company Institute.

"The opportunity for growth among faith-based investors is quite enormous," said Mr. Liechty. "This is a fledgling movement among the growing socially responsible investment community, and I think it's going to continue to build at a much faster pace than the normal investment world will experience."

Mr. Liechty supported this opinion by citing the results of MMA's 2001 opinion survey, entitled Where Faith and Wall Street Intersect, which found that a majority of U.S. investors incorporate their personal ethical values into their financial decisions. The survey also revealed that only 18 percent of investors said they had ever heard of religious mutual funds. Of that small percentage, only about 7 percent actually invest in religious mutual funds, according to the survey. These numbers suggest that firms offering religious mutual funds have their work cut out for them to communicate the availability of their products.

At the same time, the survey results suggested a large market potential for religious mutual funds. Just under half of the 1,141 investors surveyed, regardless of their religious orientation or whether they had heard of religious mutual funds, expressed some degree of interest in investing in religious funds. Apparently many investors who were merely considering religious mutual funds a year ago have decided to invest in ways that reflected their faith-based values.

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