The CATH fund debuted in April 2016, and so far has achieved its mandate to match the performance of the U.S. large-cap market while enabling people to invest according to their faith.
The fund has performed in line with S&P 500 Index-tracking ETFs from iShares, Vanguard and State Street. Granted, those three funds all have single-digit expense ratios, but faith-based investors appear willing to pay roughly 20 to 25 basis points more for a comparable product.
“The idea [for CATH] originally came to us from a financial advisor who managed a fair amount of money for Catholic institutions, endowments and foundations,” Jacobs explained.
He added this advisory firm screened individual securities to align them with Catholic investment guidelines, but found it to be a very labor intensive and inefficient process. So they approached Global X with the idea of putting this strategy into an ETF wrapper.
Jacobs said CATH attracts both institutional and retail investors. He noted that CATH’s track record prompted inquiries from clients who wanted the fund's approach expanded to non-domestic equity markets.
“If you look at a global portfolio of roughly 50% to 60% being U.S. and 30% to 35% being international developed, it makes sense to extend this approach to the next biggest portion of an investor’s equity portion of their portfolio,” Jacobs said.
He posited that CATH and CEFA are designed to be core portfolios because both products reweight their sector exposure to match their initial benchmark to reduce tracking error.
“You could make a comprehensive portfolio on the equity side with just these two funds,” Jacobs said.
Based on the success of CATH, that’s a message that could resonate with investors infused with Catholic values.