The Lord might work in mysterious ways, but two exchange-traded funds that launched this week apply a precise rules-based methodology involving artificial intelligence-driven software to bring biblically inspired investing to the masses.
Inspire Investing, an impact investing firm in Hollister, Calif., says investor demand led it to create the Inspire Global Hope Large Cap ETF (BLES) and Inspire Small/Mid Cap Impact ETF (ISMD) products that began trading Tuesday on the NYSE Arca exchange.
The funds are based on biblically responsible investing (BRI), a variant of the socially responsible investing (SRI) concept that’s gaining steam among institutional and individual investors.
“We feel that the SRI and BRI worlds have been too focused on the negative by kicking out the bad companies,” says Robert Netzly, president and CEO of Inspire Investing. “That’s important, but even more important to us is finding positive companies to invest in. We don't want to just not invest in companies that are bad, we want to invest in companies that are awesome and who are doing really good things. We’re trying to get people to invest in impactful companies that line up with conservative and biblical values, and are making meaningful changes in the lives of people around the world.”
While Inspire wants to inspire investors by focusing on the positive, it draws a hard line regarding excluding the negative. That means it’s a no-go for stalwart companies such as Amazon, AT&T and Google's parent company, Alphabet, which are corporations that comfortably sit in many SRI-oriented portfolios. (More on that later.)
As for the new Inspire funds, both of which track equal-weighted indexes built in-house by Netzly and his team, the Inspire Global Hope Large Cap ETF contains 400 large-cap companies spread across the U.S. (50 percent of the portfolio), international developed nations (40 percent) and emerging countries (10 percent).
Top holdings include Incyte Corp., Intuitive Surgical Inc., AutoZone Inc., STMicroelectronics NV and Eutelsat Communications SA.
The Inspire Small/Mid Cap Impact ETF holds 500 U.S. stocks evenly split between mid-cap and small-cap companies. The top five holdings are Kite Pharma Inc., Bluebird Bio Inc., Dycome Industries Inc., Builders FirstSource Inc. and Portola Pharmaceuticals Inc.
Both funds are rebalanced quarterly and charge expense ratios of 0.61 percent.
The indexes behind the Inspire ETFs are based on the Inspire Impact Score methodology that measures a company’s positive effects on customers, communities, workplaces and the world. It employs artificial-intelligence technology to filter millions of publicly available data points related to thousands of companies.
The Inspire funds join a small number of faith-based ETFs on the market. The Vident International Equity Fund (VIDI), Vident Core U.S. Equity Fund (VUSE) and Vident Core U.S. Bond Strategy ETF (VBND), which launched separately in 2013 and 2014, all have done well during their brief runs with assets under management exceeding $500 million at all three products. VIDI, the oldest fund, is just a hair below $600 million AUM.