Putting Faith In Investing

Religion is defined as “a cause, principle or system of beliefs held to with ardor and faith.”

There are more than 4,000 religions in the world. The biggest, with a little more than 2 billion adherents, is Christianity. Next, with a little less than 2 billion followers, is the Islamic faith, which is also the fastest-growing. By around the year 2060, if estimates hold, Islam will grow 70% and be the world’s dominant religion.

Most major religions are expected to grow by midcentury, too, just not as much: The number of Christians is expected to grow 34%; Hindus, 27%; and Jews, 15%.

This is important intelligence for the world of investing. Clearly, it means more attention must be given to Muslims, but there is also a more general takeaway: It means most people in the world, 84%, operate by some form of belief system. Indeed, values-based investing is on the rise. The Wall Street Journal recently noted this in a headline, “Financial Advisers Put Faith in Religion-Based Investing.” It found more advisors are helping clients coordinate their financial and spiritual lives.

The challenge for advisors is to quantify those ethereal values and articulate them, when possible, in the capital markets.

To be sure, there are myriad religious funds and ways of investing. According to research published in the Journal of Applied Business and Economics, there are 71 open-end mutual funds defined as faith-based. That, of course, doesn’t include managed accounts and bespoke portfolios offered by RIAs for religious clients.

Goals and beliefs are unique. But faith is a good and wide first filter for building a universe of investments that might appeal to an investor; it’s a soft hook.

Saturna Capital's Amana Fund family was built on the fundamentals of Sharia, or Islamic religious law. Its first fund, the Amana Income fund, was launched in 1986. Generally, Islamic principles require that investors share in profit and loss, that they receive no usury or interest and that they stay away from businesses involved with alcohol, pornography, insurance, gambling, pork processing and interest-based banks and finance associations. The fund does not make any investments that pay interest. Also, Islamic principles discourage speculation, therefore the fund tends to hold investments for several years.

From this foundation, Saturna has evolved into a multifund investment management organization. It has 13 funds under its umbrella and $4.5 billion of assets under management.