Investment principles and strategies of faith‐based funds

Abstract

Purpose To examine the rationale for the investment principles adopted by faith‐based funds from a biblical perspective and to evaluate the performance of faith‐based ethical funds. Design/methodology/approach A multi‐factor Carhart model is applied to examine the risk‐adjusted financial performance and investment strategies of faith‐based ethical funds. Findings The statistical results indicate that the faith‐based funds as a group do not under‐perform the market on a risk‐adjusted basis. Practical implications This suggests that investment managers may incorporate moral/ethical components into their investment decisions without unduly shortchanging their clients for whom they have fiduciary duties. Originality/value This is one of the very few papers which study faith‐based funds.