8. Why not an Index Fund or ETF?
Many studies support PASSIVE investment management. They use an index fund (with a 30 bps management fee) or an ETF (with an even lower fee). Only a few managers consistently beat the index. Also, active investment managers generally do not consistently beat their benchmarks by enough to pay for their active management fees.
Nevertheless, we provide ACTIVE investment management for three reasons:
- Investor Interest – some investors want to own only stocks of BRI companies; they want their managers to use the best available investment management tools and methods to seek a good risk adjusted return
- Index Fund & ETF Economics – over $100 million in assets is needed to generate adequate profits to create a biblically screened index fund or ETF
- Biblical Values Complications – index funds and ETFs usually require hundreds of stocks and / or sophisticated portfolio tools that select fewer stocks in varying proportions to emulate larger portfolios, which may be possible with negative screening, but would be difficult with positive values because of the limited number of stocks
The market is currently too small for an index fund or ETF using BRI criteria. It is possible that a major Christian institution could support development of a BRI index fund or ETF, which provides lower cost management for smaller investors. While we have some thoughts on how this would be done, our current focus is on separately managed accounts that reflect biblical values.
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