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Religious Funds' Ads Sport Biting Morality Check


Religion may be a solemn subject. But for the Ave Maria Mutual Funds managed by Schwartz Investment Counsel of Bloomfield Hills, Mich., a sense of humor, along with a morality check, is a blessing.

Beginning late last year into the first quarter of 2004, the group launched a series of new print and online ads, some of which aren't afraid to inject a bit of tongue-in-cheek humor, and one which tackles the industry's current ethical dilemma head on.

The no-load, morally-responsible Ave Maria mutual fund group invests according to the teachings of the Roman Catholic Church. The group includes the flagship Ave Maria Catholic Values Fund, which debuted in May of 2001, and its fraternal twin siblings, the Ave Maria Growth Fund and Ave Maria Bond Fund, both of which were introduced two years later. The growth fund is sub-advised by JLB & Associates of Plymouth, Mich., while the two other funds are managed internally.

The funds have a combined $225 million and are predominantly sold directly to investors through three major fund supermarkets, and religiously aligned registered investment advisers.

The group's sole Internet ad running earlier this month in the online edition of National Review, offers a series of guilt-laden messages. "Your mutual fund may support abortion, pornography and more," begins the online ad. "Is that any way for a Catholic to invest?" The ad then suggests that viewers explore the Ave Maria Mutual Funds and ends with the tag line: Smart Investing and Catholic Values.

This online ad follows on the heels of a black-and-white print ad that states: "Thou Shalt Not Boast." The ad artfully continues, "Thankfully, it's not a commandment, so we can tell you about our investment performance." The ad goes on to showcase the better performance of the group's flagship Ave Maria Catholic Values Fund against the performance of the S&P 500 stock index.

But humor is not this fund's group's only spiritual message. Ethics is also a strong focus, as embodied in a new print ad the Ave Maria family added several weeks ago, aimed directly at those investors weighing the moral fiber of their mutual fund managers amid the broadening industry scandal.

The ad features a close-up of a pensive man's clenched hands, and asks rhetorically, "Has your mutual fund earned your trust?" In smaller type, the ad continues, "In this scandal-ridden era, ask yourself whether your mutual fund manager has the integrity you are seeking. Then take a closer look at us." Beyond explaining that the Ave Maria Funds select morally responsible investments, the ad goes on to vow that those same core values "preclude us from engaging in unethical business practices like late trading."

In fact, according to Robert C. Schwartz, president and CEO of the funds' distributor, Schwartz Fund Distributors, when the Ave Maria Funds cast their bread upon the waters, they do so out of their own pockets. The fund advisor pays a 1% "solicitation fee" and a 50 basis point trailer commission to those broker/dealers who distribute the funds. But those fees are paid from the advisor's coffers, not the funds', Schwartz explained.

The fund ads were developed in-house with the help of an outside consultant and ad copywriter, said George P. Schwartz, president of the fund group, co-manager of the flagship fund and father of Robert Schwartz.

The group's ad budget for the first quarter of 2004 was $100,000, noted the younger Schwartz. But this latest round of ads was, for the first time, taken to a broader, secular audience, he noted.

Early in the flagship fund's life, Schwartz purchased ad space in 10 different newspapers sponsored by the Catholic Archdiocese. Later, ads were placed in a handful of regional publications and some national Catholic publications, Schwartz noted, including Our Sunday Visitor, Catholic Digest, National Review and The Weekly Standard.

Schwartz isn't afraid to capitalize on the fund industry's woes in order to garner some attention for his firm's funds and ethical business practices. While the funds' good performance has fueled significant asset inflows, he is also seeing the fruits of other current religious issues, including a scandal within the Catholic Church itself.

The success of Mel Gibson's directorial blockbuster movie "The Passion of the Christ" has reignited interest among individuals, said Schwartz.

Moreover, the debate over same-sex marriages, and the wide-reaching priest molestation allegations that have rocked the Church have actually been good for fund business, according to the Ave Maria Funds. Devout Catholics are happy to support their church even where they won't condone some activities among church members. "They are telling us, It's good to see an investment choice that allows us to support the Catholic church,'" Schwartz added.

The Ave Maria Funds, like other religiously invested mutual funds, define themselves by what companies they won't invest in, namely companies with ties to pornography and abortion, those who contribute to Planned Parenthood Federation of America.

The fund advisor makes no distinction between same-sex or traditional man-woman relationships. But since the Church teaches the sacrament of marriage, it won't invest in those firms that offer medical or other benefits to non-married partners. Last year the firm sold investments in H&R Block, Northrop Grumman, Sears Roebuck & Co. and SunTrust Banks because each began offering non-marital partner benefits.

Surprisingly, the Ave Maria Funds' ethical leanings don't preclude it from investing in what other socially conscious funds stay far away from: tobacco, alcohol and gambling/casino stocks. "We have a Catholic advisory board that has not cautioned us to avoid those companies," Schwartz said. While some may consider those "vices," they do not go against the teachings of the Church, he said. "On any given Friday, you will find a church holding Bingo," Schwartz said. "And priests are notoriously big smokers," he added.

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