Faith-Based Investing Is a Small, But Growing, Niche

Faith-based investment strategies, which comply with certain religious convictions, remain a niche, albeit a modestly growing one, in the US mutual- and exchange-traded fund market.

There were about 150 faith-based mutual funds and ETFs with nearly $97 billion in assets in Morningstar’s database as of the end of April 2026, smaller than 30 entire fund families.

Here's how these investing strategies stack up based on manager tenure, total expenses, and fund flows.

Source: Morningstar Direct. Data as of April 30, 2026.

The faith-based strategy tag, newly available in Morningstar Direct and licensed data feeds, indicates strategies that invest according to certain religious convictions based on explicit prospectus language. It can help financial advisors find appropriate investments for clients who want to build portfolios in accordance with their clients’ faiths.

The tag is not a formal analytical rating. Since Morningstar allows funds to self-identify their religious affiliation and influences, screening criteria can vary among and even within the types.

The brief definitions below summarize common portfolio characteristics.

Catholic mutual funds and ETFs often apply investment screens based on the Socially Responsible Investment Guidelines of the U.S. Conference of Catholic Bishops, or USCCB, organized around five principles:

• Protecting human life
• Promoting human dignity
• Enhancing the common good
• Pursuing economic justice
• Saving our global common home

These funds typically exclude companies involved in abortion, contraception, embryonic stem cell research, euthanasia, pornography, gambling, tobacco, and weapons of mass destruction.

Nondenominational Christian funds, sometimes referred to as Biblically Responsible Investing approaches, often apply investment screens rooted in broadly evangelical Christian or interdenominational Protestant values. They are not affiliated with a single church body or formal doctrinal standard. This category makes up most of the faith-based universe in terms of assets under management.

These funds often exclude companies involved in abortion, pornography, alcohol, tobacco, and gambling, though individual fund families vary in the breadth and strictness of their screens.

Sharia-aligned funds are usually structured to comply with Islamic law. They apply both qualitative screens that exclude companies in categorically forbidden industries—including alcohol, pork, conventional banking, gambling, tobacco, and weapons—and quantitative financial screens that restrict investment in companies with excessive interest-bearing debt.

Sharia-aligned portfolios avoid conventional bonds. They achieve fixed-income exposure through sukuk, which are debt-like financial instruments structured to comply with Islamic law’s prohibition against interest.

There is currently only one Jewish faith-based fund, and it aligns its investments with Jewish values, emphasizing shareholder advocacy over broad exclusionary screening.

Core principles include combating antisemitism and hate, supporting Israel, and advancing tikkun olam—repairing the world—through promotion of social justice, environmental responsibility, and ethical corporate behavior.

Unlike Christian and Sharia investing approaches, Jewish funds generally do not screen out alcohol or gambling.

Total flows into religiously themed funds were positive for the year to date and over the trailing 1-, 3-, 5-, and 10-year periods. However, multi-year amounts for the whole segment are small compared to the broader industry.

Sharia-compliant funds had strong flows of USD 3.5 billion over the past five years. In comparison, their Catholic counterparts have seen consistent flows, and Christian (non-denominational) inflows have varied.

Source: Morningstar Direct. Data as of April 30, 2026. *The only Jewish-themed fund in the database is still new and has gathered USD 57 million in the trailing year through April 2026.

The top flow-gatherers over all trailing periods were: 

• SP Funds S&P 500 Sharia Industry Exclusions ETF SPUS, an Islamic index fund that excludes financials, aerospace and defense, and data processing and outsourcing stocks. The fund took in USD 1.8 billion over the five years ending in April 2026.
• Guidestone Medium-Duration Bond Fund GMDYX is an intermediate core-plus offering that avoids issuers whose businesses don't pass the firm's Christian values screens. It took in USD 1.2 billion over the five years ending in April 2026.

Given the small universe, movements among and within religiously themed asset managers can have a big effect. For instance, outflows from Guidestone active equity funds and inflows into its passive index and asset allocation funds contributed to the variation in flows in Christian (non-denominational) funds.

Faith-based funds’ average adjusted prospectus net expense ratio for all share classes was 0.89%, a little higher than average secular fund. More than half of faith-based fund assets, however, were in the below-average or low-cost quintiles of similar share classes in like asset classes.

Source: Morningstar Direct. Data as of April 30, 2026. The Morningstar Fee Level ranks fund share classes’ expense ratios against similar funds and assigns a Low to High Score based on its peer group quintile.

Christian (non-denominational) had more assets in above-average and high-cost quintiles due to the higher prevalence of actively managed strategies, as well as sector, non-traditional equity, and alternative funds that tend to charge higher fees. 

The only Jewish fund was in the low-cost quintile. Most assets in Catholic funds were in the low quintile.

Average and median manager tenure for faith-based funds are often shorter than those of the broader mutual fund and ETF universe. The shorter tenures, in part, owe to the relative youth of faith-based funds, nearly half of which launched in the last 10 years. 

Tenure also does not always equal experience. Guidestone Funds Medium Duration Bond’s average manager tenure is less than four years, for example, but much more seasoned managers from established firms, including PIMCO, Loomis Sayles, and Guggenheim, subadvise the strategy. 

Ave Maria Value Focused Fund AVERX, which invests in accordance with Catholic teachings, and Iman Fund IMANX had the longest average manager tenures among faith-based funds.

Faith-based funds cluster around the core column of the Morningstar Style Box, based on the size and value-growth scores of their holdings. They also offer more options in the growth area of the style box than in the value zones. 

Sharia funds typically exclude financials and debt-laden companies, which gives them a growth tilt. Amana Growth AMAGX, for example, has more than half its assets in technology stocks and none in more value-leaning financials, basic materials, and utilities companies.

Investors have fewer choices for faith-based fixed-income funds, but providers offer the basics. Most of the offerings are in the short-term, intermediate core, and intermediate core-plus categories, which can serve as the linchpins of fixed-income portfolios. 

Christian (non-denominational) asset managers have the widest variety of bond offerings, including at least one high-yield one: Timothy Plan High Yield Bond TPHAX.

There are no Jewish-themed bond funds. Sharia-compliant fixed-income offerings are all in the global bond and short-term bond categories, which can hold sukuk.

ESG investing and faith-based investing both aim to deliver positive returns while aligning with specific investor values, often through exclusions. However, environmental, social, and corporate governance concerns include a more varied group of potential issues.

Faith-based investing approaches often use exclusionary screenings to avoid investments that don’t align with religious convictions, while many ESG funds exclude industries like oil and gas. Both approaches may also prioritize impact investing, stewardship, and risk mitigation.

Not all funds with the ESG label prioritize the same issues. The term broadly refers to a range of material financial issues, including water and land use, carbon emissions, and broader impact on the community, among others.

The faith-based strategy tag in Morningstar Direct and licensed data solutions allows financial advisors and asset managers to filter investments by their stated objectives. Teams can use the tag for workflows like:

• Investment screens based on client values or objectives.
• Comparison of the risk and return tradeoffs of incorporating a faith-based fund into a portfolio.
• Competitive analysis against similar strategies with fund flows data.

From there, professional investors can use portfolio comparison tools to evaluate past performance, expenses, and any style tilts that may inform a fund’s role in a portfolio.