PRXG & PRXV: Investors Seek Faith-Based ETFs to Align Values

Faith-based investing is emerging as an opportunity for financial advisors, with approximately 48% of investors wanting their faith or values to factor into investment decisions, according to new research from Praxis Investment Management.

However, the company's recent study reveals a disconnect: While three-quarters of investors want to discuss faith-based investing with their advisors, only 9% of advisors initiate these conversations.

Praxis Launches New Active ETFs: PRXG and PRXV

This research comes as Praxis launches its first two exchange-traded funds on Tuesday—the Praxis Impact Large Cap Growth ETF (PRXG) and the Praxis Impact Large Cap Value ETF (PRXV). Both now trade on the NYSE.

"Our new active ETFs are designed to meet the demand of faith-based investors," Chad Horning, president of Praxis Funds, said in the release announcing the funds. "Investors want competitive, values-driven investment options and they want to talk with their financial advisors about investing with their faith in mind, and these products facilitate that conversation."

The research, which surveyed 1,001 individual investors and 403 financial advisors, uncovers why this conversation remains largely untapped. Despite 59% of advisors being aware of faith-based investing, a staggering 91% do not raise the topic with clients. Meanwhile, just 5% of investors currently invest based on faith values, despite higher interest.

According to the report, people are interested in faith-based investing for two primary reasons: They want their financial activities to align with ethical and moral standards, and they view themselves as stewards with responsibility to support positive social outcomes.

The most common approach investors take is avoiding companies whose practices conflict with their faith (37%), followed by investing in funds that engage with companies to promote their values (35%) and seeking investments in companies that support their faith or values (35%).

Bridging the Advisor-Client Gap

Advisors' reluctance stems largely from uncertainty, with 37% citing limited product availability and 30% expressing concerns about both verifying alignment with client faith and potential underperformance. Both advisors (48%) and investors (34%) agree that evidence of competitive returns would be the primary factor needed to increase faith-based investing adoption.

"Research shows that investors want advisors who understand and engage with their faith-based investing preferences. Our new ETFs provide practical solutions for advisors looking for lower cost, liquid, tax-efficient, values-driven investment options to serve these clients," said Benjamin Bailey, vice president of investments at Praxis, who will head the team managing both new ETFs.

The research also reveals a difference in how investors and advisors approach faith-based investing. While 80% of investors who incorporate faith values into investing do so on their own rather than through their advisors, they often choose different investment vehicles than advisors would recommend. According to the report, this self-directed approach potentially leads to suboptimal outcomes that could be improved through better advisor engagement.

The new Praxis growth and value ETFs seek capital appreciation and performance similar to the CRSP US Large Cap Growth Index and CRSP US Large Cap Value Index, respectively, with expense ratios of 0.36% each, according to the release. They employ quantitative equity strategies similar to those used in Praxis's existing mutual funds while applying equity screens consistent with their core values.

According to the research, simply asking, "Is it important for your portfolio to in any way reflect your faith?" has the potential to foster a deeper understanding and connection between advisors and clients with religious values.