Biblical ETF Makes Misleading Claims

October 15, 2019

Correction: The article previously stated that Ultimus Fund Solutions was previously an affiliate of Gemini Fund Services, BLES's distributor. BLES's distributor is Northern Lights Distributors, whose parent company, NorthStar Financial Services Group, sold its stake in Gemini Fund Services (including Northern Lights Distributors) to a third-party, who also bought Ultimus Fund Solutions. We apologize for the error.

On Tuesday, Oct. 15, Inspire Investing put out a press release announcing that, through the strength of its biblically based investment methodology, its flagship ETF, the $147 million Inspire Global Hope ETF (BLES) had doubled, even tripled the performance of its "secular" benchmark over multiple time periods, including year to date, one year and since inception.

But the problem is that the fund’s numbers can't be replicated. Also, the press release uses a comparison that is itself misleading, as Inspire is using an apples-to-oranges comparison of price return and total return that significantly inflates BLES' relative outperformance.


Dubious Claims

As one of the few faith-based ETFs on the market, BLES' goal is to invest globally in "biblically aligned" companies that satisfy a set of exclusionary screens that align with conservative Christian values, as well as a certain threshold for positive ESG rankings.

BLES' portfolio breaks down into 50%/50% U.S. and international stocks and, importantly, is equally weighted. As such, the MSCI ACWI Equal Weight is an obvious benchmark for comparison, and it's one that Inspire uses in its literature.

In the press release, Inspire claimed that, as of Sept. 30, 2019, BLES had returned 16.07% year to date. That's nearly double the return of its benchmark, which had returned 8.37%.

(Author's note: After we spoke with Inspire for this story, the firm amended the press release posted on its website to show updated figures of 16.70%, noting that the 16.07% figure was a typo. Using Bloomberg data, we were able to confirm that 16.7% is an accurate total return for BLES year to date. As far as we can tell, Inspire did not reissue the press release for wire distribution.)

However, 8.37% is not the return of the MSCI ACWI Equal Weight year to date. Bloomberg data and MSCI's own fact sheet agree that the actual index return for this period is 10.9%.

The discrepancy arises because Inspire is using not total return, but the price return of the MSCI ACWI Equal Weight, which did in fact rise 8.37% year to date.


BLES' Year-To-Date Returns, Inspire Data Vs. Bloomberg Data
  YTD "Return" Inspire YTD Total Returns, Bloomberg YTD Price Change, Bloomberg
BLES 16.70% 16.68% 14.50%
MSCI ACWI Equal Weight Index 8.37% 10.88% 8.37%

Sources: Inspire, Bloomberg; data range: Jan. 1, 2019 to Sept. 30, 2019


Price Return Vs. Total Return

The difference between price change and total return is subtle, but important.

The price return of an investment is simply the percentage difference between where that investment's price starts and where it ends up over some period of time. Its total return, meanwhile, incorporates the impact of interest payments, capital gains distributions, reinvested dividends and so forth.

For example, if ETF XYZ's starting value is $100 and its ending value is $110, then the XYZ's price change over that period is 10%. If ETF XYZ also had a 1% dividend over that same time period, which was reinvested, then the investor would see a total return of 11.1%.

In terms of understanding how a security's value changes over time, total return is a far more useful metric than price change, and for that reason, most investors rely on it when evaluating their potential investments, or when comparing their investments to relevant benchmarks.

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