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Successful Impact Investing: Embracing Faith-Based Screens for Top Returns

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GuideStone Funds has been managing assets for many years, but it wasn’t until 2012, when GuideStone won Lipper’s Best Overall Small Fund Group in the U.S. over the three-year period ending November 30, 2011 that financial advisors became aware of the Christian-screened mutual fund family’s stellar track record—one that clearly demonstrates that there is no need to sacrifice values for strong investment performance.

Since then, said Ron Dugan, vice president and investment officer at GuideStone, the interest level in the company’s products has been sky rocketing, so much so that this year, GuideStone—which manages around $10.7 billion in assets—finally opened up its suite of global mutual funds to the broader investing public.

“Winning the Lipper award really put us on the map,” Dugan said, “and made people aware of the fact that Christian-screened mutual funds can be on par, if not even above par, to other funds.”

GuideStone created its first mutual fund products in 2001 but even before then, the firm was managing retirement assets for pastors, missionaries and employees of Southern Baptist and Evangelical churches and ministries. The funds have a clear mandate, and that is they do not invest in any companies that are inconsistent with Christian values. They are global and GuideStone uses a manager-of-manager approach, “so that we are not picking the individual securities but providing our sub-advisors with a list of companies that they must exclude from consideration as they go around implementing their own strategies,” Dugan said. “We have resources to do that particular research and our larger investment team is charged with identifying the best-in-class sub-advisor talent and putting them together in a multi-manager framework.”

Each of the fund managers must generate consistent positive return performance by managing risk and try to achieve the greatest amount of operational efficiency possible, he said. GuideStone monitors their performance on a regular basis to make sure they are fulfilling their assigned roles.

GuideStone currently has 31 funds, across which it employs 33 sub-advisors and 76 strategies are implemented across the funds.

“We don’t like fads, we don’t want to create a fund that doesn’t have a solid investment thesis behind it, but we are always looking out on the horizon to see what’s coming,” Dugan said.

As such, the international markets are high on GuideStone’s list and as emerging markets in particular became more important, the company created a special emerging market equity fund, which now has about $300 million in assets.

“Within the last two years, we have also created other funds such as a global natural resources equity fund, for energy and mining and so on,” Dugan said. “We also changed our real estate fund from U.S. to global, to reflect the fact that thethat real estate is a growing market globally, while the U.S. market, in terms of REITs continues to dwindle.”

This year, too, GuideStone is high on Lipper’s list: Its GuideStone Extended-Duration Bond Fund won the 2015 Lipper Fund Award for Best Fund Over Three Years (Corporate Debt A-Rated Funds) and Best Fund Over Five Years (Corporate Debt A-Rated Funds).


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