The Vatican’s latest foray is not theological but financial, following the launch of two new stock indices in conjunction with Morningstar – one for the US, one for the euro zone – calibrated to Catholic principles.
Exchange-traded funds (ETFs) may well follow, and there could be demand. Bloomberg ETF analyst Eric Balchunas notes existing Catholic ETFs have “held up pretty well”, with the Global X S&P 500 Catholic Values ETF currently holding more than $1 billion (€840 million) in assets.
Most such products are US-focused and a Vatican-backed range could appeal more broadly, particularly in Europe and Latin America.
Backtested over the past decade, the results look more than respectable, with the US and European Catholic indices generating annualised returns of 18 and 10 per cent, respectively.
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One reason for this is that the US index is less papal portfolio than plain vanilla mega-cap growth. More than 20 per cent sits in four names – Meta, Amazon, Nvidia, and Tesla – and almost half in the top 10, which also include Apple, JPMorgan, Broadcom, Visa, Micron, and Alphabet.
Some inclusions might raise eyebrows. Big tech’s dominance brings with it familiar controversies regarding misinformation, mental health, anti-union policies and difficult working conditions, privacy, tax engineering, and so on.
Meanwhile, the inclusion of names such as Visa and JPMorgan illustrate how historic debates about usury and double-digit interest rates have evolved over time.
Some names may give religious investors pause, but this tension isn’t unique to this index – it’s common across ESG (environmental, social, and governance) funds. Once you strip out tobacco, gambling and controversial weapons, you’re largely left with the same tech-heavy US giants.
Commercially, this makes sense. Excluding too many companies risks chronic underperformance, and underperformance kills ETFs far faster than ethical misgivings.
The church may have distinctive moral teachings, but when it comes to equity portfolios, it looks remarkably like everyone else.
