Crossmark Global Investments, a Houston-based faith-based investment management firm, has announced its first foray into the exchange-traded funds space, launching the actively managed Crossmark Large Cap Growth ETF (CLCG) and Crossmark Large Cap Value ETF (CLCV). The two funds are based on existing separately managed accounts that Crossmark already runs and will be managed by CEO and CIO Bob Doll and Head of Research Ryan Caylor.
“You can’t ignore the fact that ETFs are capturing the imaginations of a lot of people, and for good reasons,” Doll said. “I remember saying to my team probably a year ago, ‘We can survive just doing what we’re doing, but if we want to thrive, we’ve got to have some ETFs.’”
Doll said the funds’ faith-based strategies differentiate them from what’s in the marketplace. About two-thirds of the money Crossmark manages is values-based. That means the firm excludes certain things and includes, or “gives an extra kiss to,” other things, Doll said.
The company will exclude companies that make products that hurt or kill people. That includes companies that make cigarettes, abortion products or adult films. In some cases, there are total exclusions; in other cases, there are restrictions. If the product accounts for 10% or less of a company’s revenue, they won’t exclude it. Take Kroger, for example, the American retail company. While the company sells alcohol, it only accounts for a small percentage of its revenue, so it’s not excluded from the portfolio, Doll said.
For inclusion in the portfolio, Crossmark will look at the traditional stuff; it must be a reasonably priced stock, with good management and growing cash flows.
“We also have measures of values: How do you treat your employees? How do you treat your community? Your clients? Your suppliers? And we score these things,” he said. “If you score higher on both the traditional stuff and the values stuff, you have a higher chance of making it into the portfolio.”
Crossmark looks at scores from third parties, such as MSCI and Sustainalytics, and takes pieces of those scores for its evaluation.
In short, they’re looking for companies that make their workforce, community and infrastructure better. That might be an after-school program, education for underprivileged students in their hometown, or substance abuse programs.
“If there are two companies, and one of them at noon takes their employees out back where nobody can see and pats them on the back and says ‘You’re doing a good job,’ you’re going to get some values points,” Doll said. “And the other company takes their employees out back every day at noon and beats them and says, ‘You’re not working hard enough,’ they’re going to get negative points.”
Historically, Crossmark’s distribution has been about two-thirds values- and faith-based advisors, with the remaining one-third being the broader wealth management industry.
The two ETFs cost 50 basis points, all in. Doll said the firm will wait until these products are profitable before launching more, but he expected they would eventually offer a suite of six to eight ETFs.
Doll, known for his bullish outlooks and annual list of 10 market predictions, came out of retirement in June 2021 to serve as CIO at Crossmark; he was also tasked with launching new actively managed products.
His current view on the markets is not necessarily bearish; the firm is fully invested. But he is cautious.
“We observe that the economy is OK but slowing; inflation is stubborn, and with an assist from tariffs, is probably not going to go down anytime soon,” he said. “The housing market is struggling, with high prices and high mortgage rates. AI is a tailwind and helping both the products and the capital expenditures. And selling at 24 times earnings, stocks aren’t cheap. We put all that together and say, ‘You better be really careful what you own.’”
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