Doing well by doing good is an often-elusive investment goal, but George Schwartz seems at least to have figured out how to do well by not doing things he believes are bad.
His five-star Ave Maria Mutual Funds focus on ethical investing and have performed strongly, usually approximating or topping their benchmarks.
The fund is as its name might imply: An effort to profit through a thesis that follows moral guidelines consistent with those of Mary, the mother of Jesus, specifically and the Catholic faith in general.
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More specifically, the fund family follows certain tenets—call them the Four Commandments—when choosing companies to include in the fund. The list consists primarily of "don'ts" rather than "do's."
"When our analysts and portfolio managers are managing these funds, they try to find the best investments to meet the objectives of each fund," Schwartz, a co-manager of Ave Maria funds, said during a chat with CNBC.com at the Schwab IMPACT 2013 conference in Washington.
"In doing so, they screen out certain companies—about 150—that violate some of the core teachings of the Catholic Church," he said.
Four practices that will get a company banned from the Ave Maria funds: Supporting abortion; supporting embryonic stem cell research (because it "is closely linked to abortion"); contributing to Planned Parenthood; and involvement with pornography.
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While the philosophy no doubt will rankle progressive sensibilities, it's hard to argue with the results.
Ave Maria's flagship Rising Dividend fund carries Morningstar's top five-star designation and is up 26.8 percent in 2013. That puts it in front of the , which has gained 25.3 percent on a total-return basis. The fund has $642.2 million under management as part of Ave Maria's $1.4 billion total handle.
"The funds exclusion list "leaves 2,850 companies for our analysts and portfolio managers to select from," Schwartz said. "They've had no problem finding good investments to meet their objectives."
Its top holdings are energy exploration firm Schlumberger, UPS, Coach, Norfolk Southern and health-care product manufacturer Covidien.
As for moral compass, Schwartz said, the fund family does not have a list of pros, or "positive screens."
"Some people think we want to invest in companies that build churches," he said. "We consider our funds morally responsible. We don't screen out alcohol, tobacco, firearms. We don't screen in companies that are good to the environment, sensitive to pollution issues, anything like that."
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The Ave Maria fund family is 10 years old and began at the behest of the Catholic Advisory Board, a group that includes former Notre Dame football coach Lou Holtz, former Major League Baseball Commissioner Bowie Kuhn and CNBC's Larry Kudlow. The group is chaired by Tom Monaghan, the founder of Domino's Pizza, who has been linked closely with Catholic causes.
The 60,000 or so investors are in Ave Maria because they want to make money—and support the causes they believe are important.
"Virtually all of them are pro-life," Schwartz said. "Some people invest primarily because it's Catholic or because of our pro-life orientation. But the serious investors, the fiduciaries of institutional investors, have to look deeper than that. They have to see good investment results."
—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.
