An analysis revealed irreplicable return numbers as well as apples-to-oranges comparisons of performance
A U.S.-listed biblical ETF’s claim that it outperforms its secular index has been called into question after an analysis raised concerns about how the issuer performs its return calculations and comparisons.
As reported by ETF.com contributor Lara Crigger, the Inspire Global Hope ETF (BLES) aims to help faith-based investors by focusing on “biblically aligned” companies around the world. Aside from exclusionary screens that align with conservative Christian values and certain, it sets a certain threshold for positive ESG rankings to choose its portfolio holdings.
“BLES' portfolio breaks down into 50%/50% U.S. and international stocks and, importantly, is equally weighted,” Crigger said, noting that the fund literature cites the MSCI ACWI Equal Weight index as its benchmark.
The fund provider, Inspire Investing published a press release on October 15 to announce how its flagship US$147 million had doubled, even tripled the performance of its “secular” benchmark over year-to-date, one-year, and since-inception timeframes.
The press release claimed that BLES had achieved a 16.07% year-to-date return as of September 30 — Inspire later corrected the figure to 16.7% — nearly double the 8.37% seen for the benchmark. But based on Bloomberg data and MSCI’s own fact sheet, the actual MSCI ACWI Equal Weight index return for the period was 10.9%.
“The discrepancy arises because Inspire is using not total return, but the price return of the MSCI ACWI Equal Weight,” Crigger said. While the price return of an investment simply considers its starting price and where it lands over some period of time, the total return also accounts for interest payments, capital gains distributions, reinvested dividends, and other mitigating factors.
“[M]ost investors rely on [total return] when evaluating their potential investments, or when comparing their investments to relevant benchmarks,” she said.
Over a one-year period, Inspire’s press release said Bless went up 1.37% — the firm later amended it to 1.07% — while MSCI ACWI Equal Weight dropped 3.63%. But -3.63% was the benchmark’s one-year price return, whereas its total return was actually -0.96%.
And the company claimed that since inception, BLES has posted 6.62% in annualized returns, compared to 2.19% for the benchmark. “We were unable to replicate either of these numbers,” Crigger said, adding that the total-return figure for the MSCI ACWI Equal Weight should have been 5.17%.
The ETF performance calculations used by Inspire also appeared to be questionable. Based on ETF.com’s analysis using Bloomberg data, BLES’s year-to-date, one-year, and since-inception total returns were 16.68%, 0.97%, and 6.3%.
When reached for comment, Inspire Investments CEO attributed the inconsistencies to the firm’s data provider, Ultimus Fund Solutions. He told ETF.com that the provider “gets their data directly from the NYSE and index providers, as far as I know.”
He also acknowledged that Inspire compares the total return of BLES to the price return of the MSCI ACWI Equal Weight benchmark in its literature. However, he was unable to provide a reason for the practice.
“A price return index on an income-generating asset class (like equities or bonds) measures the actual performance of exactly nothing,” said ETF.com Managing Director Dave Nadig. “It represents no real-world investor experience, and no rational investor would ever choose one as the benchmark for any investment's performance.”
[Author’s Note: Following publication of the ETF.com article, it has come to our attention that some of the claims made by ETF.com about Inspire’s data inaccuracies have been disputed as possibly incorrect. Inspire did admit that they inadvertently published total return data of their ETF compared to price return data of the index; however, the company caught their error and issued a corrected press release, which shows BLES still outperforming its index.]