Investors have plenty of factors to consider when choosing mutual funds. There's risk tolerance, fund fees, investment horizon, diversification, historical returns, turnover and manager tenure to name a few.
They conceivably could add religion to the list.
Researchers at the University of Georgia and Southern Methodist University found that certain types of mutual funds based in areas where there is a high concentration of Catholics generate more volatile returns than similar funds based in areas where there is a low concentration of Catholics. Funds in high Catholic areas take on more risk, but doing so "does not seem to correspond to significantly greater fund returns," according to University of Georgia professor Tao Shu, who co-authored the study.
"There are so many factors affecting mutual fund returns and risk taking. That's why I would say people need to be very careful interpreting our results," he said.
Mr. Shu and his colleagues looked at the performance of about 1,600 mutual funds whose objectives were either growth or aggressive growth and how those funds performed from 1988 through 2008. All of the funds were actively managed. Passively managed index funds, which buy and hold stocks in the S&P 500 and other market indexes, were excluded.
Then they looked at religious preferences in the counties where the funds were based, lumping them into five different categories based on how Catholic or Protestant the counties were.
What they found was that local religious beliefs significantly influenced how mutual fund managers behaved.
Managers in high Catholic and low Protestant areas concentrated their portfolios in fewer industries. They also traded more actively and aggressively, and were more likely to make aggressive second-half bets if their fund performed poorly in the first half.
Meanwhile, fund managers in heavily Protestant areas took fewer risks, according to researchers.
Returns among funds based in heavily Catholic counties were about 6 percent more volatile than returns for all the funds they looked at, Mr. Shu said.
The findings held up even when the researchers excluded New York and Boston, hotbeds of Catholicism and mutual fund operators.
"Local religious beliefs have significant influences on mutual fund behaviors," the authors wrote in a paper to be published in the October issue of Management Science.
Mr. Shu said he and his colleagues were not the first to study how religious beliefs affect financial or economic decisions. Previous studies focused on two kinds of risk: pure risk, in which there is only the potential for downside (such as driving fast or drunk); and speculative risk, where there is downside risk as well as upside potential (such a gambling or investing).
Those studies showed that Protestants do not like speculative risk and view it as sinful, while Catholics "are more open to gambling," Mr. Shu said. He pointed to the games of chance Catholic parish festivals rely on to raise money.
Mr. Shu said other studies have documented that many factors determine how well mutual funds do and how much risk their managers take. So his team's findings about the influence of religion "need to be interpreted with great caution," he emphasized.
Critics of executive pay have new perspective on the clout they wield thanks to a recent survey of corporate directors conducted by PricewaterhouseCoopers.
Of the 860 corporate directors who responded to the survey, 86 percent said that when it comes to designing compensation plans, compensation consultants -- firms that public companies pay to tell them how much they should pay executives -- were very influential.
The company CEO -- who has a vested interest in how compensation plans are crafted -- was also very influential, according to 79 percent of the directors surveyed.
But institutional investors, the nominal owners of the company, were cited as very influential only by 54 percent of the respondents. And just 45 percent of the directors said proxy advisory firms, which advise institutional investors on how to vote on pay and other issues, were very influential.
Finally, a mere 12 percent of directors said the media, which spills barrels of ink annually chronicling how much Corporate America is paid, was very influential.
Nearly two-thirds of the directors said their company took action based on the results of shareholder say-on-pay votes, the annual, nonbinding referendum on compensation policies. This year, pay plans won the support of 70 percent or more of shareholders at 91 percent of the U.S. companies examined by pay consultant Semler Brossy.
Directors said their companies' most common responses to the votes were improving disclosures about their pay plans, making pay more performance-based and communicating more with proxy advisory firms.
Only 2.5 percent said they reduced compensation and 36 percent said they did nothing based on the outcome of the vote.
Len Boselovic: firstname.lastname@example.org or 412-263-1941.