In God We Trust: Morally Responsible Investing
An interview with Catholic investment advisor George Schwartz
George Schwartz is founder, chairman and CEO of Schwartz Investment Counsel, Inc., a registered investment advisor headquartered in Plymouth, Michigan. The company manages stock and bond investment portfolios for institutions, foundations, individuals and mutual funds, including Ave Maria Mutual Funds. He is a lifelong Catholic, married for more than 50 years to wife Judi, with whom he has five adult children. In 2018, he released his third book relating to investing, In God We Trust: Morally Responsible Investing.
You grew up in a Catholic family in Detroit, and you were educated by Adrian Dominicans.
Yes. The sisters’ discipline was extraordinary. They were like drill sergeants in the Marines. But, with 64 children in the classroom in those days, you had to be strict.
Although I didn’t like it at the time—they might whack you with a ruler if you got out of line—they taught us reading, writing and the Catholic faith. They’d teach us good habits, like going to Mass before school.
In the years since, the Adrian Dominicans have lost their way. Many members have left, and those who remained have become quite liberal. I don’t know if they even teach anymore. But during my childhood, they provided a great service to the Catholic Church.
Your father was a businessman.
My father and mother both were involved in business. Both were pro-life, and devout members of the Catholic Church. They were charitable to the Church financially, and set a great example for me personally.
In your book, you speak about some of the lessons your mother taught you.
Yes. She used to say, for example, “Always do what you say you’re going to do, no matter how hard it is.” She taught us an attitude of staying humble, never bragging, and taking an interest in other people. She taught us to be charitable, to follow the teachings of the Church, and obey the 10 Commandments. She passed away at age 77 in 1993.
You were almost killed in a private plane crash in 1969.
Yes. When the plane was going down, at the angle we were flying into the top of the trees, I thought, “I’m going to find out what it is like to die.”
The pilot did die, and the other four of us were badly injured. I broke my back in five places. My father had a serious ankle injury, nearly having his foot severed off. He had 10 operations subsequently, and never was able to walk properly after that. Andy Farkas, a professional football player, was with us, and had every bone on the left side of his body broken.
But, I believe I grew to be a stronger person during my long recovery.
What made you want to write In God We Trust?
Bob Schwartz, my son, talked me into writing it. It is an update of Good Returns, my previous book that came out nine years ago.
In God We Trust gave me an opportunity to expand my thoughts on capitalism vs. socialism. I’ve been frustrated that so many people—some pro-life Catholics, leftists, politicians and young people—who are infatuated with socialism. So, I include a discussion of the free enterprise system, the greatest economic system in the world, vs. the continually failed system of socialism, which is so popular with the economic illiterate.
Why do you think it would be a mistake for the U.S. to become a socialist country?
As Michael Novak laid out in his book The Spirit of Democratic Capitalism, a dynamic economic sector is the poor’s best hope for escaping the prison of poverty. It is the only system to take poor people and make them middle class, or even rich. Capitalism works, socialism doesn’t.
There are two groups I see pushing socialism. One is made up of young people who haven’t lived long enough to understand history. Capitalism has lifted billions of people out of poverty. It produces wealth. Under socialism, the poor are always worse off, corruption increases, and so does hopelessness and despair.
The other group is those who promote socialism as a way to hurt the economy and the stock market, and ultimately bring down President Trump. I don’t think they’re uneducated like the college students, but they’re upset about Trump and the Republican Party being in power.
This is a bad combination, young people who don’t know history and older activists who want to bring the economy to its knees.
Tell me about your relationship with Tom Monaghan and Bowie Kuhn and the launching of Ave Maria Mutual Funds.
I met Tom many years ago through my wife, who met him on retreat. When she told him I managed investments, he wanted to meet me. My firm has managed investments for the Monaghan family ever since.
Tom is a wonderful individual, a devout Catholic and strongly pro-life. He has largely given away his fortune, establishing schools such as Ave Maria University and Ave Maria School of Law, and several Catholic charities. He sold his Domino’s Pizza business for a billion dollars, and has since devoted his life and fortune to the Church.
He has had a profound impact on my life and career. He has also had a positive impact on me morally.
Tom knew Bowie Kuhn through baseball; Tom had owned the Detroit Tigers [from 1983-92]. Bowie was the baseball commissioner. After he retired, he joined Tom in a number of charitable endeavors.
Tom and Bowie approached me with the idea of starting a Catholic mutual fund. I didn’t know what this would mean; do you invest in companies that make rosaries and Bibles? They said no, that you invest in the way you always do, but screen out companies that support abortion.
We checked with our SEC lawyers if such a fund was legal, and they said it was, as long as you disclosed to investors beforehand what you are doing. So, we put together a Catholic advisory board made up both by lay Catholics and members of the clergy. Along with screening out firms that support abortion, we added those which were involved with pornography.
Our board included many prominent Catholics, some of whom we’ve lost, such as Bowie, Michael Novak and Phyllis Schlafly. They were instrumental; we miss them.
We also have Tom, Professor Robert George and Scott Hahn; our clergy members include Cardinal Adam Maida and Cardinal Allen Vigneron. Coach Lou Holtz also helped us recruit Larry Kudlow. We meet regularly and determine what types of companies we should screen out. They essentially are: 1) those companies that are involved with abortion; our 100,000+ investors are strongly pro-life, 2) those involved with embryonic stem cell research, which is related to abortion, 3) those that contribute money to Planned Parenthood, and 4) those involved in the production or distribution of pornography. That comes out to about 150 companies out of the Russell 3000 we don’t do business with, or 5% of the total.
How have the Catholic funds performed?
We’ve had no trouble getting good results. Our growth fund is 5-star rated, and has been a terrific performer, averaging 16.2% per year for the past 10 years. Our other funds haven’t done that well, but last year, all five beat their category average. We’re proud of that.
Our bond fund has been around 17 years, and has never had a down year. It is very conservatively managed, buying high quality corporate securities and treasuries; it is not a capital appreciation vehicle, but has been a heck of a fine performer.
For you, these funds are a way to use your business talents to promote your Catholic Faith.
Yes. We engage in what we call morally responsible investing, a phrase Phyllis Schlafly suggested. When other investors use this phraseology they mean such things as social justice and minority set asides; those are not things our Catholic advisory board has asked us to focus on.
You experienced some anti-Catholic bias in getting the fund approved by the SEC.
Yes. I was shocked. I was wondering why our application was being held up. It became obvious when I talked to the examiner personally. He was obnoxious. He said, “If you guys have a Cardinal on your board, why not have him issue an imprimatur?”
You admire Warren Buffett’s skill in investing, although you do not agree with many of his personal views.
The big thing we disagree on is abortion. He’s an advocate of it. He has left-leaning political views; he was a big Obama and Clinton supporter.
But, he has a photographic memory, and is very disciplined in his approach to investing. He’s a contrarian, meaning when he invests he likes to do the opposite of what most people are doing. He likes to buy and hold; he sticks to his investment principles. He’s gotten good advice from his partner, Charlie Munger. He’s learned the merits of investing in great businesses.
You say that when we engage in morally responsible investing, it helps the economy.
Yes. When you invest in companies that support abortion or pornography, we’re supporting destructive behaviors. Pro-life, pro-family and life-affirming investing helps growth and helps capital formation. Hence, we pursue them vigorously.
Our analysts and portfolio managers are not experts on the Catholic Church; they are not theologians. But, those on our board are. We rely on them for our screening process. Our moral principles come from our board, and then the members of our firm go out and implement those policies. It’s been a great partnership.