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Introducing the Global X S&P Catholic Values Developed ex-U.S. ETF (CEFA)

Jun 24, 2020

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On June 24, 2020, the Global X S&P Catholic Values Developed ex-U.S. ETF (CEFA) began trading on Nasdaq. CEFA provides exposure to large cap companies in developed markets outside of the U.S., whose business practices adhere to the Socially Responsible Investment Guidelines of the United States Conference of Catholic Bishops (USCCB).  

An International Equity Fund That Aligns with Religious Values

With its recent launch, the Global X Catholic Values Developed ex-U.S. ETF (CEFA) joins the Global X S&P 500 Catholic Values ETF (CATH) in providing broad equity market exposure that adheres to Catholic investment guidelines. While CATH focuses on US equities, using the S&P 500 as its starting universe, CEFA provides international equity exposure. Its starting universe is the S&P EPAC ex-Korea Large Cap index (a benchmark for developed ex-U.S. markets), and the companies in the parent index are then screened to remove those whose business practices do not adhere to adhere to the investments guidelines outlined by the United States Conference of Catholic Bishops (USCCB).

CEFA: How it Works

CEFA tracks the S&P Developed ex-U.S. Catholic Values Index, which employs a three-step process to align its exposures with Catholic investment guidelines while reducing tracking error to broad international equity benchmarks.

  • Step One: To eliminate exposure to activities inconsistent with Catholic values, as defined by the USCCB, CEFA applies a revenue screen to exclude companies that have exposure to certain activities inconsistent with the Catholic faith, such as biological or nuclear weaponry and child labor employment.

Catholic Values Revenue Screen

  • Step Two: To reduce tracking error to international equity benchmarks, the remaining companies are re-weighted to match the sector weights of the S&P EPAC ex-Korea Large Cap index.
  • Step Three: Index components are reviewed and re-balanced on a quarterly basis to maintain the relevancy of steps 1 & 2.

Apart from tracking the underlying index, a critical piece of fund management is voting proxies on behalf of the fund’s shareholders. Proxy voting will be conducted via Glass Lewis & Co.’s guidelines on Catholic Policy.  Glass Lewis has structured a Catholic voting policy based largely on the principles set forth by the USCCB, which is the same set of principles used to create the filters for the index tracked by CEFA.

Portfolio Fit: International Benchmark-like Exposure

CEFA is designed to provide investors with broad benchmark-like exposure to developed ex-U.S. international equities. Therefore, in a Catholic- oriented portfolio, it could be a core piece of an equity allocation. Based on the S&P Global BMI Index, developed ex-U.S. exposures represent nearly one-third of the global equity universe.

S&P Global BMI Index

Conclusion

Aligning investments with one’s religious values can be a difficult task for individuals. Reviewing hundreds of companies’ business practices, trading in international markets, and thoughtfully voting proxies can take substantial time and resources. CEFA is designed to make this process efficient for investors by aligning its investments and voting with Catholic guidelines and reducing tracking error to international benchmarks. By utilizing CEFA, Catholic investors may invest responsibly and consistently with their faith by integrating their values into their portfolios.

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Investing involves risk. including the possible loss of principal. CEFA’s consideration of the Guidelines in its investment process may result in choices not to purchase. or sell. otherwise profitable investments in companies that have been identified as being in conflict with the Guidelines. This means that the Fund may underperform other similar funds that do not consider the Guidelines when making investment decisions.

In addition to the normal risks associated with investing. international investments may involve risk of capital loss from unfavorable fluctuation in currency values. from differences in generally accepted accounting principles or from economic or political instability in other nations. The fund is non-diversified.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Global X NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times. Indices are unmanaged and do not include the effect of fees, expenses or sales charges. One cannot invest directly in an index.

Carefully consider the funds’ investment objectives, risks, and charges and expenses. This and other information can be found in the funds’ full or summary prospectuses, which may be obtained at globalxetfs.com. Please read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated With Global X Management Company LLC or Mirae Asset Global Investments. Global X Funds are not sponsored. endorsed, issued. sold or promoted by Standard & Poors. nor does Standard & Poors make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO, Global X nor Mirae Asset Global Investments are affiliated with Standard & Poors.

CEFA is not authorized or sponsored by the Roman Catholic Church and the United States Conference of Catholic Bishops has not endorsed Global X, its investment management activities and/or the Fund.