Bob Doll, Crossmark
Values-Based Investing Isn't ESG — Here's What It Actually Is
Bob Doll never really retired. He was eligible, took it on a technicality, and knew the whole time he was coming back. Forty years managing US large cap money, chief equity strategist at Nuveen, CIO of US equity at BlackRock, and now CEO and CIO at Crossmark Global Investments. The vehicle kept changing underneath him. Mutual funds, then separate accounts, now ETFs.
Outside the office he directs a church choir and plays piano and organ, and he sits on a stack of faith-based boards. That matters more here than it usually would. The firm he runs has been managing money since 1987 and is owned by AG Financial, the financial arm of the Assemblies of God Church.
I asked him where values-based investing separates from ESG. He said he's not sure what ESG even means anymore. The label has blurred past the point of being useful. What he does is narrower and easier to say out loud. Values-based investing lines up what a client owns with what that client believes. From there it's his job to decide which companies come out of the portfolio, which ones get extra credit, and which ones are worth a phone call.
That is the avoid, embrace, engage framework, and I pushed him on what each piece actually looks like at the desk.
Avoid is the exclusion list. Doll's own phrasing for it is companies that kill, maim, or addict people. Run against the Russell 1000, which is his universe, that takes out a little over fifty names, roughly 6% of the capitalization of the index. He did not oversell it. Fifty names is real, and it still leaves plenty of room to build a diversified large cap portfolio.
Embrace runs the other direction. He calls it giving a company an extra kiss. How does it treat its employees, its customers, its suppliers, the community it sits in. Those get scored on an objective measure rather than a gut read, and a company that scores well on the fundamentals and on the values side is more likely to end up owned.
Engage is for the companies on the periphery. If you would start doing this, or stop doing that, we would look at you. That can be a letter or a phone call. Sometimes it's coordinated with other managers to get the company's attention, and he says every so often it moves.
The firm brought two actively managed large cap ETFs to market in July 2025, one growth and one value, both patterned on separate accounts the firm had already been running for years. Doll says that when they launched, nothing else on the shelf was doing faith-based active management in large cap growth and value.
Seventy-five percent of the score is a quantitative multifactor model. Several dozen return variables covering earnings progression, cash flow, valuation, and the firm's assessment of whether management can deliver on the plan it has laid out. The other twenty-five percent is the values overlay, scored the same objective way. The two scores get added on that weighting, and Doll was clear that the output is a starting point rather than an answer. A high score makes a name eligible. It doesn't put it in the portfolio.
I asked how often he reruns it. Every day. The values quarter moves very slowly. The other three quarters move more. The run he gets in the morning is rarely far off the one from the day before. Where it does move, he wants to know why before the open.
On which factors are carrying the load right now, he named two without hesitating. Return on equity and price to free cash flow. The cycle is long in the tooth, he said, and stocks aren't cheap. With rates, inflation, war, and oil all open questions, he's leaning on those two harder than he ever has.
Then I asked about concentration, because the top ten in the growth fund is close to 60% of the portfolio and that number gets advisers nervous. His answer flipped the premise. The Russell 1000 Growth index is more concentrated than his portfolio is. Most of the big names in his top ten are underweights against the benchmark, not overweights. His risk management runs at plus or minus two hundred basis points against an index weight. A company sitting at 5% of the index gets 3% in his fund even when he doesn't like it. The rise of the megacap names inside the growth benchmark is what makes any active growth portfolio look concentrated now.
The value fund is a different shape for the same reason, running fifty-six holdings. The value index carries more than 800 names against roughly 300 in growth, so there are far fewer positions he's effectively required to own, and that frees him up to spread out.
Both funds are overweight financials, and banks specifically. He gave three reasons. They're cheap relative to the rest of the market on his read. They're the biggest beneficiaries of a deregulation push that he thinks is moving quickly and getting almost no coverage because everything else is louder. And their balance sheets are in better shape than they usually are this deep into a cycle, because so much of the lending that would have sat on them migrated into private credit instead. His underweights are the defensives. Consumer staples he sees as reasonable to expensive with mixed fundamentals. He's underweight healthcare while actively hunting for names there, because he wants the diversification.
On the growth and value cycle, he thinks value has come back and earned a place in the allocation. The portfolios struggling this year are the ones nobody has tended to. A heavy growth tilt, left alone after a decade of it working. The thing he is watching into next year is inflation. It isn't high, and it isn't where the Fed wants it, and by his count the Fed will miss its 2% target for the sixth year running. What they are willing to do about that shapes everything downstream of it.
The part that surprised me most was who buys these. Doll says a meaningful number of holders across the firm's products have no faith affiliation at all. When he asks them why they're there, the answer comes back as some version of we like the products, we like the service, and we trust you because we know what you stand for.
I asked what the firm learned moving from mutual funds and separate accounts into ETFs. He told me he said to his management team about eighteen months ago that they could survive without ETFs but were unlikely to thrive without them. His position on the wrapper is that he doesn't have one. An adviser tells him what they need for their clients and the firm has a version of it in whatever vehicle they want. There are more ETFs on the drawing board, and he wants the first two carrying their own weight before the next pair goes out.
Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.
Full Transcript
3,101 wordsMachine transcribed from Brad Roth's conversation with Bob Doll, Crossmark. Timestamps link to that moment on YouTube. Lightly cleaned, otherwise unedited.
Welcome to Behind the Ticker, the podcast where we go beyond the symbol and into the strategy. I'm Brad Roth, founder and chief investment officer at Thor Funds. And in each episode, I sit down with ETF managers, CIOs, and industry leaders to break down how these funds are actually built, how they behave in real markets, and how advisors use them in real portfolios. Most people just see a ticker symbol, but we know much more goes on behind the ticker. Hi, Bob. Welcome to the show.
Thank you, Brad. Good to be here. So why don't you give everybody your background? I know we've got 40 years in business. You were chief equity strategist at Nuveen, CIO of U.S. Equity at BlackRock. You retired and then you came back to cross-market CEO and CIO. Can you walk us through that arc and what pulled you out of retirement? Yeah, let me do that part first. I had no intention of retiring. I was eligible for retirement, so technically took it, but knew I was coming back and thankfully to Nuveen. So you just went through it briefly. I've been in the investment management business my entire career. the consistent part has been managing money, U.S. large cap money, mutual funds, SMAs, and now ETFs.
And I've had some management leadership opportunities along the way, taken some of them, and they've extended me and hopefully we've done okay. So I always ask everybody before we get into the business side of this, outside of work, what do you like to do? So I keep pretty busy with music. I direct the church choir and play keyboard, piano, and organ, and I'm on a bunch of faith-based boards. They keep me busy too. So I don't have a lot of spare time to chase other things, although I do try to get exercise. So let's talk about Crossmark. The firm has long heritage and value-based investing, going back to the steward mutual funds. For listeners who aren't familiar with Crossmark, can you give us at a high level, what's the firm and the philosophy? Sure. Crossmark's been around since 1987.
We are owned by AG Financial, which is the financial arm of the Assemblies of God Church. We manage both values-based and non-values-based money, depending on the client and what their needs and desires are. We've managed SMAs for a long time, mutual funds in the last double-digit number of years, and more recently ETFs. So we, in essence, help people line up their investments with their values. They can choose to do that with size and the SMA category. We can tailor it to their needs, wants, and desires. And it's a whole lot of fun trying to meet their needs.
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So values-based investing often can get confused with ESG, but they're actually quite different. Can you walk us through how the Crossmark approach differs from what people think typically of as ESG? Yeah. Thanks for making that observation. It is confusing to people, although these days I'm not sure what ESG is. It's become so blurred. Values-based investing simply helps people line up what it is they invest in with what their values are. As a money manager, our responsibility is to figure out which companies to exclude from a portfolio, which ones to, we use the phrase, include. I call it give an extra kiss. And then along the way, how are we going to engage companies where there might be issues that if they overcome them, we might be willing to invest in them. So it's a process whereby,
Obviously, we start with the characteristics of a good company, a good plan, reasonable stock valuation, smart management, et cetera, et cetera. That's first and foremost, if you will, the secular characteristics to which we then add the values-based piece to it. And that's how we create portfolios. So the framework you actually use is avoid, embrace, engage. Can you kind of talk us through what each of those pieces actually mean in practice? Sure. The avoid is what companies are we not going to invest in? For example, companies that I like to say kill, maim, or addict people. We don't own them. They're not good for society, if you will. And to be practical, I'm the large cap US equity manager. And so I use the Russell 1000 as
Benchmark thousand largest companies in the US. A little more than 50 of them we exclude for the reasons I just gave you that add up to about 6% of the capitalization of the universe. So it's notable, but it's not a problem getting a good diversified portfolio and seeking to outperform. By the way, there is no statistical evidence that you give up anything having a values-based portfolio relative to a non-values-based portfolio. So it's not like, well, how much do I have to give up to get these portfolios? So that in brief is the exclude part. The include. I like to say, I used this phrase a minute ago, we like to give an extra kiss to companies that are doing good. And that's measured lots of different ways, but it's an objective process. How do they treat their employees, their
Customers, their suppliers, their community? And they get points. It's like I said, an objective measure. So if you score high on the secular side and the extra kiss, you're more likely to make it in the portfolio. The third piece is, as you mentioned, the engaged piece. Companies that are on the periphery. If you would do this or not do that, company management, we might consider investing in you. And that's sometimes via a letter. It's sometimes a phone call. It's sometimes in coordination with other money managers to move that process along, try to get their attention. And sometimes we do.
Interesting. So the show is about ETFs. You guys launched two ETFs back in July of 2025. CLCG, which is your large cap growth and CLCV for large cap value. You're just past the one year mark. Can you give us a big picture on the fund and the funds and really what they're trying to accomplish and a hole they're trying to fill in the marketplace? Yeah, Brad, these are both values based, as you mentioned, large cap growth and large cap value. They're patterned after our SMAs. There are very few. In fact, when we launched, there were no other faith-based, actively managed large cap value and large cap growth products. So it fits that need and that niche for somebody who's looking to fill that hole in an ETF to round out a portfolio. So the goal of the growth one is
To beat other growth indices, in particular, the Russell 1000 growth index. And on the value side, the same thing, the Russell 1000 value index. So actively traded, as we know, tax managed as the ETFs are and liquidity available are the characteristics of these ETFs. So the construction, when I look at it, is a fairly specific mix. It's 75% quantitative, multi-factor, 25% this value overlay. Can you talk us through how those two pieces work together? Sure. Well, a couple of words individually, and then how we put them together, which is pretty simple. The secular pieces I like to call it is, what's the company fundamentals look like? What's the earnings progression, cash flow? What's the valuation of the stock? What's the assessment of the company's ability to engage and deliver on a strategic plan? Lots of different
Return variables. There are several dozen variables in that quantitative secular piece. Then, as I mentioned a minute ago, the 25%, the values-based piece is objective as well. And we score these and add them up for a company. And so in a sense, there are two different scores. We add them up with the 75-25 weighting, come up with an overall score. And that helps us. It's not the answer. It's the starting point to what might we put in the portfolio. A high score, and you're more eligible and more likely to make it in the portfolio and vice versa. Just curious quickly, Bob, how often are you rerunning that screen?
Yeah, thanks for asking. Every day. Now, the values part of it hardly ever changes. I shouldn't say hardly ever. It changes very slowly over time. The other 75%, parts of that change more often. But every day, I get a new run, a computer run, which looks at the portfolio, looks at the universe, gives us the quantitative ranking. Now, needless to say, the one I got this morning, there's not a whole lot different from the one I got yesterday. But where there are changes, we want to identify them and make sure we understand them. Yeah. And just out of curiosity, you talked about the factors such as valuation, earnings dynamics, profitability. Which of these is doing the heavy lifting in this current market environment?
At the moment, I would say the common factors of return on equity and price-to-free cash flow are the most important. We are in an environment where the cycle, the economic cycle, is fairly long in the tooth. Stocks are not all that cheap. There are a lot of question marks and issues around the world with interest rates and inflation and more and oil prices and all those good things. So we are relying more heavily than ever on those two to repeat, price-to-free cash flow and return on equity. So let's dig a little bit deeper into CLCG. I don't want to name any positions, but your top 10 is nearly 60% of the fund. Can you kind of walk us through how you get to that level of concentration? And is
Concentration kind of part of this growth factor to enable you to get outsized returns? Actually, the index, the Russell 1000 Growth Index, is more concentrated than our portfolio. Many of the names you see in the top five or 10 are common names. They're the big names in the benchmark. And actually, more of them are underweights versus the benchmark than overweights. So part of our risk management is if a name is 5% in the index, we could be plus 2 or minus 2. So even if I don't like a company, if it's 5% in the index, we're going to have 3% in there for risk management purposes. So that's a lot of how you get those weightings. The growth index with the emphasis and prevalence of the Magnificent 7 has grown in recent years. And that's why these
Portfolios can be more concentrated. But we actually have, to repeat, lower weightings in many of those top 10 than the benchmark. And so does that have to do, so the other thing I noticed is for a growth fund, CLCG has a heavier overweight in terms of financials towards the index is, it's a little bit unusual for a growth fund nowadays. Can you talk about that positioning? Does it just have to do with diversification? Yeah. So actually, we positively like many of the fundamentals. As you observed, there are fewer of them in the growth index than there are in the value index. But those that are there, we tend to pay attention to. Financial services, the banks are important to us in both portfolios.
So let's move over to CLCV, which is your values fund. It's a very different construction. 56 holdings, much more spread out. Like what's driving that diversification difference between the two funds? That is driven entirely by the benchmark. The growth index, the Russell 1000 growth index is far more concentrated than the value index. And therefore, there are fewer names that we must own, benchmark weight minus two, if you will. And so that enables us to own more names. And there are far more names. The Russell 1000 value index has more than 800 names. The Russell 1000 growth index has only about 300 names. So you can see that difference is the prime driver of what a portfolio looks like that's trying to beat those benchmarks.
Yeah. So similarly to growth, we're seeing a little bit of a sector tilt, overweight in financials. You've also got some overweight in industrials and information technology. Can you talk us through where you're finding value today and maybe some sectors you're trying to avoid that don't look as attractive? Yeah. So financials, a few more comments since we're overweight in both portfolios. We like financials, particularly the banks. There's several reasons. One, these stocks, in our view, are fairly cheap relative to the rest of the market. Two, they're the biggest beneficiaries of deregulation, which is happening at a quick pace. We don't read a lot about it because there's so much else in the news. And the balance sheets of financials, again, banks in particular, are healthier today than normal at this point in the economic cycle because a lot of the lending took place outside
The banking system, notably in private credit. So that's among the reasons we like the financials. Our underweights tend to be in the more defensive areas, consumer staples, which are reasonable to expensive stocks with mixed fundamentals. We're also underweight healthcare, although we're looking hard to find some more healthcare names in the portfolio. It's a good diversifier. So as we all know, growth has dominated value for much of the last decade. Where do you think we are in that cycle right now? And does that setup for value look different than it has for a very long time? Yeah. As Brad, so far this year, value has crushed growth after a lot of years where it's been the other way around. So our view is value has come back and deserves a place in the portfolio.
I find a lot of portfolios that maybe don't get tended to all that often are way overweight growth on an underweight value have struggled this year, getting a little more balanced in the portfolio we think makes sense. So while we're, talking about markets here a little bit, you're famous for your annual 10 predictions, an event people kind of wait for every year. Can you give us a taste of what you're watching heading in the back half of 26 and maybe into 27? Yeah. I don't give any thought to next year's predictions till December, but you're always trying to monitor what's going on. I'd say what's really important now, both to get right or wrong, the 26 predictions and how we will begin to look at 2027 is inflation. Inflation is not high,
But it's not low as the Fed wants it to be. You're probably aware the Fed has said for five years in a row, this is the sixth year inflation target is 2%. They've missed the target. This will be the sixth year in a row. And so that I think in their ability or desire or willingness to tackle inflation will have a lot to do with the outlook going forward. So let's get back to the funds really quickly. the important question here is for an advisor thinking about these funds, how would you position them in a portfolio? And does the value-based screen resonate with a broader audience than maybe people might expect? Yeah, that last point is very interesting. We have a bunch of people in not just the ETFs,
But our longer dated products that don't represent to be of faith in any way, shape or form. And when you ask them, well, then why are you in these products? Their response is, you've got good products, performance is good. You've got good service. We trust you given what you stand for, and therefore, please invest our money. So it's interesting who might be there. But for FAs who are looking particularly for ETFs and want to create as many do, an asset allocation basket, for the active part of large cap US, there are not a lot of choices out there. We hope to be two of those choices that make sense. So just curious at a company level with Crossmark, such a rich history in mutual funds, what do you think you've learned or what is different
Maybe about being in the ETF space or ecosystem than being in the mutual fund or SMA space? Yeah, a good subject. I remember about a year and a half ago saying to my management team, we can survive without ETFs, but we are unlikely to thrive without ETFs. So let's go on and create a couple and we have more on the drawing board as time goes by. Look, the marketplace dictates to us what the vehicle should be. We're agnostic. I'll walk into a financial advisor's office and he might say, we have large cap, we're interested in large cap growth. What do you have for us?
I say, well, what do you want? You want a mutual fund? You want an SMA? Do you want an ETF? We're agnostic. So help us figure out what it is you're trying to do with your clients and we have a product that will fit the bill. Well, and I don't want to get too much into specifics, but one of my questions was, are we going to see more from Crossmark? Like are you just kind of listening to the marketplace or are you actively know kind of where your product roadmap is heading here in the near future? So we feel we've got plenty of mutual funds and plenty of SMAs. We need and want more ETFs and we will round them out as time goes by. We want to make sure that the two that
We've launched get critical mass come into profitability before we bring the next two on board. But there will be more coming from Crossmark as time goes by. Well, Bob, I can't tell you how much I appreciate your time with me today. Before I can let you go, where can people learn more about Crossmark, your entire suite of products, and obviously these two ETS? The best place to go is our website. And there's lots of information there about who we are, what we manage, obviously, including the ETFs. Brad, thanks for the opportunity. It's been a joy on my side as well. Yeah. Thanks for being with me today. Thank you.
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