How Genocide Filters Impact a Filtered Fund’s Performance

TL;DR: Our 5-year backtest shows targeted BDS filtering had minimal impact on returns (even outperforming in some cases), while broader filters like the Watermelon index significantly affected the performance of the growth fund due to exclusion of major tech companies. A conservative dividend-focused fund remained largely unaffected by either filter.

Many ethically conscious investors are asking an important question today: What would my portfolio performance look like if I excluded companies complicit in genocide or occupation?

At Amal Invest, we recently ran a 5-year backtest on some of the most common U.S. mutual funds and ETFs — comparing performance with and without genocide-related filters.

We also added the S&P 500 ETF (SPY) as a benchmark for comparison.

The Funds We Tested

We selected three representative funds across different investment strategies:

• FDGRX – Fidelity Growth Fund (Growth-focused)
• VDADX – Vanguard Dividend Appreciation Fund (Conservative dividend-based)
• SPY – S&P 500 ETF (Market benchmark)

The Filters We Tested

BDS Filter

Boycott, Divestment, Sanctions (BDS) is a Palestinian-led movement for freedom, justice and equality. BDS upholds the simple principle that Palestinians are entitled to the same rights as the rest of humanity.

Our list is directly sourced from the BDS Movement's official page.

Last updated: 5 January 2024

Watermelon Index

The watermelon Index is a tool for worker-led resistance against the occupation and genocide in Palestine. It is a database of companies complicit in Israeli crimes and worker campaigns against them.

5-Year Performance Results

Why 5 years? The test considers historical holdings data in our analysis. Our data provider only shows holdings information back to 2019, when SEC mandated disclosure requirements came into effect. This gives us reliable, comprehensive data for accurate backtesting.

Here's how a $10,000 investment would have performed across different filtering scenarios:

Key Takeaways from Our Analysis

The Data

Growth Fund Vs Save Fund Vs S&P 500 in a 3-way comparison

FDGRX - Growth Fund

VDADX - Save Fund

SPY - S&P 500

1. Targeted Filtering Shows Promise

The BDS filter demonstrated that ethical investing doesn't necessarily mean sacrificing returns. In fact, FDGRX with BDS filtering outperformed the unfiltered version by 3.3% over the 5-year period.

2. Broad Filtering Comes with Costs

The Watermelon filter's broader exclusions, particularly of high-performing U.S. tech giants (Apple, Amazon, Google, Meta), led to significant underperformance:

• FDGRX dropped 24.8% compared to the unfiltered version
• SPY benchmark fell 11.7% below its unfiltered performance
• Even the conservative VDADX saw a 2% decline

3. Investment Style Matters

Conservative, dividend-focused funds like VDADX were largely resilient to both filtering approaches due to their lower exposure to the excluded companies. Growth-oriented funds felt the impact more acutely.

A Hypothesis: The Tech Factor

The sharper performance drop under the Watermelon filter suggests that high-growth U.S. tech and defense companies — though ethically problematic for many investors — have been key market drivers over the past 5 years.

This creates a real dilemma for values-based investors: some of the market's best performers are companies they may want to avoid for ethical reasons.

However, this doesn't necessarily mean values-based investing will always underperform. Market leadership rotates over time, and what drives performance in one period may not in another.

Legal Compliance: Navigating Anti-BDS Legislation

A common question we receive: How does Amal Invest deal with U.S. anti-BDS legislation?

Our Position

Amal Invest is not affected by anti-BDS laws for several key reasons:

1. We don't manage pooled funds or take investment positions
2. We provide screening tools, not investment management

How It Works

• Investors maintain full control of their holdings
• We don't facilitate divestment — we provide screening transparency
• Users apply our filters to their self-managed portfolios

This structure ensures complete compliance while empowering investors with the information they need to make informed decisions.

The Bigger Picture: Values vs. Visibility

At Amal Invest, we believe investors shouldn't have to choose between values and visibility.

Traditional approaches to halal investing often rely on static exclusion lists without showing the actual impact on performance. Our dynamic filtering system provides:

• Real historical performance data with and without filters
• Clear visibility into the trade-offs of different approaches
• Customizable filtering based on your specific values

What This Means for You

Whether you're managing your own portfolio or working with a financial institution, these results highlight several important considerations:

1. Not all ethical filters are created equal — targeted approaches may have less performance impact
2. Your investment style matters — conservative strategies may be more resilient to ethical exclusions
3. Transparency is key — understanding the performance implications helps set realistic expectations
4. Legal compliance is achievable — proper structuring allows for values-based screening without regulatory issues

Analysis conducted on Friday, June 13th, 2025. Past performance does not guarantee future results.