Timothy Plan US Small Cap Core ETF (TPSC)

The Timothy Plan US Small Cap Core ETF (TPSC) is an exchange-traded fund that invests in smaller US companies screened according to Christian values — excluding firms involved in gambling, abortion, contraception, or controversial labour practices. The fund holds roughly 500 stocks and charges a moderate expense ratio, aiming to provide faith-consistent exposure to the small-cap market.

The thesis: faith-based screening in the small-cap space

TPSC operates on the premise that an investor’s portfolio should reflect their moral convictions. The fund’s screening process starts with US companies in the small-cap range (roughly companies worth between $300 million and $10 billion) and then applies a negative filter. Holdings are excluded if parent or subsidiary companies are involved in abortion services, contraception manufacturing, gambling operations, pornography distribution, or embryonic stem-cell research. The fund also excludes companies with controversial labour practices or ownership structures that violate specific Christian teachings.

This dual approach — market-cap selection plus values-based screening — means TPSC does not track a traditional index. Instead, it holds a custom portfolio of the remaining eligible small-cap names, weighted by market capitalisation. The fund is not alone in its screening methodology; similar vehicles exist in the conservative Protestant, Catholic, and Jewish investment spaces. But TPSC’s particular formulation targets evangelical and mainstream Protestant investors.

Construction and holdings: concentrated or filtered?

Small-cap universes are inherently less liquid and more concentrated than large-cap markets, and adding a values screen reduces the pool further. TPSC typically holds 500–600 stocks across sectors. The exclusions mean the fund skews away from healthcare (a common screening casualty given abortion and contraception criteria) and away from consumer discretionary (casinos, betting operators). This concentration into the residual universe creates natural tilts — the fund is often heavier in technology, industrials, and financial services by default.

Like most small-cap vehicles, TPSC carries higher turnover than a large-cap counterpart because smaller companies are acquired, delist, or drift out of the small-cap band faster. The fund also faces a liquidity challenge that all faith-screened funds encounter: a values-based screen narrows the investable universe, which can make large redemptions or inflows harder to execute smoothly. For the fund sponsor, it also means ongoing compliance work — tracking which companies change ownership or spin out subsidiaries, which might suddenly trigger or clear a screening criterion.

Costs and cash drag

TPSC’s expense ratio is moderate for an actively managed small-cap vehicle and modest for a rules-based screened fund. Like all screened funds, it incurs drag from its narrow universe. If an excluded company soars, the fund cannot hold it, forgoing gains. Conversely, if an excluded company crashes, the fund avoids losses. Over time, the performance hit from screening depends on which industries are most heavily filtered and whether those industries over- or underperform.

The fund also carries a cash allocation, usually held at a small percentage as a buffer for redemptions and screening-rule updates. This cash drag suppresses returns in rising markets.

The hidden risk: mission drift in a changing world

The clearest risk in any faith-screened fund is that the screening rules do not age well, or that the underlying companies’ actions change faster than the fund’s monitoring process. A company might acquire a subsidiary that violates screening rules, or a spin-off might suddenly become ineligible. If the fund lags in updating holdings, it may inadvertently own companies it should not, damaging trust with the investor base.

The second risk is concentration. With only 500–600 eligible stocks in a constrained universe, sector concentration is real. A downturn in the overweight sectors can hit the fund harder than a broad small-cap benchmark would. Smaller companies are also more volatile than large-cap stocks, so a screened small-cap fund compounds that volatility.

Finally, values screening is not free. All else equal, a screened fund underperforms a non-screened alternative by the amount of performance forgone by excluding the best performers in the filtered industries. How large that drag is depends on how those industries cycle relative to the broader market.

How to research TPSC

Investors seeking to understand TPSC should begin with the fund prospectus and fact sheet, available from the sponsor’s website, which lay out the exact screening criteria and current holdings. The annual report shows sector and geographic weighting. Compare the fund’s rolling returns (3-, 5-, 10-year) to a broad small-cap benchmark (the Russell 2000 is the standard) to see the cost of values screening over time. Check the turnover ratio in the fact sheet — higher turnover suggests the screen is creating churn. Most importantly, read the fine print on what “screening” means: the wording varies between funds, and criteria that sound identical may be applied very differently. TPSC publishes its full holdings, so it is also possible to audit the fund yourself and ask why any particular company is or is not included.