ETFs
Balanced offering of political ETFs in the United States
Writing from New York, Bailey McCann examines proposed political ETFs.
As the US election approaches, a group of ETFs is poised to capture investment from both sides of the divide. Whether you’re right or left, you can invest in an ETF that aligns with your values — or at least the values of your representative in Congress.
Politically oriented ETFs are not new: Small groups of them have come and gone over the years as part of “values-aligned” investment offerings. The goal of these funds, their promoters say, is to give investors the tools to put their money where their political ambitions lie.
Reflection Asset Management’s DEMZ ETF, for example, offers a large-cap core fund that tracks the S&P 500, minus companies that have taken Republican positions. Companies in the index must have made more than 75% of their political contributions to Democratic causes and candidates. Top holdings include Apple, Microsoft and Loewes. Performance is positive; the fund is up 16.70% year-to-date through July 12.
On the other side is the Point Bridge America First ETF (BATS: MAGA). The MAGA ETF tracks an index of 150 companies in the S&P 500 Index whose employees and political action committees (PACs) strongly support Republican candidates. Top holdings include Vistra Corporation, Charter Communications, and Howmet Aerospace, among others. Its year-to-date return through July 12 lags DEMZ’s at +6.07%. Conservatives can also invest in the American Conservative Values Fund (ACVF) — the fund excludes companies perceived as hostile to conservative values from its index. Companies on the exclusion list include Alphabet, Amazon, many major banks, and Walmart, among others. ACVF’s performance is closer to DEMZ’s, but still lags behind it at +15.83% year-to-date through July 12.
All three funds can add a thematic element to mainstream U.S. equity holdings and have been around for more than three years. Their asset sizes, however, have remained relatively modest.
If thematic trading isn’t enough, there’s the option of tracking how members of Congress themselves trade. Unusual Whales Subversive Democratic Trading ETF (NANC) and its conservative counterpart Unusual Whales Subversive Republican Trading ETF (KRUZ) track how members of Congress trade based on their financial disclosures.
These funds are doing relatively well. NANC is up +22.80% YTD through July 12, and KRUZ is up +9.93% over the same period. Both funds were launched in 2023, so they have a shorter track record than other funds in this thematic group. The thesis behind these funds is interesting: Members of Congress often leave Congress much wealthier than they entered it. However, a closer look at the top holdings raises questions about how close these funds are to the S&P 500. Both funds have large positions in Nvidia, for example.
Individual investors are likely to be the target of these funds, particularly those who want thematic exposure aligned with their values. If the growth of DEMZ and MAGA over the past three years is any indication, there doesn’t appear to have been much of a pickup within the advisor community.