ETFs
Congressional ETF Positioning Tips
When it comes to politics, advisors often tell us they try to avoid the topic in conversations with their clients. We understand it. Political discourse is passionate and nuanced these days. But in the spirit of the first U.S. presidential debate this week and our collective focus on what the world (and markets) might look like in November and beyond, let’s take a look at Congressional ETFs and how members of our Congress is investing as a presidential election approaches.
There are two unique ETFs that sit at the intersection of politics and investment opportunity, if you will. They are still relatively new to the market but already have about $150 million in combined assets. They are:
- Democratic ETF Subversive Unusual Whales (NANC A-)
- Republican ETF Subversive Unusual Whales (KRUZ B)
Content continues below advertisement
Invest Like Your Congressman
These funds invest in securities in which Members of Congress and their spouses invest, with positions selected and weighted based on required reporting that Members of Congress must make each time they buy or sell a security under the Actions Act.
To be clear, NANC and KRUZ are not intended to be political expression vehicles. Even though their origins are tied to Unusual Whales’ effort to draw attention to the commercial activities of Congress. They do not invest based on party agendas or political rhetoric. They are simply vehicles for alpha generation.
That said, these funds offer a revealing glimpse into how members of Congress across party lines view this opportunity set.
As policymakers, members of Congress have unique insight into the regulatory impact of their actions on different companies and industries. They have access to a lot of information that we don’t. That makes their investment choices for their own money particularly interesting.
In a nutshell, NANC is moving heavily toward tech mega-cap growth this year. At the same time, KRUZ is more broadly diversified across all sectors, leaning more towards sectors that benefit from economic strength.
Nearly 45% of NANC is invested in technology, while KRUZ has twice as many financial stocks, twice as many industrial stocks and nearly seven times as many energy stocks as its peer.
Here is the comparison of the sectoral distribution between NANC and KRUZ:
In other words, these sector bets give NANC a strong growth orientation while KRUZ leans more toward value. In 2024, growth has reigned supreme and market leadership has been limited, so it is not surprising to see the disparity in performance between the two funds in favor of NANC.
Source: VettaFi PRO
On a more granular level, looking at each fund’s top 10 holdings also helps to get an idea of each portfolio’s weighting level. NANC has more than 25% of its holdings tied to just three stocks (Nvidia making up more than 13% of the total portfolio), while KRUZ is much less weighted, with a 3% allocation to JP Morgan.
NANC Holdings
Source: Subversive
KRUZ Holdings
Source: Subversive
Money in the mix
It’s also worth noting that NANC, also invested in big tech, holds a similar position to cash in the form of an allocation to MINT among the top 10 stocks. Cash is generally considered a defensive play. Does this suggest Democrats are heeding the call for caution?
Cash on the sidelines has been a major theme in the market this year, with persistent inflation, high rates and an uncertain market and rate environment going forward. We’re all looking at how this money will ultimately be redeployed once rates start to fall, and NANC could play a role in that.
Go forward
As we digest the first presidential debate and prepare for what promises to be a colorful election season, these Congressional ETFs could continue to provide insight into what our members of Congress really think about the markets and the opportunities available. As alpha-seeking funds, these ETFs offer investors a chance to invest like their congressman does with the information they have – doing what they do – rather than just doing what they say during the election campaign.
For more information, please visit VettaFi.com | ETF Trends.