Reflection debuts US ‘democratic values’ ETF

Nov 5th, 2020 | By | Category: Equities

South Carolina-based investment adviser Reflection Asset Management has introduced its first ETF with the launch of a politically inspired thematic US equity strategy.

US Democratic Values ETF

The fund provides exposure to US large-cap companies that make financial donations to the Democratic Party.

The DEMZ Political Contributions ETF (DEMZ US) targets companies that favour the Democratic Party through political contributions while maintaining a risk profile similar to that of the S&P 500.

The fund is aimed at investors who wish to utilize their investment portfolio to support Democratic values, which it defines as diversity and inclusion, a living wage, affordable employee healthcare, wealth creation opportunities for employees, and minimizing environmental impact, without sacrificing returns.

The ETF has listed on Nasdaq Exchange and comes with an expense ratio of 0.45%.

Jason Britton, CEO of Reflection Asset Management, commented, “We are excited to bring to market the first-ever Democratic leadership ETF. DEMZ provides US large-cap equity exposure while maintaining the integrity of owning only those companies that share the investor’s commitment to democratic causes and candidates.”

The ETF’s underlying reference is the DEMZ Political Contribution Index, calculated by S&P Dow Jones Indices, which screens the S&P 500 for firms that direct at least 75% of their total corporate political contributions during an election cycle to Democratic Party candidates and political action committees (PACs) registered with the Democratic Party.

Data around political contributions is provided by Goods Unite Us, a non-partisan technology data platform.

Constituents are weighted using a proprietary factor model that seeks to minimize the performance difference between the index and the S&P 500. Additionally, no stock may account for a weight greater than 5%, while the weight of any GICS sector cannot deviate more than 5% from its weight in the S&P 500. The index is reconstituted and rebalanced on a quarterly basis.

As of the end of September, the index had 41 constituents with the largest sector weights allocated to information technology (27.0%), financials (13.7%), communication services (12.7%), consumer discretionary (11.5%), and consumer staples (9.6%). Notable holdings included M&T Bank (5%), Alphabet (parent of Google) (5%), Colgate-Palmolive (5%), Apple (5%), Consolidated Edison (4.9%), Agilent Technologies (4.8%), IBM (4.51%), Progressive Corp (4.5%), Adobe (4.0%) and Moody’s Corp (4.0%).

The fund comes hot on the heels of the US ‘conservative values’ ETF from Washington D.C.-based investment adviser Ridgeline Research. The American Conservative Values ETF (ACVF US), which is listed on NYSE Arca with an expense ratio of 0.75%, provides actively managed exposure to US large-cap equities of firms with politically conservative principles.

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