Subversive debuts ETFs tracking stocks held by US lawmakers

Feb 9th, 2023 | By | Category: Equities

New York-based Subversive Capital has launched two ETFs that invest in equities of companies held by current Democratic or Republican members of the US Congress.

Subversive debuts ETFs tracking US lawmakers’ stock holdings

Sitting members of the US Congress are thought to possess an information advantage when it comes to stock market investing.

The Unusual Whales Subversive Democratic ETF (NANC US) and Unusual Whales Subversive Republican ETF (KRUZ US) have been listed on Cboe BZX Exchange, each with an expense ratio of 0.75%.

The ETFs’ tickers are a play on prominent US politicians from each party — Nancy Pelosi, a Democratic congresswoman representing California; and Ted Cruz, a Republican senator from Texas.

According to Christian H. Cooper, Portfolio Manager of Subversive Capital’s ETFs, sitting members of the US Congress are thought to possess an information advantage when it comes to stock market investing.

Cooper said: “A quick online search shows how members of Congress perform relative to the rest of the market. Congress has outperformed the market and beat the SPY index in 2021 and 2022. We believe members of Congress have more information than the rest of us, and if they can trade on that information, we should be able to do the same, and now we can.”

Investment approach

NANC and KRUZ invest in companies that sitting Democratic and Republican members of the US Congress, respectively, as well as their spouses, have disclosed as having significant interests in.

While the funds are actively managed, Subversive states that it does not express a view on the underlying equities but rather buys or sells securities based solely on the information provided by the ETF’s data provider Unusual Whales, an option flow platform and information service.

According to the ‘Stop Trading on Congressional Knowledge (STOCK) Act’, members of the US Congress are required to report any trade over $1,000 made on their or their spouses’ behalf within 45 days.

STOCK Act filings are filed with either the Senate Office of Public Records or the Clerk of the House of Representatives and made available online pursuant to the Ethics in Government Act.

Cooper has stated that the ETFs’ portfolios are expected to be updated weekly unless a significant change warrants a more immediate adjustment.

According to the ETFs’ factsheets, NANC is expected to hold between 750-800 stocks, while CRUZ will hold a slightly smaller set of around 550-600.

NANC’s top positions are currently Microsoft (7.4%), Amazon (6.8%), Alphabet (6.0%), Apple (5.5%), and Salesforce (4.5%). CRUZ’s biggest holdings are Magellan Midstream Partners (3.6%), Microsoft (2.6%), Energy Transfer (2.3%), Dow (1.8%), and Phillip Morris (1.6%).

Subversive made its ETF debut in January by launching three actively managed funds targeting the investment themes of decarbonization, food security, and mental health.

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