Anti-Woke ETFs Are Pitching to Conservatives Mad at Corporate America


Dan Grant is fed up with “wokeness.” He’s sick of such companies as Nike Inc. and Coca-Cola Co. taking liberal positions on social justice issues. “People are tired of woke companies, tired of wokeness overall, and tired of companies putting their social justice activism ahead of generating profits for their shareholders,” Grant says, sitting in a small Nashville office festooned with dinosaur fossils and a pet Australian snake-necked turtle named Melvin.

The former JPMorgan Chase & Co. banker is betting that the 74 million people who, like him, voted for Donald Trump are mad about it, too—mad enough to buy shares of his company’s exchange traded funds, which invest in companies Grant and his colleagues deem unwoke. That means they lean right politically or are at least neutral in their activism and donations. Grant is chief executive officer of 2ndVote Advisers, a small group of politically conservative money managers pushing against what they see as a stampede toward left-leaning, socially conscious investing on Wall Street.

Last year, 2ndVote Advisers began rolling out a series of conservative-themed ETFs—focused on issues such as guns, abortion, and censorship—that Grant has been touting on right-wing talk radio. “We’re saying enough is enough,” Grant told Sebastian Gorka, the bombastic former Trump adviser who started a radio show after he was fired from the White House. “We’re telling these CEOs to stop doing what the left is pressuring them to do.”

There’s a lot of money to be made in ETFs, which can be bought like stocks by anyone with a brokerage account. So far this year more than $720 billion has flowed into the funds, according to Bloomberg Intelligence, with about $27 billion directed at funds that consider environmental, social, or governance (ESG) issues. Grant sees an opening to tap into the Trump vote by offering investments that express a different set of values.

In December, 2ndVote will launch an ETF perfectly attuned to the latest Trumpian cultural grievance: a “First Amendment fund” called the American Freedoms ETF. Composed of companies with permissive speech policies, the fund excludes platforms such as Facebook, Google, and Twitter, which the former president claims unfairly “censor” him. Grant insists the fund’s purpose isn’t political. Rather, it’s an expression of economist Milton Friedman’s dictum that a company’s sole responsibility is to make money. “What I would say to Jack Dorsey and Mark Zuckerberg is they should focus on profitability, not on social justice activism like Black Lives Matter and climate alarmism,” says Grant. “I wouldn’t want to be in their shoes if Trump gets reelected.”

Grant isn’t the first money manager to target the MAGA masses. “They’re kind of copying me,” complains Hal Lambert, founder of Fort Worth-based Point Bridge Capital, which rolled out its GOP Stock Tracker ETF, better known by its ticker MAGA, in 2017. Both firms also compete with the American Conservative Values ETF, started last year by Ridgeline Research. Despite bickering over which fund is the more authentically conservative, none holds assets in excess of $35 million. For all that Trump has suffused American life, the world of ETFs has so far been resistant.

Top Holdings

Data: Compiled by Bloomberg as of Nov. 9

Financial professionals say that’s no accident. “We always advise investors not to mix politics with their portfolio,” says Nate Geraci, president of advisory firm ETF Store. “There’s no academically rigorous research showing that investing based on political leanings is going to yield any sort of outperformance.” Advisers, who play a key role in selecting funds for many investors, are also leery of upsetting clients who might get angry if they’re placed in funds that conflict with strongly held political views. “God forbid you’re perceived to be playing political favorites,” says Ben Johnson, director of global ETF research at Morningstar Inc. Although money has flowed to ESG funds, that jargony branding is studiedly nonpartisan.

Another hurdle for Trump-thirsty ETFs is that there are already plenty of investment options for people wishing to express right-wing or libertarian world views: They can buy gold or cryptocurrencies if they distrust U.S. monetary policy. Now they can buy a Bitcoin futures ETF, too. Or they can snap up shares in Digital World Acquisition Corp., the “blank check” company that’s agreed to merge with Trump’s planned social media business. There are also Trump-themed nonfungible tokens—a crypto version of collectible art. Amid the MAGA gold rush, buying an ETF isn’t the most obvious option.

Grant thinks he can change that. The investing world just needs to undergo a political awakening to recognize the folly of corporations pursuing progressive social and climate goals—and embrace red America’s values instead, he says. Along with Andy Puzder, former Trump labor secretary nominee and a 2ndVote advisory board member, he’s organizing a conservative shareholder activist group modeled after Engine No. 1, the tiny ESG-driven firm that won a fight over three Exxon Mobil Corp. board seats this year.

Amid a growing conservative backlash against everything from Joe Biden to election integrity to teaching kids about racism, Grant’s bid to politicize investing—he’d say “depoliticize”—is in keeping with the zeitgeist. Politics has lately filtered into investing in ways that have become impossible to ignore. It isn’t just the money pouring into ESG funds—the explosion of meme stocks like GameStop Corp. has been driven by a kind of quasi-populism where buying shares becomes a means of personal expression, a way to declare one’s affinity and stick it to the establishment. With just about everything else today becoming hyperpolarized around politics, Grant argues, why shouldn’t ETFs, too?

Before launching an ETF business, 2ndVote began as a conservative watchdog group. In 2012, David Black, a forensic toxicologist and husband of former Tennessee Republican U.S. Representative Diane Black, grew upset after giving money to the March of Dimes at a grocery store, only to discover later that the organization issued grants to Planned Parenthood. Black, who opposes abortion, didn’t vote for politicians who support Planned Parenthood; neither did he wish to support through his personal spending—his “second vote”—companies or causes that did. With private backing, he started 2ndVote to police corporate policy and political advocacy, eventually creating a liberal-to-conservative point scale to rank each of the companies in the S&P 1500, as well as major nonprofit groups.

2ndVote launched a newsletter and social media feeds to trumpet its findings and try to influence conservative spending choices, without much obvious effect. Its ratings are sent to the boards of every S&P 1500 company. They can sometimes be perplexing: Exxon and Chevron Corp. both rate as “liberal” companies. Recent campaigns against Nike (for “denigrating the American flag”) and Walt Disney Co. (whose Muppet Babies TV show promotes “gender confusion to young children”) haven’t dented either company. The group has also lobbied wealth managers, including MAGA ETF founder Lambert, who wasn’t impressed. “If you try to measure conservatism by public statements and HR policies, every company is going to look crazy far left,” says Lambert, whose fund measures partisanship by tracking political donations instead.

The Blacks and Grant started 2ndVote Advisers in 2020. Shortly after Joe Biden’s victory last November, they began offering ETFs to give, says Grant, “disgruntled investors a mechanism to fight back”—and to try and make some money. Retail investors haven’t flocked to them yet. In addition to the problems of partisan branding, the funds are fighting other trends in money management. For a start, after applying their social screens, the managers actively pick stocks they think will perform best. In recent years much of the money in funds has shifted to passive, index-tracking portfolios after mountains of evidence piled up showing that most active managers can’t beat indexes such as the S&P 500 after their fees. The 2ndVote funds’ fees are also high, at 0.75% of assets per year, compared with just 0.03% for the popular Vanguard S&P 500 ETF.

relates to Anti-Woke ETFs Are Pitching to Conservatives Mad at Corporate America
Grant and Puzder are organizing a conservative shareholder activist group modeled after the ESG-driven firm Engine No. 1.
Photographer: Stacy Kranitz for Bloomberg Businessweek

Sometimes more expensive funds can break through if they capture investors’ imaginations or rack up a streak of strong returns, but it’s rare. “Almost every dime that’s flowing into ETFs falls into one of two categories: ‘dirt cheap’ or ‘shiny object,’ ” says Eric Balchunas, senior ETF analyst for Bloomberg Intelligence. Since their inception almost a year ago, the two existing 2ndVote funds have beaten the S&P 500—one by a hair and another by more than 10 percentage points. But many advisers will want to see at least three years of performance before judging a fund.

2ndVote portfolios’ performance is driven more by concentrated investments in a handful of stocks than by political trends. For example, the higher-performing 2ndVote Society Defended ETF, which considers companies’ donations and activism on gun issues, has as its top holdings blue-state favorite retailer Costco Wholesale Corp. and banking giant Goldman Sachs Group Inc. (which gave more to Democrats than Republicans in the last election cycle), with more than 4% of assets in each. Goldman’s been a big winner, returning more than twice as much as the market since the fund’s debut.

Grant says he wants his funds to be seen as a “counterweight” to what many conservatives regard as the elite liberalism of corporate America and Wall Street. Citigroup Inc. and Bank of America Corp., after the shootings at a high school in Parkland, Fla., said they’d stop providing certain banking services to some gun-related businesses; major asset managers including BlackRock Inc. and Vanguard Group Inc. sided with Engine No. 1 in its board fight with Exxon. To people on the left, these may seem like tiny steps—BlackRock and Vanguard remain Exxon’s largest investors. Grant disagrees, and other conservatives do, too. Corporate CEOs, lionized in Republican circles only a few years ago as “job creators,” are emerging as villains in the new narrative. “They get to pursue a leftist agenda using someone else’s money,” Grant says.

Republican governors, some with an eye on the White House, are amplifying these complaints. Texas Governor Greg Abbott has signed laws banning state investment in firms that cut ties with the oil and gas industry and another targeting banks that curb lending to firearms manufacturers. Recently, Florida Governor Ron DeSantis blasted “the rise of woke capitalism” in a searing speech to the state Chamber of Commerce that carried a threat. “If you’re using your power as a corporation and you’re leveraging that to try to advance any ideology,” DeSantis said, “I think it’s very dangerous for this country, and I’m not just gonna sit idly by.”

As Republican officials grow bolder and more willing to break norms, it’s not a stretch to imagine them pressuring the public pension funds in their states to embrace their agenda. The ESG movement originally picked up steam when a few big pension funds decided to use their financial muscle to signal a value system that encompasses more than just profit-seeking. Puzder sees a promising market in the Republican backlash. To that end, Grant has met with officials in Arizona, Louisiana, and Missouri, and recently spoke to a gathering of state treasurers in Orlando. “There are states that are very strongly supportive of Second Amendment rights that have large pension funds,” Puzder says, “and we would certainly like to sign up some of those pension funds.”

To capitalize on this energy and become a viable business, Grant says 2ndVote Advisers needs to amass $150 million in assets. With this in mind, in early November he wasn’t pitching asset managers in New York or Los Angeles. Instead, he traveled south to the taproot of modern conservatism— Mar-a-Lago—to further gin up Republican anger about woke capitalism.
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