Defiance to Launch Autism Impact ETF, Donate Profits
With ETFs generally operating on thin margins, it’s quite rare for an issuer to forgo profits.
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This issuer is seeing whether it pays to be altruistic.
With Autism Appreciation Month only two weeks away, Defiance ETFs is set to launch a fund that invests in companies providing products, services or research in the autism ecosystem, according to SEC filings. The holdings will include medical research and pharmaceutical firms, companies developing AI tools that monitor and assess autism and businesses that build education systems for neurodivergent learners. However, the goal of the fund appears to be more than capitalizing on the biotech and medical industries.
For its first two years, Defiance will donate all net advisory profits from the fund to autism-focused nonprofits. After that, the minimum donation will remain at 50% of advisory profits, an unusual move in an industry where ETFs typically operate on thin margins. It’s not the first fund to donate profits, said James Seyffart, senior research analyst at Bloomberg Intelligence. “It’s for a good cause and I hope they’re successful, but it’s going to come down to whether they can raise assets,” he told ETF Upside. “At the end of the day, it’s still a fund, it’s still a business and they’re still going to have to raise capital.”
For a Good Cause
Expense ratios for passive ETFs are often low, ranging from no fee at all for broad market funds like the BNY Mellon US Large Cap Core Equity ETF (BKLC) to 0.25% for more industry-specific products. The funds live and die by how much they scale, so to part ways with any profits is quite a choice. Though a short list, the Defiance ETF is the latest example of a fund with a philanthropic element at its core:
- The Simplify Health Care ETF (PINK) is 100% pro bono, donating all of its profits to breast cancer research each year. Its returns have gone up roughly 14% in the past 12 months, outpacing the Dow.
- The Green Century Balance Fund (GCBLX) is a mutual fund that invests in companies with a focus on environmental, social and governance issues. The fund is owned by several nonprofits, so all the earnings from the GCBLX go back into their missions.
The philanthropy is both a marketing and altruistic strategy, Seyffart said. “[Defiance] doesn’t have to donate the money, but they are.” See, it’s not always about the money.
