More ETFs Get Political, Investing Like Insiders

With all of the political attack ads we all have to endure for another month, it might be refreshing to see some bipartisanship.

Subversive Capital, the force behind two funds that track the investments of Congressional Democrats and Republicans, is prepping another that will focus on the companies and sectors that overlap between the two camps. That product, the Subversive Bi-Partisan Congressional Trading ETF (PLCY), could launch as soon as mid-December — so anyone interested in the pachyderm-equine hybrid will have to wait until after the election. It’s among the latest in the niche category of politically themed exchange-traded funds, which ranges from tracking how legislators invest to allocating to companies that could benefit from political alliances. And then there’s the elephant in the room: the Truth Social funds, a line of MAGA-inspired investment strategies from a company owned by the president.

“All of these ETFs capitalize on people’s passion for their political affiliation and political views,” said Cinthia Murphy, director of research at TMX VettaFi. “They tap directly into high conviction, like the thematic space does. And just like the thematic space, they offer completely different approaches within the category.”

Cast Your Ballots

If there’s anything the modern ETF market does well as a whole, it’s getting in on investment themes quickly, if not the wider zeitgeist. Partisanship has been building for years in the country, so it seems inevitable that investors would have ETFs to choose from that reflect their identities. That seems to be a draw for the funds affiliated with the president, but the Subversive Congressional Democrats Trading (NANC) and Republicans Trading (GOP) ETFs are more about investing like insiders. It’s not necessarily a popularity contest, but NANC (a nod to Rep. Nancy Pelosi, D-California) currently has more than three times the assets as GOP, at $300 million versus $95 million. “The way Nancy Pelosi trades is high-conviction,” said Dan Weiskopf, a portfolio manager for the Subversive funds. “For that reason alone, people can put their arms around that ETF and the [investment] process.”

Historically, Congressional Democrats have favored technology stocks and Republicans have tilted more toward value than growth, Weiskopf said. That is changing somewhat amid the AI explosion and as more in the GOP have embraced crypto, he noted. So far this year, the GOP ETF is outperforming NANC, with year-to-date returns of 24% versus 18%, respectively. 

There are also some new varieties of funds on the horizon:

• The Quantify Quiver Political Capital ETF, which the company filed for this week, would invest in stocks based on engagement with the federal government, assigning companies political influence scores.
• Several issuers are also prepping funds that would make prediction-markets-style binary bets on election outcomes. Currently, the Securities and Exchange Commission is evaluating how to treat novel ETFs, and no such funds have gone live.

Political Brinksmanship: Given the range of strategies — and their extreme variance in risk level — it would be prudent for investors to vet a political ETF as much as (they should) a political candidate. Regardless, some of the funds, as well as others to come, are finding an audience. “Politics sells. The heat, the hatred, the passion makes for great storytelling,” Murphy said. “You get people emotionally invested.”