A growing ETF is looking to capture conservative investors who want to eschew outspoken companies that tout left-wing causes.
The American Conservative Values ETF is an exchange-traded fund started last October that was created with the mission of catering to conservative investors. Founded by investment experts Bill Flaig and Tom Carter, the fund tries to track the S&P 500.
Carter, who is the president of the ETF, told the Washington Examiner that he and Flaig, who is the CEO, noticed that there has been a proliferation of environmental, social, and corporate governance funds that are focused on clean energy or being against fossil fuels. He said the dearth of funds tailored to conservatives sparked the idea.
Instead of starting with a smaller portfolio of companies that are just identified as conservative, Carter said that they opted to start with a broad large-cap index, the S&P 500, and remove or boycott companies that they considered to be working against freedom of speech, the Second Amendment, and “basic conservative rights.”
He said that about 20 securities were initially nixed from the fund for not being aligned with conservative values, although more companies have been removed for various reasons since the ETF was established. Some of the securities that don’t exist in the fund include heavy hitters such as Apple , Amazon , and Google.
Carter pointed out that Google and Apple were removed following their decision to pull the controversial Parler social media app, which was predominately used by conservatives, following the Jan. 6 attack on the Capitol. Amazon met the same fate when it essentially took Parler offline.
The fund, which began with about $1 million and has since grown to some $14 million, has to walk the fine line of balancing advocacy with performance. He said in order to compensate for divestment in one company, they find another in a similar industry and overweight those companies while being careful to keep the fund tethered to the S&P 500’s performance.
“You can’t take an Apple out of the S&P 500 and make up for it completely, so you are taking on what we call active risk,” Carter said. “So, you take on some active risk when you eliminate companies and you have to put in other companies.”
Carter said that the active risk that the ETF tries to work with is plus or minus 2% from the S&P 500. Since last October, the fund has swung both ways, with periods where it was outperforming the index and periods where it has trailed.
The fund’s major goal now is to attract more investors. Carter said that while his ETF has recently had some “pretty significant volume days,” they want to continue to attract conservatives who want to invest with their values while still getting large-cap performance.
While it’s a difficult metric to ascertain, investors in the ETF have contributed both small and large amounts of money, he said. Carter pointed out that he and Flaig watch the trades every day and have seen some large bulk trades, some up to $150,000, but have also seen people buying just two or three shares at a time, which could be less than $100. Based on the latest count, the ETF has just over 1,000 shareholders.
The goal for the end of the year is to grow the fund to $25 million, which is one of the levels within the industry where the funds become very viable and basically pay for themselves, Carter said.
Carter said the pitch to conservatives who might be interested in investing with the ETF is that they may already be investing in a company they don’t want to contribute to without knowing about it. He used media companies as an example and pointed out that Disney owns ABC, AT&T owns CNN, and Comcast owns NBC.
“There are all of these media companies that conservatives don’t agree with and don’t align with conservative values, yet when you’re investing in a large-cap index fund, you are buying those companies,” he said. “And you may not know it, or you may know it and not want to.
“What we’re telling people is you can get very similar returns with us … yet not give your assets to companies that don’t share your values,” Carter added.