Are there bucks to be made in the backlash against "green" ESG funds -- and against so-called woke politics? That remains to be seen, but let's take a look at the latest effort: The God Bless America exchange-traded fund (YALL) , which is scheduled to launch in October.
While I don't have a portfolio to analyze yet, I thought I would prime the pump by reviewing what information I could find about the strategy and the person behind it. To be honest, there wasn't much out there, but I did find a recent podcast/webcast that sponsor Adam Curran gave via YouTube and of course, white label issuer Tidal's filings with the Securities and Exchange Commission.
This fund continues the trend of anti-environmental, social, and environmental products that have been launching in the U.S. exchange-traded fund market recently. After listening to the interview, I must say that I do agree with Adam's take that this upcoming downturn will not be resolved as quickly as 2008 was, if only because we simply aren't able to print our way out of the current situation nor will we get some great bounce back like we saw in 2020. If economic cycle transition shapes resonate with you, I'm thinking "L" as opposed to "U" and certainly not a "V," even if the Russia vs. Ukraine conflict gets resolved tomorrow.
In talking about the fund strategy Adam's "anti-woke" focus on companies that "aren't going out of their way to alienate 49% to 50% of their employees, their customer base or their shareholders" makes sense to the extent that companies should focus on their core business first and foremost.
Adam does take issue with the pervasiveness of ESG-focused funds, which he describes as products that "people who vote with their left hand" can access. While YALL and other funds are taking a swipe at ESG funds, and in a lot of cases deservedly so, I wonder how stringent their evaluation filters will be. Reading through the prospectus, the first page talks about the strategy and the security selection process. The fund is actively managed and sets its security selection universe to companies with a minimum $1 billion market capitalization. From there, the adviser employs some negative screens that look to eliminate companies that emphasize politically left or liberal political activism and social agendas from all available sources. There are some nuances here, such as the fund avoiding investing in companies that make left-leaning public statements about political issues unrelated to the company's business. Further, the prospectus states that in evaluating a company's political activity, the Sub-Adviser will not consider a company's internal policies regarding employee relations nor its political or charitable donation practices.
But assuming that a company's board ties into that company's ability to generate shareholder returns, how will YALL treat companies listed on Nasdaq, given the adoption of board diversity as a listing requirement? I'm thinking these kinds of rules are exactly what YALL is rallying against. I guess we'll see once the fund starts trading and we can get ahold of a daily holdings file.
From a quantitative perspective, the fund will focus on "companies with low price-to-earnings ratios (relative to industry peers) that have a multi-year track record of job growth." This is fairly generic language but given this is an active fund, the issuer is under no obligation to spell out exactly what it's doing to select names. With regard to sector diversification and position weighting, the prospectus states that fund sectors will track traditional Global Industry Classification Standard (GICS) sectors and overall sector weighting will reflect the observed sector weights of the initial security selection universe. There is no further detail about how individual positions will be weighted within each sector, but I think a safe assumption will be that they will use market capitalization to set those weights.