By Gunjan Banerji
Investors hoping to abandon so-called woke principles might be looking in the wrong place.
Some of them have turned to exchange-traded funds that promise an antidote to the liberal culture that has rankled many Americans. The American Conservative Values ETF, for example, says it lets investors align portfolios with political beliefs and boycotts companies that are viewed as hostile to its values.
It singles out "big tech and banking elites" such as JPMorgan Chase, the New York Times and Meta Platforms, saying they silence conservative voices. "We believe conservatives either unwittingly or begrudgingly support the woke liberal agenda with their current investments," its website states.
But some of these funds can mirror the mistakes of socially conscious investments that were wildly popular on the left, either dressing up broad-based investing in ideological terms, or sacrificing returns in the name of ideological purity.
A look under the hood of the American Conservative Values fund, for instance, reveals something a lot like an S&P 500 index fund with higher fees. Of roughly 370 holdings, some 335 also belong in the S&P 500, according to Dow Jones Market Data. Its top holding is Nvidia, followed by heavyweights such as Microsoft, Broadcom and Berkshire Hathaway. Those stocks also loom large over the broad S&P 500.
The fund's performance has closely mimicked that of the broader market over the past three years, and it has outperformed by about 2 percentage points this year.
The ETF's holdings are reminiscent of environmental, social and corporate-governance funds, many of which were big tech funds disguised as sustainable investments to fight climate change. Just as there was no industrywide playbook for what belongs in sustainable funds, there is no model for anti-woke funds.
Such funds can underscore the pitfalls of principles-based investing, which has surged in popularity. They accumulated assets of more than $100 billion, according to FactSet figures as of June, roughly nine times the figure just six years ago.
The category includes everything from a women's-empowerment ETF to a fund that's considered Sharia-compliant, or in adherence to Islamic law.
The virtue-signaling can come with steep costs. The conservative ETF has an expense ratio of 0.75%, compared with under 0.1% for a fund that owns the broader market, such as the Vanguard S&P 500 ETF.
William Flaig, founder of investment adviser Ridgeline Research, says the actively managed fund has delivered for investors, performing roughly in line with the S&P 500 even after accounting for fees. He adds that the fund is "boycotting" behemoths that don't align with its values and make up around a third of the S&P 500.
Investors "are keeping 30 cents of every dollar they invest out of the companies that are working against their values," Flaig says.
The majority of ETFs in the principles category have lagged behind the S&P 500 over the past year, according to Dow Jones Market Data as of June.
The Point Bridge America First ETF, with the ticker MAGA, has trailed the S&P 500 by more than 20 percentage points over the past three years.
The MAGA ETF promises to invest in companies whose political-action committees and employees donate to Republican candidates. By adhering to this approach, it has raised the risks of underperformance. The fund is heavily weighted in financials and industrials companies, with less exposure to technology than the broader market.
Hal Lambert, the founder of Point Bridge Capital and a conservative donor, says a better comparison would be with an equal-weighted S&P 500 index. The MAGA ETF has outperformed that index over the past three years. However, it also carries a higher expense ratio of 0.72%.
Elisabeth Kashner, director of global funds research and analytics at FactSet, points out that investors might be better off taking the money they would save in fees by investing in a cheaper index fund and donating the sum to their favorite conservative politician. A $10,000 investment in a principles-based fund might cost $75 a year. The fees on the total stock market ETF would be $3 annually.
Investing based on your political principles is easier than ever. But it comes at a cost.
Write to Gunjan Banerji at gunjan.banerji@wsj.com
(END) Dow Jones Newswires
July 08, 2025 05:30 ET (09:30 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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