ETFs Track Congressional Trading Ahead of U.S. Elections

As the United States approaches a pivotal election season, two exchange-traded funds (ETFs) are offering investors a novel way to gain insight into the investment behaviors of congressional members. The Unusual Whales Subversive Democratic ETF (NANC) and the Unusual Whales Subversive Republican ETF (KRUZ) track the trading activities of Democratic and Republican lawmakers and their spouses, respectively.

These ETFs, launched by Subversive Capital, are based on the premise that congressional members may have access to information that could influence their investment decisions. The funds' compositions are determined by the dollar amounts disclosed in congressional trading reports, as mandated by the Stop Trading on Congressional Knowledge (STOCK) Act.

Year-to-date as of October 25, 2024, NANC has returned 25.24% (NAV Total Return), outperforming KRUZ's 14.33% (NAV Total Return). The performance of NANC has been comparable to major indices like the S&P 500 and Nasdaq Composite.

Notably, the ETFs reveal divergent investment preferences between the two political parties. NANC is heavily weighted towards the technology sector (42.48%), while KRUZ shows a more distributed allocation across technology (25.54%), financial services (14.92%), and industrials (13.81%). Interestingly, both funds include Nvidia and Microsoft among their top holdings, reflecting bipartisan recognition of these companies' roles in artificial intelligence development.

The significance of these ETFs extends beyond their investment potential. They offer a unique window into the collective intelligence of lawmakers regarding future U.S. policy legislation and its potential economic impact. As the presidential and congressional elections approach, these funds could provide valuable insights into the potential direction of U.S. economic policy.

However, investors should be aware of the risks associated with these ETFs, including the potential for regulatory changes that could affect congressional trading practices. Additionally, the funds' strategies may result in high portfolio turnover, potentially leading to higher transaction costs and tax liabilities.

As the political landscape continues to evolve, NANC and KRUZ present an innovative approach for investors seeking to align their portfolios with perceived political and economic trends. These ETFs not only offer a new investment strategy but also serve as a barometer for the intersection of politics and finance in the United States.