Regarding politics, advisors often tell us that they work hard to steer clear of the topic in client conversations. We get it. Political discourse is heated, and fraught with sharp edges these days. But in the spirit of the first U.S. presidential debate this week, and our collective focus on what the world (and markets) may look like come November and beyond, let’s consider congressional ETFs, and how our Congress members are investing as we head into a presidential election.
Two unique ETFs navigate the intersection between the political sphere and the investing opportunity, if you will. They are still relatively new to the market but already have some $150 million in combined assets. They are:
Invest Like Your Congress Member
These funds invest in the securities that Congress members and their spouses are investing in, with the positions selected and weighted based on the required reporting Congress members have to do any time they buy or sell a security under the STOCK Act.
To be clear, NANC and KRUZ don’t set out to be tools of political expression. Even if their origin was tied to Unusual Whales’ effort to bring attention to Congressional trading activity. They aren’t investing based on party platform or political rhetoric. They are simply vehicles of alpha generation.
That said, these funds offer a revealing glimpse into how Congress members across party lines are feeling about the opportunity set.
As policymakers, Congress has unique insight into the regulatory impact their actions have on different companies and industries. They have access to a lot of information we don’t have. That makes their investment choices for their own money especially interesting.
In a nutshell, NANC is tilting heavily into the mega-cap tech growth story this year. Meanwhile, KRUZ is more broadly diversified across sectors, tilting more towards sectors that benefit from economic strength.
Almost 45% of NANC is in technology while KRUZ owns twice as much financials, twice as much industrials, and almost seven times as much energy as its counterpart.
Here’s the sector breakdown comparison for NANC vs. KRUZ:
Put another way, these sector bets give NANC a strong growth tilt while KRUZ is leaning more towards value. In 2024, growth has reigned supreme, and market leadership has been narrow at that, so it’s not surprising to see the performance disparity between the two funds to the benefit of NANC.
On a more granular level, a look at the top 10 holdings in each fund also speaks to the level of top-heaviness of each portfolio. NANC has more than 25% tied to just three stocks – Nvidia being more than 13% of the total portfolio – whereas KRUZ is a lot less top-heavy with a mix that’s led by a 3% allocation to JP Morgan.
NANC Holdings
KRUZ Holdings
Cash in the Mix
It’s also noteworthy that NANC, as invested in big tech as it is, holds a cash-like position in the form of an allocation to MINT among the top 10 holdings. Cash is usually seen as a defensive play. Does that suggest Democrats are heeding the call for caution ahead?
Cash on the sidelines has been a big theme in the market this year with sticky inflation, rates high, and an uncertain market and rate environment going forward. We’ve all been looking for how that cash gets eventually redeployed once rates start to come down, and NANC could play into that.
Going Forward
As we digest the first presidential debate, and brace for an election season that promises to be colorful, these Congressional ETFs could continue to offer insight into how our Congress members are actually feeling about markets and the opportunity set. As alpha-seeking funds, these ETFs offer investors a chance to invest as their congress member does with the intel they have – do as they do – rather than just do as they say in the campaign trail.
For more information, please visit VettaFi.com | ETF Trends.
