New ETFs Help Investors Trade Alongside Members of Congress

Let’s be honest. Voters know that members of Congress are privy to information that the rest of the public is not. And yes, some of that information is material to share price performance in some companies.

Add to that, it’s accurate to say this form of “insider trading” isn’t accepted by the investing and voting public. It’s disdained by Democrats, independents and Republicans alike and was a central theme in the flipping of both Georgia Senate seats in the 2020 election cycle.

Still, politicians trade, frequently at that. In many cases, they generate market-beating returns for themselves, not for constituents. Now, there are exchange traded funds for that.

On Tuesday, Subversive Capital Advisor, in partnership with Unusual Whales, rolled out the Advisor's Unusual Whales Subversive Democratic ETF(Ticker: NANC) and Unusual Whales Subversive Republican ETF (Ticker: KRUZ). Both new ETFs are actively managed and will be managed by Subversive’s Christian Cooper.

KRUZ, NANC Details

Presumably, KRUZ is in reference to Sen. Ted Cruz (R-TX) who actually isn’t a frequent trader or a highly profitable one, according to Unusual Whales data. NANC is almost certainly in reference to Rep. Nancy Pelosi (D-CA).

She and her supporters may not like the reference, but the stark reality is, in the last Congress, she failed to advance legislation to ban members from trading individual stocks. That bill had bipartisan support. That and her husband sure has a knack for trading around events members of Congress know about before the general public does.

In essence, KRUZ and NANC are akin to guru and hedge fund strategies that seek to provide ordinary investors with exposure to the stocks held by famed investors and big hedge funds. Similar to those strategies, KRUZ and NANC are beholden to delays.

While investors that take stakes of 5% or in a particular company have 45 days from the end of the quarter in which to alert the Securities and Exchange Commission (SEC), politicians have a month to report their trades. Sounds better for ordinary investors, but those consider KRUZ or NANC should consider a couple of factors.

First, politicians from both parties have penchants for delayed filings and filing errors. Second, the amount of stock they own in a particular company is never articulated in exact terms. For example, a congressional filing for a member that owns shares of Apple (NASDAQ:AAPL) will indicate that member owns something like $10,000 to $50,000 worth of that stock. That’s a big range, making it hard for investors to get a sense of the politician’s conviction on the stock in question.

KRUZ, NANC Have Allure

It’s worth pointing out that neither Subversive Capital and Unusual Whales are political pundits nor are they grinding a political ax with KRUZ and NANC. For investors, the point here is that politicians, thanks to access to information, are pretty good investors themselves.

“A quick online search shows how members of Congress perform relative to the rest of the market. Congress has outperformed the market and beat the SPY index in 2021 and 2022. We believe members of Congress have more information than the rest of us, and if they can trade on that information, we should be able to do the same, and now we can,” notes Cooper.

Fortunately, both KRUZ and NANC are homes to familiar, large-cap stocks, indicating neither is speculative in nature. That could make the funds appealing to a broader audience of market participants.

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