After the rapid success of its inaugural anti-ESG exchange-traded fund, Strive Asset Management is striking while the iron’s hot.
The firm, which launched in 2022 with backing from billionaire investors including Peter Thiel and Bill Ackman, filed for four additional equity ETFs with U.S. regulators on Tuesday. The filings land just two weeks after the Strive U.S. Energy ETF (ticker DRLL) launched, which has already accumulated nearly $250 million in assets.
While DRLL and the planned funds are passively managed and track indexes, Strive has a clear aim: accumulate enough assets to hold sway in corporate boardrooms. As outlined in Tuesday’s filings, Strive will “generally vote against board members and proposals that advance social or political agendas unrelated to providing excellent products and services to customers” -- which in DRLL’s case, means encouraging oil companies to drill more. That pits the issuer against the likes of BlackRock Inc., which has launched a wave of environmental, social and governance-focused funds in recent years.
“There is a growing number of investors who believe politically-charged ESG mandates have become too intertwined with how larger asset managers vote company shares, and Strive is seeking to a capitalize on that,” said Nate Geraci, president of The ETF Store, an advisory firm. “It’s a pretty good start for DRLL, and I think on the heels of that success, they’re now going to move forward with launching ETFs in various other categories.”
Strive sits on the opposite end of the ideological spectrum to Engine No. 1, which won three seats on the board of Exxon Mobil Corp. in June 2021 to push the company to diversify beyond oil and then launched the $90 million Transform Climate ETF (NETZ) in February.
The Ohio-based Strive is planning its expansion as flows into ESG ETFs falter. Dogged by poor performance as energy stocks soar, just $4.5 billion has been funneled into the category so far in 2022, data compiled by Bloomberg Intelligence show. Compare that to two straight years of more than $30 billion of inflows.
Meanwhile, Republican politicians have been heavily criticizing ESG investment principles. Florida Governor Ron DeSantis passed a resolution this week that directs fund managers of the state’s pensions to invest in a way that prioritizes the highest return possible, without considering ESG criteria. A group of attorneys general from mainly Republican-led states wrote a letter to BlackRock this month, saying the asset manager is pursuing ESG investment policies to the detriment of their state pension funds.
Despite the rising tide of anti-ESG sentiment, principles-based ETFs on either side of the aisle have struggled to gain traction. The Point Bridge GOP Stock Tracker ETF (MAGA), which invests in companies that support the Republican party, has attracted just $17 million in assets despite outperforming the S&P 500 this year.
While DRLL has been an early success story, it’s unclear whether that momentum is sustainable, according to Bloomberg Intelligence.
“In order to be effective in voting, you need assets, and I just don’t know if their strategies are going to be popular enough to get to an asset level that’s going to be meaningful for voting,” said Athanasios Psarofagis, a Bloomberg Intelligence ETF strategist.
This article was provided by Bloomberg News.