US conservative-values fund shares almost a third of holdings with LGBTQ+ strategy

Fact sheets bring into question ability to meaningfully incorporate values into large cap funds

An ‘anti-woke’ investment fund in the US, which is celebrating its first anniversary today, shares almost one third of its top 25 holdings with an LGBTQ-focused strategy.  

The American Conservative Values ETF (ACVF) is an actively-managed large-cap fund with 389 holdings, and is based “on the conviction that politically active companies negatively impact their shareholder returns, as well as support issues and causes which are opposed to conservative political beliefs and values”. 

It is part of a growing pushback against the corporate ESG and sustainability movement in the US. Earlier this month, Senator Marco Rubio introduced the ‘Mind Your Own Business Act’, which would require corporate directors to prove that any “woke” corporate actions were in the best interests of their shareholders, in order to avoid liability for breaching fiduciary duties. 

Created and Advised by Ridgeline Research, which claims to provide the first “ETFs for ideologically conservative investors”, the $30.5m ACVF excludes the “worst companies which the adviser determines support liberal causes, charities, advocacy groups, campaigns, candidates, PACs and think tanks”.  

Morningstar places the fund in its second-highest sustainability category and deemed it to have lower-than-average overall ESG risk. Benchmarked against the S&P500, it “is designed to replace your current large-cap investments with an alternative you will be proud to own”, said Ridgeline.

But, according to its most recent fact sheet, the fund shares eight top 25 holdings with a strategy dedicated to companies that have demonstrated a “commitment to LGBTQ diversity and inclusion and ESG compliance as part of their corporate social responsibility fundamental mandate.”

Younger and smaller than ACVF, the $4.1m LGBTQ + ESG100 exchange-traded fund was launched in May and tracks the LGBTQ100 ESG Index, which covers US large caps.   

Both strategies hold Tesla, Microsoft, Services Now, UnitedHealth Group, Visa, Home Depot, Mastercard and Nvidia Corp. 

When asked about the overlap, ACVF’s CEO William Flaig, told RI: “The starting point of our portfolio construction is a diversified large cap equity universe [so] we will inevitably have significant overlap with other large cap portfolios. We believe the best way to assess ACVF is to consider the large-cap companies we don't own.” 

Coca Cola and Walt Disney are among firms included in the LGBTQ100 ESG Index that are blacklisted from ACVF. The latter has also excluded Bank of America, retailer Lowe’s and American Express for “teaching their employees Critical Race Theory”. It axed Nasdaq earlier this year over its decision to require the companies it lists on its marketplace to disclose information on their racial and gender diversity.   

“Increasing our advocacy/boycotts beyond this point in the current market environment we believe would tip the balance of advocacy and performance towards risking performance,” said Flaig.  

Partha Sen, the CEO of the provider behind the LGBTQ100 Index, Fuzzy Logix, told RI its constituents support the idea that “equality is not a Conservative or Liberal entitlement”.

“Companies that support, foster and advance equality in their organisation are quantifiably more successful and demonstrate superior returns in the stock market,” they added.