‘God Bless America’ Fund Tops S&P 500

While “anti-woke” crusader Vivek Ramaswamy got backing from billionaires for his funds, most others haven’t grown beyond $300 million in assets.

The rule of thumb is that institutional investors often avoid funds with less than $300 million. 2nd Vote Advisers liquidated its two conservative-themed ETFs last year after they failed to gain traction.

The problem with thematic ETFs is they frequently open when the investment idea is at or near its peak, said Itzhak Ben-David, a professor at the Ohio State University Fisher College of Business and a researcher at the National Bureau of Economic Research.

They also usually underperform, he said, pointing to his research that shows specialized ETFs tend to trail market benchmarks by about 30% over five years.

“It’s human behavior. It was true in 1929 (just before the Great Depression) and it’s true today,” Ben-David said. “If you read something in the news or see it on TV, you’re probably not the first to notice it. Maybe you’re among the last ones and the price is already reflecting this information.”

The biggest factor that determines the success of any ETF is good marketing, said Arthur Laffer Jr., president of Laffer Investments who was an adviser of the 2nd Vote ETFs that closed.

Politically-focused funds are “designed to polarize,” he said. “That’s their shtick,” but to attract buyers, they have to generate excess returns or show that they can reduce investment risks.

Despite all these challenges, a conservative-leaning ETF managed by the recently set up Azoria Partners plans to open in March.

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