Vivek Ramaswamy launches anti-activism exchange-traded fund (2022)
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On August 9, 2022, Strive Asset Management – a startup venture from author and entrepreneur Vivek Ramaswamy – launched trading on its first ETF, an energy fund tagged DRLL on the New York Stock Exchange (NYSE). Bloomberg described the launch as follows:[1]
“An anti-activism exchange-traded fund of sorts has launched to supposedly 'unshackle' energy companies from climate concerns that some investors have forced them to reckon with.
"The aim of the Strive US Energy ETF (ticker DRLL), which began trading Tuesday, is to accumulate enough assets for the Ohio-based manager to have say in the boardroom, according to co-founder Vivek Ramaswamy. Strive launched in 2022 with backing from billionaire investors including Peter Thiel and Bill Ackman.
"DRLL joins a small but growing wave of so-called anti-woke ETFs after issuers such as BlackRock Inc. put their heft behind environmental, social and governance-focused funds in recent years. ...
"'We are post-ESG,' Ramaswamy said in a phone interview. 'US energy stocks have tremendous potential if they’re unshackled from the shareholder-imposed ESG mandates.' …
"Roughly $27 million traded in DRLL on Tuesday, Bloomberg data show. While most of that likely came from investors lined up ahead of time, it’s an impressive amount of day-one volume for an 'indie ETF,' according to Bloomberg Intelligence senior ETF analyst Eric Balchunas."
In the Wall Street Journal’s “Weekend Interview” with James Taranto, Ramaswamy described Strive and its new fund in his own words:
“The standard advice to retail investors is to buy passively managed index funds, which invest in the stocks of a broad range of companies. That’s an excellent way to balance risk and return, to ride waves of economic growth and offset losses from individual companies that sink beneath them. But Vivek Ramaswamy, a newly minted investment-fund executive, says that politics have quickly come to dominate index funds too. He has an ambitious plan that aims to break its grip.
"The problem arises from what’s known as 'the separation of ownership from ownership.' When you invest in, say, a BlackRock fund, you own shares in the fund, which in turn owns stocks or other underlying assets. Formal ownership of a company share gives BlackRock a vote in elections for the board of directors and on resolutions governing corporate policy. Multiply that share by hundreds of millions, and it adds up to real clout.
"The three biggest fund managers—BlackRock, Vanguard and State Street—manage a combined total of some $20 trillion in assets. Their holdings of Exxon Mobil Corp., to take a prominent example, totaled more than 890 million shares, or about 21% of the company, as of March 31. When they vote as a bloc, that can easily tip the balance, as it did in 2021 when the big three backed a slate of Exxon Mobil directors put forth by the tiny activist fund manager Engine No. 1, which held fewer than a million shares.
"'It was an accident of this investment structure that gave that much voting power to that concentrated group of actors with an unprecedented aggregation of capital,' Mr. Ramaswamy says in a Zoom interview from his home office in Columbus, Ohio. The big fund managers began only a few years ago 'to exercise that voting power to advance social and political agendas.'…
"When a fund manager uses your money 'to advance agendas that do not serve the capital owner’s interest,' Mr. Ramaswamy says, 'that represents a large-scale fiduciary breach.' But what can you do about it? Litigation is prohibitively expensive, and regulatory solutions are unpromising with an ESG-friendly administration in Washington. Buying stocks directly and voting them yourself is a high-risk investment, not to mention a labor-intensive one, and for a nonbillionaire the return in recovered voting power is trivial. Besides, pursuing any of these possible remedies would take you down a political rabbit hole, exactly what you’re trying to avoid.
"Enter Mr. Ramaswamy, a 37-year-old wunderkind. He founded a biotech investment firm in 2014, at 28, then left it in 2021 and published two books, 'Woke, Inc.: Inside Corporate America’s Social Justice Scam' last August and 'Nation of Victims: Identity Politics, the Death of Merit, and the Path Back to Excellence,' forthcoming next month. 'I enjoyed writing the books,' he says. 'I thought I was going to keep going at it.'
"Instead he decided that 'problems in our culture, created in the market, . . . needed to be solved through the market,' and Strive Asset Management was born, with Mr. Ramaswamy as executive chairman. Its first offering, the Strive U.S. Energy ETF (ticker symbol DRLL), began trading this week on the New York Stock Exchange, where Mr. Ramaswamy will ring the closing bell on Wednesday.
"Strive is an activist investment manager. 'Our mission,' its website declares, 'is to restore the voices of everyday citizens in the American economy by leading companies to focus on excellence over politics.' The firm won’t do this, Mr. Ramaswamy emphasizes, by selecting stocks in accord with 'right-wing values' the way ESG funds promote left-wing values.
"Instead its first few funds, including DRLL, will be managed passively, and subsequent ones actively, for profit, not politics.”
In a letter to supporters late in the week, Ramaswamy reported that the fund had done well in its launch – even better than Bloomberg had noted:
“We launched our U.S. energy index fund ($DRLL) on the New York Stock Exchange yesterday. Our aim is to liberate the U.S. energy sector from Environmental, Social, and Governance (ESG) constraints by delivering a new shareholder mandate to American energy companies. ...
"Our first two days showed strong trading with over $60 million in flows already. The folks at NYSE told us this is one of the biggest launches of its kind.”
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
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