Copying Congress: The Bizarre World of Political Stock-Picking Funds

Regardless of your position on the political spectrum, it’s no secret that Congress, as a whole, has the assets and investment opportunities to grow long-term wealth. Now, you have the chance to copy Congress. 

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There are two new exchange-traded funds (ETFs) that mimic the trading patterns of the U.S. Congress members. You can invest in:

• The Unusual Whales Subversive Democratic Trading ETF, ticker NANC, is an ETF based on Democratic lawmakers’ trades, named after Nancy Pelosi.
• The Unusual Whales Subversive Republican Trading ETF, ticker KRUZ, is based on Republican lawmakers’ trades and is named after Ted Cruz. 

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The Nancy Pelosi ETF (NANC) was established on Feb. 10, 2023. It has an all-time return of 44.43%, or an increase of $10.97 since its initial offering of $24.69. While the NANC fund has had a good showing, what if you had invested $20 a week in Nancy Pelosi's portfolio for the past five years? You'd have invested $5,220 over five years and have $8,326 today, a 1.6X return. Over the same period, the SPY ETF had a lower return; you’d have $8,130 today.

Also established on Feb. 10, 2023, the KRUZ ETF is up 21.74%, to $30.39 per share, from $24.96 at its inception. If you had invested $1,000 on Feb. 10, 2023, you’d have $1,217.40 today. 

What’s the difference between the positions in the two funds? 

• KRUZ ETF has a higher percentage in oil and gas (11%).
• NANC ETF has a higher percentage in software (17.5%).

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On NPR’s show The Indicator from Planet Money, hosts Darian Woods and Wailin Wong decided to try it out. As an experiment, the hosts invested $77.35 in these ETFs and flipped a coin to decide who invested in which fund.

As of July 28, 2024:

• Democratic-based trades (NANC) are up 18.20% year-to-date
• Republican-based trades (KRUZ) are up 10.42% year-to-date

If the hosts had invested from Jan. 1, the NANC investor would have made $14.07, and the KRUZ investor would have made $8.05—hardly life-changing numbers. 

Before you buy, consider the ethics of politicians trading stocks. Some advocates are calling for a ban on congressional stock trading. In fact, a proposed bill called the ETHICS Act aims to address this issue. However, a study has shown that congresspeople’s trades don’t systematically outperform the market. In fact, almost absurdly, experiments with reindeer picking stocks outperformed congresspeople’s trades, highlighting the inherent risks of any investment. 

Should you invest in either of these funds? Individual investors could benefit from the broad diversification of both funds. However, investing in either fund doesn’t directly support either political party, and investors don’t need to pick funds based on political affiliations to reap the financial rewards. 

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