Agnostic energy ETF, backed by Thiel and Ackman
A new ETF provider backed by Peter Thiel and Bill Ackman is listing an energy ETF, which markets itself as “anti-ESG” and “anti-work”.
The Strive US Energy ETF (DRLL) tracks the Solactive United States Energy Regulated Capped Index. The index if made up of 50 US businesses whose main revenue line comes from energy-related activities. The index is agnostic between energy sectors and includes oil, gas, nuclear, solar and wind companies.
The index caps the weight of stocks at 22%, and prevents companies with more weight than 4.5% collectively taking more than 45% of the index. This stops oil majors becoming too influential.
The fund aims to derive alpha from the “destructive mandates” of ESG investing. Strive’s management and VC backers believe that ESG mandates have unfairly penalised US oil and gas businesses.
Strive said in an interview with ETF.com that they accept the science of global warming. But believe that political activism and not ETFs are the solution.
The fund charges 0.41%.
Bernie’s commentary – what the numbers say
ESG ETFs are only a tiny fraction of the US ETF market. From what I’m seeing there is almost $150 billion invested in US ESG ETFs. Yet there is more than $7 trillion AUM invested in US-listed ETFs. On my maths, US ESG ETFs market share is just 2%. What is more, much of this money in US-listed ESG ETFs comes from Europe, thanks to Scandinavian pension funds and the like. Looking at things quantitatively I’m not sure an “anti-woke” crusade is fully justified.
It's also worth clarifying where Thiel and Ackman, the billionaire backers, are putting their money. These two are investing in Strive, the asset manager. Not the ETFs that Strive offers. When billionaires use ETFs they – like everyone else – tend to use the cheap broad market ones. Warren Buffet and the Walton family are among Vanguard’s biggest clients. Still, as I’ve committed my career to the ETF industry, I’m glad to see that some billionaires are backing ETF providers with VC funding ( I have to give a shoutout to my angel investor ETFS Capital ) . It suggests smart money still believes the industry can grow.
Energy ETFs are an interesting case commercially. It's a bit of an insider's secret, but they have the highest success rate of becoming profitable (yet ETF providers rarely list them). There’s currently 54 energy sector ETFs in the US and all but one of them is sitting on AUM above its breakeven threshold. So Strive has clearly done its market research.
