Rebel Without a Cause

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    There’s something titillating about sin stocks and vice funds, don’t you think? Perhaps it is the way a little naughtiness provides the rare opportunity to feel youthfully rebellious, almost cool, in our well-polished and square investment world. There is a financial rationale behind it, too: morally questionable yet highly addictive products and activities make for steady and predictable revenue streams (as any drug dealer would tell you). Yes, addicting and killing your best customers might be a terrible long-term business model, but we all know how short investment horizons really are.

    It has been a bit quiet around vice funds lately, though. Like smokers gingerly shielding their cigarettes from the wind out there, sin stocks, too, have been thrown out of the banquet room by a majority of increasingly ESG-conscious, socially responsible investors. Even USA Mutual’s archetypical ‘Vice Fund’, which has been around since 2001, felt compelled to change its revealing name[1] a couple of years ago.

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    Enter DRLL, the new cool kid on the block; vice fund 2.0, promising a bold alternative to those wishy-washy asset management products that penalise poor struggling energy companies and force a toxic ESG agenda in the boardrooms. Apparently, “it is time to drill, frack and do whatever else is necessary to succeed without apologising for it.” Forget about those phoney ambitions to fight climate change and social injustices. Let’s be a bad and reckless rebel without a cause, like a young James Dean.

    And it seems to work, yet again. Just like rebelling against ethical investing before, rebelling against ESG has become an immediate success. Strive Asset Management’s DRLL is the largest non-seeded ETF launch so far this year. It needed less than a month to amass more than USD 300 million. “Excellence over politics” is obviously a catchy slogan.

    Unfortunately for the new anti-ESG ETF, all the data on its underlying investments are publicly available and thus easy to scrutinise. Which Robert Eccles, our favourite sustainability professor, has been quick to do in a brilliant instalment, “Drilling Into DRLL’s Top 10 Holdings: A Woke Analysis”. Turns out, no matter whether you look at their climate commitments and disclosures or their DE&I policies, each of the fund’s ten biggest holdings displays quite impressive ‘woke’ behaviour. Who knew being anti-woke would be so hard?

    Not that the facts are about to deter Strive. Riding on the initial success, the asset manager has already applied for an SEC license to launch four new ETFs in November, all vowing to use their shareholder votes against motions deemed to “advance social or political agendas unrelated to providing excellent products and services to customers.”

    I wish we could treat DRLL as just another innocent distraction, nothing but a skillfully executed market ploy that might attract a few cowboys and HA hangarounds. Alas, the fund seems to be symptomatic of something much bigger happening across the pond. From Texas to Florida, right-wing politicians like Hegar and DeSantis seem hellbent on directing state funds towards investments “without considering the ideological agenda of the ESG movement.” Could it be that Strive created their anti-woke DRLL ETF, especially for them? Just imagine the disappointment of the comptroller and the governor, though, once they discover the high ESG ambitions of the companies in DRLL’s portfolio.

    And, let’s face it, tempting as it might be to play the rebel for a while, to shun all thoughts about the future and behave in an utterly irresponsible and destructive way, we all know we need to grow up at some point (unless, we aren’t given the chance).

    [1] For the record, though, its current name, Vitium Global Fund, still means ‘vice’ in Latin and the original strategy hasn’t changed much.

    Image courtesy of Arthur Halucha from Pixabay
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