First-Time ETF Issuer Targets Lobbying Data

Strategas Asset Management is debuting on the ETF market with two funds, including one designed to hold the companies spending the most on lobbying the federal government.

The Strategas Global Policy Opportunities ETF (SAGP) and the Strategas Macro Thematic Opportunities ETF (SAMT) both debuted on the NYSE Arca on Tuesday morning with expense ratios of 0.65%. Both ETFs are actively managed.

SAGP uses publicly available lobbying data to determine which publicly traded companies apply the highest pressure on Congress and federal agencies, regardless of whether the outcome of a bill or regulatory proposal’s fate is good or bad for that company’s business prospects.

Strategas Portfolio Manager Dan Clifton said the strategy makes sense now because of the political volatility the country is experiencing at the federal level, particularly with the two parties often trading control of the House, Senate or presidency.

That uncertainty regarding policy has led to more than half of the S&P 500 companies listing political changes as their top risk in annual filings in 2018, compared with about one-quarter just before the 2008 financial crisis.

The chosen companies are then weighted on the firm’s macroeconomic outlook, and are generally reweighted when quarterly lobbying disclosure data is released. At least 30% of its assets are earmarked for companies based outside of the U.S. at any given time.

According to research from watchdog group OpenSecrets, the largest corporate spenders in 2021 were Amazon, Meta Platforms, Raytheon, Lockheed Martin, Boeing, Comcast, the Swiss pharmaceutical firm Roche and Google parent company Alphabet.

Clifton said many of those names won’t be in SAGP because their lobbying efforts are likely to focus on workplace issues like labor law and benefits requirements instead of trying to carve out a specific advantage. Instead, the firm aims to capture “lobbying intensity” by measuring companies on their spending relative to size.

“What we’re really trying to see is which companies are making an investment in Washington like it's a research and development investment,” he said.

The fund also has a built-in cyclical nature because it will rotate in and out of sectors based on the priorities of whichever party holds the most power at any given time, Clifton said.

Defense, health care and biotechnology companies will feature prominently in SAGP’s holdings on launch, along with tax services provider Intuit and buy-now-pay-later leader Afterpay.

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Contact Dan Mika at [email protected], and follow him on Twitter