ETFs Pressured To Drop Gun Stocks

March 01, 2018

In the wake of the mass shooting at Marjory Stoneman Douglas High School on Feb. 14, where a former student killed 17 people with an AR-15 rifle, calls for gun reform have never been stronger. Activists have organized marches, boycotts, even televised town halls between lawmakers and the survivors.

A new mood of activism is also sweeping the investment world, where financial firms are increasingly rethinking their ties to weapons manufacturers, and investment funds—particularly ETFs—have come under pressure to divest the gun stocks in their portfolios. Recent articles on CNBC,, USA Today and Quartz have all taken passively indexed ETFs to task for their ownership of weapons manufacturers.

While it's true some ETFs hold firearms makers, including the company that manufactures the AR-15 rifle used in so many mass shootings, ownership by passive ETFs in gun stocks is nowhere near that of actively managed funds.

Furthermore, divestment isn't as easy as it might seem. Passive ETFs are restricted in how they may rid themselves of their holdings in weapons manufacturers, since doing so might introduce tracking error. That's a problem actively managed funds don't have.

"Most active funds could sell their gun stocks tomorrow," said Eric Balchunas, senior ETF analyst for Bloomberg. "They really do have that liberty."

Which ETFs Hold Gun Stocks?

Though dozens of companies touch the civilian firearms industry in some way, the three publicly traded companies generating the most revenues from guns are:

  • Sturm, Ruger & Co (RGR), 95% of revenues
  • American Outdoor Brands Corp. (AOBC), 68%
  • Vista Outdoor, Inc. (VSTO), 49%

Forty-seven ETFs hold at least one of these stocks in their portfolios. The 10 with the largest ownership stakes are listed in Table 1, along with details of their holdings:


Table 1: ETFs With The Top 10 Largest Ownership Stakes In Gun Stocks
Ticker Fund Contains Total % of ETF Assets of ETF ($M) Total Assets ETF Invests in Gun Stocks ($M)
SPUN VanEck Vectors Spin-Off ETF VSTO   1.33% $4.81 $0.06
ITA iShares U.S. Aerospace & Defense ETF AOBC  RGR   1.14% $5,920 $67.49
XSHQ PowerShares S&P SmallCap Quality Portfolio RGR   0.54% $4.01 $0.02
FYT First Trust Small Cap Value AlphaDEX Fund AOBC   0.49% $73.68 $0.36
RZV Guggenheim S&P Smallcap 600 Pure Value ETF VSTO   0.47% $173.29 $0.81
IJS iShares S&P Small-Cap 600 Value ETF RGR  VSTO   0.40% $5,200 $20.80
SLYV SPDR S&P 600 Small Cap Value ETF RGR  VSTO   0.40% $1,230 $4.92
ISMD Inspire Small/Mid Cap Impact ETF VSTO AOBC 0.38% $28.84 $0.11
VIOV Vanguard S&P Small-Cap 600 Value ETF VSTO   0.38% $274.47 $1.04
EWSC Guggenheim S&P SmallCap 600 Equal Weight ETF RGR  VSTO   0.37% $32.37 $0.12

Source: ETF Channel,, issuer websites. Data as of Feb. 26.


Most ETFs holding gun stocks are either small-cap funds that hold weapons manufacturers because of their small size; or single-factor funds, such as value or dividend funds, that include weapons makers based on the strength of their balance sheets.

ETFs Minimally Invested In Gun Stocks

Either way, these 47 ETFs devote only a tiny portion of their portfolio assets to gun stocks. The ETF with the largest percentage holding is the VanEck Vectors Spin-Off ETF (SPUN), which holds just 1.33% of its $4.9 million portfolio in Vista Outdoor. That position is worth roughly $60,000.

That said, percentages alone can be misleading: The $6.1 billion iShares U.S. Aerospace & Defense ETF (ITA), which has the second-largest percentage weighting, has a position in gun stocks worth $67 million.

Even given ITA's significant investment, however, the combined ownership of gun stocks by the 10 ETFs with the largest positions totals just $96 million.


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