Peter Thiel-Backed ETF Takes Aim at ESG

August 10, 2022

The Strive U.S. Energy ETF (DRLL), a new exchange-traded fund that launched Tuesday, aims to free investors from the “destructive mandates” of traditional environment, social and governance investing. 

The fund invests in broad energy stocks via the Solactive United States Energy Regulated Capped Index. Matt Cole, Strive Asset Management’s head of product, said ESG has been a drag on the energy sector—despite the segment’s strengths. “We started with the energy sector for a reason,” he said in an interview with ETF.com. “We think the U.S. energy sector [has] been impacted the most.”  

The firm is not denying climate change science, Cole added, but believes the best route to effect change is through political activism. While piecemeal reforms at individual energy companies have relatively little impact, legislation and shareholder advocacy would apply to all. 

“Our ETFs are passive right now, but our voter voice will be very active in these companies,” he said, noting that Strive plans to put forth proposals that make sense. “We think it's going to be very hard for a lot of asset managers not to support them, because they're in the best interest of these companies.” 

Strive, which was co-founded by Vivek Ramaswamy and often described as “anti-woke,” has the backing of famous names like Peter Thiel and Bill Ackman, and intends to compete with asset management giants like BlackRock Inc., Vanguard Group and State Street Global Advisors. 

“We bring a significantly different vote and voice to the table than our competitors,” Cole noted. 

While most energy ETFs are already up 30% or more year to date, the company expects stocks in the energy sector to appreciate “multi-fold” in the next two years due to China easing its pandemic lockdown policies and lessening supply shortages stemming from the war in Ukraine.  

“The largest U.S. asset managers have shackled U.S. energy companies with so-called ‘scope 3 emissions caps’ and other destructive mandates that contributed to the American energy crisis today,” Ramaswamy said in a press release. 

DRLL covers more than 50 energy companies, taking a broad-based approach to the space and spanning both conventional and renewable energy firms. Its underlying index is weighted by modified market capitalization, according to the prospectus. Cole said that the fund has had a 99.7% correlation with large energy ETFs offered by major issuers over the last several years, with very similar risk and return. 

The new fund comes with an expense ratio of 0.41% and lists on the NYSE Arca. 

The narrower Energy Select Sector SPDR Fund (XLE), the largest ETF in the category, at more than $35 billion, has 21 holdings but comes with an expense ratio of just 0.10%. The much broader $1.45 billion Fidelity MSCI Energy Index ETF (FENY) charges just 0.08%. DRLL’s expense ratio is on par with that of the $2.11 billion iShares U.S. Energy ETF (IYE), which also charges 0.41%. 

The firm has four more ETFs in registration covering semiconductors, large cap U.S. stocks, technology and emerging market ex-China

 

Contact Heather Bell at [email protected] 

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