New "patriotic", "right-wing" thematic ETF YALL makes its debut

Aside from ESG considerations, the ETF industry is usually fairly apolitical. So, imagine my shock when the new God Bless America ETF (YALL) debuted earlier this month, garnering strong inflows and attracting over $13 million in assets under management. 

Here's the logo from its prospectus. As you can see, it looks straight out of a Republican or Donald Trump political campaign handbook:

Now, I'm no stranger to weird thematic ETFs, but even with the wacky funds I've seen debuting recently (Inverse Cramer and breakfast commodities to name a few), YALL takes the cake for how in-your-face its investment thesis and political stance is. Let's give it a deep dive. 

What is YALL ETF?

Managed by Toroso Investments and sub-advised by Curran Financial Products, YALL is unapologetically jingoistic and right-leaning when it comes to its investment strategy.

YALL explicitly excludes companies that encourage politically left social agendas, activism or make left-leaning public statements unrelated to business ("virtue signaling"). According to its prospectus, this is to eliminate companies that prioritize liberal politics over maximizing shareholder value. 

After applying this exclusionary criterion, the ETF then targets 30 to 40 U.S. companies with low valuations in the form of a low price-to-earnings ratio and relative dividend yields, along with a multi-year track record of creating strong domestic job growth for American citizens. 

Holdings in YALL can come from all 11 GICS market sectors and will be market capitalization weighted. The sub-advisor will scrutinize social media, advertisements, press releases, TV appearances, and other forms of communication made by its constituent holdings to determine if they still meet the political criteria. Its current expense ratio sits at 0.65%, which is typical for an actively managed ETF. 

My thoughts on YALL ETF

This ETF is as close to an "anti-ESG" ETF as you can get. While there are ETFs that invest in "vice" industries like tobacco, alcohol, oil, gambling, etc., none of them do so based on a political stance. YALL is a firm rebuke against the increasing prevalence of ESG factors in ETF construction.

Is this a good way to invest? I'm not sure. My prediction is that YALL will perform about as well as any actively managed ETF comprised of U.S. large and mid-cap stocks. Currently, the five largest holdings in the ETF include Tesla, NVIDIA, Amgen, Costco, and Danaher, which are decent blue-chip stocks. 

Is its strategy sound? I have no idea. YALL is less grounded in quantitative rigor than it is in qualitative heuristics. My guess is if YALL was backtested, it would show past outperformance due to the sound nature of its holdings. I have no idea if this would be as a result of its holdings being "anti-woke."

Personally, I don't use political considerations as part of my investment policy statement. However, I recognize that some people feel strongly about politics, and it plays a big part in their lives, which can include investment decisions. If you think about it, YALL is just the opposite of what ESG investors do. 

I will note that it is much easier for beginners to invest based on a theme they're familiar with and believe in. So, if you lean to the right of the political spectrum and want to invest based on that, this ETF might be for you. If you lean to the left, you now have a possible short target. 

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