In total , 37 members of Congress beat the S & P 500 in 2023 , according to stock and options data company Unusual Whales .

But can ordinary investors copy this kind of success ?

Enter Christian H . Cooper , portfolio manager at Subversive Capital , who in February 2023 worked with Unusual Whales to launch the Unusual Whales Subversive Democratic Trading ETF ( NANC ) and the Unusual Whales Subversive Republican Trading ETF ( KRUZ ). Both funds track the stock trades made by members of Congress . The funds ’ ticker symbols refer to California Rep . Nancy Pelosi and Texas Sen . Ted Cruz , two members of Congress who have made notable stock market profits .

Both funds are actively managed , diversified ETFs that invest based on the public disclosure filings made by sitting members of Congress and their families . The NANC fund holds more than 700 securities , favors future-looking stocks and is heavily overweight in technology stocks . The KRUZ fund , meanwhile , holds more than 400 names and is overweight in sectors such as energy , financials and industrials .

The return for the Democratic fund for the year as of early July was 22.59 %, which beat the 17.66 % return of the S & P 500 . The ETF has returned 48.18 % since its inception . The Republican fund ’ s return as of early July was 9.68 %, which lagged the S & P 500 but beat the 4.09 % performance of its benchmark , the Dow Jones Industrial Average . The Republican-modeled ETF has returned 20.61 % since inception .

Since they were created , the two funds have grown assets from zero to $ 150 million , Cooper says .

What motivated Cooper to start the ETFs ? “ I must attribute the idea 100 % to Unusual Whales ,” he says . “ They really popularized the notion that Congress can generally outperform the market .” Cooper has traded equities and options at Credit Suisse , Jefferies and RBC .

According to Unusual Whales , Pelosi , the California Democrat who formerly served as speaker of the House , last year got a 65.5 % return on her stock investments , easily outperforming the S & P 500 return of 26.1 %. Outdoing her was Democratic Rep . Brian Higgins of New York , who raked in an eye-popping 238.9 % return on his actual portfolio in 2023 before resigning from his seat in February .

The top Republican on the Unusual Whales list in 2023 was Rep . Mark Green , a Republican from Tennessee who racked up an impressive 122 % return .

Cooper translates the physical trade disclosures from Unusual Whales into an actual portfolio in hopes of optimizing returns . “ Just because a member of Congress buys 1,000 shares of XYZ stock does not mean that I buy 1,000 shares . In order to capture any information edge , I have to make that decision in the context of the total portfolio of Congress , and Unusual Whales data is indispensable to that process ,” he says .

Just as in the political arena , Democrats and Republicans have divergent views when it comes to investing , he says .

“ Both NANC and KRUZ are almost diametrically opposed to each other from a risk perspective . Republicans trade more like the Dow , and Democrats trade like the S & P . If you evaluate with that lens , NANC is beating the S & P on a risk-adjusted basis and KRUZ is as well when compared to the Dow . But KRUZ is lagging the S & P . Only recently have Republicans been trading [ Nvidia ] more , so now that has moved to a top holding in KRUZ as well .”

The top Republican on the Unusual Whales list in 2023 was Rep . Mark Green , a Republican from Tennessee who racked up an impressive 122 % return .

While the NANC fund has benefited from Nvidia ’ s returns of more than 200 %, the KRUZ fund has more exposure to energy and utilities stocks , which have performed well , although not as well as technology , he says . Have the funds caught the attention of financial advisors yet ?

“ Advisors are interested , and I am talking to a lot of them , but this is a new idea and an idea that challenges market norms ,” Cooper says . “ For the moment , there does seem to be some information advantage here if you evaluate based on risk-adjusted statistics alone . But I suspect advisors will be a bit more comfortable as we approach the three-year mark with that same level of performance .”

— Tracey Longo

SEPTEMBER 2024 | FINANCIAL ADVISOR MAGAZINE | 11