MW Is Nvidia a Republican or a Democrat? These political ETFs have voted.

By Mark Hulbert

ETFs that combine investing and politics tap into investors' polarized views. Why they shouldn't get your vote.

Politically focused ETFs show that investing and partisan politics don't mix.

Is Nvidia Corp. a Republican company? The question arises because Nvidia (NVDA), at the crest of the AI wave on Wall Street, is one of the largest holdings in the Unusual Whales Subversive Republican Trading ETF GOP, which invests in stocks owned by Republican members of Congress (and/or their family members).

Reinforcing the company's conservative credentials is that it also is the largest holding in the American Conservative Values ETF ACVF, which "is designed for investors seeking to align their portfolios with conservative values."

But wait - Nvidia also is the largest holding in the Unusual Whales Subversive Democratic Trading ETF NANC - which invests in stocks owned by Democratic members of Congress and their families - and the Democratic Large Cap Core ETF DEMZ (which invests only in "companies that have made over 75% of their political contributions to Democratic causes and candidates").

How can we make sense of Nvidia's presence in each of these otherwise polar opposite ETFs?

You might hope that it is evidence of an emerging bipartisan consensus in Washington. But a cynical interpretation is more realistic, according to research conducted by Itzhak Ben-David of Ohio State University. In an email, he said that he suspects that specialty ETFs focus on narrow investment themes primarily for marketing purposes to justify their high expense ratios. "These ETFs give investors almost identical exposure to the S&P 500 SPX, yet can charge much higher fees because they tap into investors' polarization instincts."

Ben-David's research was published in the March 2023 issue of the Review of Financial Studies. Entitled "Competition for Attention in the ETF Space," his co-authors were Byungwook Kim of the University of California-Irvine, Francesco Franzoni of the University of Lugano in Switzerland and Rabih Moussawi of Villanova.

As evidence that these ETFs track closely with the S&P 500, consider the correlation between their monthly returns and those of the S&P 500, as measured by a statistic known as the correlation coefficient. This statistic would be zero if there were no relationship and 100% in the event of a perfect correlation. The two Republican-leaning ETFs have correlation coefficients of 92% and 99%, while the two Democratic-leaning ETFs have coefficients of 96% and 97%.

Not surprisingly, given these extremely high correlation coefficients, the performances of these politically oriented ETFs do not deviate significantly from that of the S&P 500. Over the past 12 months, as you can see from the accompanying chart, three of these four ETFs have slightly lagged the S&P 500 and one has slightly outperformed. Our best guess about their future returns is that they will lag the broad market by the amount of their expense ratios.

These partisan ETFs couldn't survive if their expense ratios were as low as those charged by the large broad-market index ETFs. Most of these broad market index ETFs charge less than 0.10% of assets, and some of the largest ETF providers - such as Schwab and Vanguard - charge just 0.03% on many of their funds. At that rock bottom rate, the DEMZ ETF would earn less than $14,000 per year (based on its current assets under management). The GOP ETF would earn just over $17,000 per year.

The bottom line: It's hard to escape the conclusion that these specialty ETFs are little more than expensive index funds. A better alternative might be to invest in a low-cost index ETF and then donate the money you save to your favorite cause.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

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-Mark Hulbert

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August 18, 2025 07:35 ET (11:35 GMT)

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