Calling for a Freedom-Weighted Mutual Fund
Why can’t I find a freedom-weighted mutual fund that invests in U.S. companies?
With illegal orders emanating from the White House at a rapid clip, I would like to see a mutual fund that weights its domestic investments based on whether and to what extent the listed company and its executives are supporting or opposing the President’s aggressive power grabs.1 Given that our freedom, security, and welfare may depend on whether the U.S. slides even further into authoritarianism, I would think more options would be available for ordinary people to join forces to invest in a manner that is equal to the crisis we are confronting.
A freedom fund would scrutinize political contributions, of course, but then go much further. A freedom-weighted fund could ask whether a company and its top executives are following the law as set out in the Constitution and enacted statues, or instead are following an executive order that violates the law. If the President tells the company never to speak of inequality or climate change, does the company resist, or does it willingly surrender its right to speak so as to curry favor or avoid retaliation? Is the company’s leadership itself using rhetoric that encourages or normalizes political violence? Does the company spread disinformation or knowingly make products that facilitate the spread of disinformation?
The answers to these questions may well be subjective or difficult in some cases, but evidence-based and transparent determinations can help investors to understand them. Issues are complicated and companies may get some things right and other things wrong, but this is a reason to have a nuanced evaluation on a sliding scale, not a reason to avoid the issues altogether. A freedom-weighted fund would invest more in companies that are scoring well on these questions and less in companies that are performing poorly.
The complexity of the issues and rapidly changing norms is a reason to bring together seasoned analysts who can focus on them full time. There are not enough hours in the day for individuals to untangle how their passive mutual fund investments are unwittingly flowing to the President’s enablers. Another reason is that many individuals are not in a position to confront companies. For many employees and service providers, their livelihood may well depend on not criticizing certain companies, or they may fear government retaliation. These employees can make mutual fund elections without jeopardizing their ability to earn a living.
I find three funds that are in the ballpark of what I’m describing here, but none of them is quite what I have in mind. The Democracy International Fund uses the Economist’s democracy index to favor investments in companies in more democratic countries over those in less democratic countries.2 But it excludes the United States from its approach. Similarly, the Freedom 100 Emerging Markets ETF invests in companies in other countries, not in the United States.3 The DEMZ fund invests in companies that donate predominantly to Democratic candidates and committees.4 But I would prefer an alternative to an explicitly partisan fund, and the DEMZ fund’s contribution-based methodology does not seem responsive to current events.
Beyond these funds, there is a whole world of non-profit advising and activism in the ESG space. Republicans in Congress and in red states have targeted these nonprofits with subpoenas5 and antitrust lawsuits,6 alleging that shareholder activism is tantamount to price-fixing. As absurd as these lawsuits and investigations are, what I’m describing here does not incur any of these risks. I’m not talking about shareholder activism; I’m talking about not buying certain companies. We still have that right, and should exercise it.
Really, you need a footnote for this one? Okay. I have in mind, among other things, the President’s executive order purporting to modify the Fourteenth Amendment to eliminate birthright citizenship, his order purporting to “pause” the statutory TikTok ban, his order purporting to freeze federal spending, and his illegal firing of the Inspectors General.
www.democracyinvestments.com.
https://freedometfs.com.
https://demz.fund.
https://www.asyousow.org/press-releases/2023-11-1-house-judiciary-committee-silence-shareholders.
https://www.axios.com/2024/11/27/texas-coal-electricity-blackrock-vanguard.