Ramaswamy’s 2024 presidential bid exposes the anti-ESG fallacy
Vivek Ramaswamy wrote a polemic against “wokeness” in which he struggled to define exactly what “woke” means(1) and then founded a so-so anti-woke exchange traded fund. Naturally, he is now running for president.
Ramaswamy originally made his money in biotech. Still, transitioning from newbie anti-ESG fund manager to anti-ESG White House hopeful in under a year displays a haste that, in gentler times, would have been described as unseemly. Nonetheless, Ramaswamy’s entry to the Republican race does at least lay bare the underlying fallacy of Strive Asset Management, the financial firm he co-founded and which was backed by Peter Thiel and Bill Ackman, and the anti-ESG sentiment it seeks to monetize.
Cast your mind back to all of nine months ago, when Strive announced its mission to take on the “ideological cartel” of passive fund giants BlackRock, State Street and Vanguard, which are apparently coordinating to foist a woke agenda on Americans via their 401Ks. Whereas the likes of BlackRock chief Larry Fink were attempting to push companies to deal with things like climate change, Strive would create financing vehicles pushing in the opposite direction. Its first ETF, focused on energy companies, sports the self-explanatory ticker “DRLL.”
DRLL, or the Strive U.S. Energy ETF, makes for an interesting little case study. Launched in August, it is essentially a large-cap energy sector fund with some utilities and even renewables stocks thrown in. It sets itself against BlackRock’s iShares U.S. Energy ETF, which it closely tracks, and has a similar expense ratio. However, DRLL has underperformed the comparable, and far bigger, Energy Select Sector SPDR fund from State Street by about three percentage points while charging four times the fee.
Last September, Strive sent an open letter to Chevron – its second biggest holding – accusing it of caving to the wokesters by diverting a little money to decarbonization ventures better spent on, you know, DRLL-ing. In doing so, Strive displayed an ignorance of the sector’s recent history: After the excesses of the shale boom, the ESG mantra of restraint on oil and gas production aligns better with financial returns and investor preferences. Chevron just announced a $75 billion buyback program and all the majors, despite raising spending this year, are sticking with the playbook of discipline and big payouts. Indeed, you could have just owned Chevron and Exxon Mobil, which exemplify this, and have earned almost 4 percentage points more than DRLL so far with no management fee. Maybe you could even sell that; ticker: OBVI.
DRLL’s shaky reasoning and high cost is of a piece with the broader anti-ESG push by the likes of Florida Governor, and likely presidential contender, Ron DeSantis and various Republican-led states. In mandating that fund managers cannot factor things like exposure to climate-related risks into their investment decisions, anti-ESG politicians are deploying the strong arm of the state to derail fiduciary responsibility and thereby impose costs on investors. That was the rebuttal delivered recently by the board of Kentucky’s County Employees Retirement System in a letter to the state Treasurer after she issued an effective blacklist of financial firms, BlackRock included, accused of undermining the state’s energy industry (which, in a further plot twist, barely exists).
One person’s woke agenda is another’s risk management. In telling fiduciaries which risks they can or can’t weigh, the anti-ESG crowd are indulging in the very politicization of finance of which they accuse the likes of BlackRock. Ramaswamy’s expeditious transition from anti-woke fund manager to anti-woke wannabe politician is an almost too-perfect illustration of the projection and shabby reasoning that underlies the project.
(1) In “Woke Inc.”, the book he published in 2021, Ramaswamy writes: “Basically, being woke means obsessing about race, gender, and sexual orientation. Maybe climate change too. That’s the best definition I can give.” I can’t say for certain that would pass peer review.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
This column does not reflect the opinion of Parikh Worldwide Media/News India Times