Trump's election win boosts anti-DEI investing

A group of Donald Trump's MAGA allies is seizing on his election to push a new ETF focused on investing in companies that reject diversity, equity and inclusion (DEI) initiatives, which Trump has railed against.

Why it matters: The fund — pitched to potential investors last week during a meeting at Mar-a-Lago — is the latest example of a Trump-inspired backlash to corporations and retailers that some conservatives see as promoting overly progressive social agendas.

Zoom in: Trump's team says the president-elect isn't involved with the ETF, which is dubbed the Azoria Meritocracy fund.

• But the fund's CEO and co-founder James Fishback is a friend of Trump ally Vivek Ramaswamy. And last week, Trump himself popped into the meeting of potential investors, who included Cathie Wood, founder of Ark Invest.

Fishback says the new fund will mirror the S&P 500 index — but will exclude three dozen companies that it sees as using DEI quotas in hiring or promotions. They include:

• Starbucks, which has said it wants to "achieve racial and ethnic diversity of at least 30% at all corporate levels and 40% of all retail and manufacturing roles by 2025." (Starbucks, in a statement to the Financial Times, said its diversity goals had expired and were not renewed.)
• Best Buy, which aims for "1 in 3 new corporate salaried positions to be filled by BIPOC," or Black, Indigenous, and people of color.
• The United Rentals equipment company, which wants 40% "gender and ethnic diverse representation" in U.S. sales and management roles.

What they're saying: "When great companies ... throw hiring standards out the window as they race to 'out-woke' one another, the inevitable result is mediocrity and underperformance," Fishback said.

• Fishback noted that if the excluded companies change their hiring practices they could be added back into the actively managed fund, which launches early next year.

Trump supporters see the fund as an opportunistic reflection of Trump winning the election and following through on his promises to resist DEI initiatives.

• "What makes the promise of those elections actually be fulfilled is the starting of new institutions," said Kevin Roberts, president of the Heritage Foundation.

The big picture: A growing crowd of conservative players are putting their names or money behind similar efforts.

• Rather than join his father's administration, Trump's son Don Jr. joined the 1789 Capital venture firm, which invests in a "parallel economy" of companies and products with conservative values. He also joined the board of the MAGA-friendly shopping platform PublicSquare, causing shares of its stock to jump.
• Ramaswamy's Strive Asset Management is known as an anti-ESG firm, meaning it rejects companies' environmental, social and governance policies that Strive says conflict with investors' interests.

• Vice President-elect JD Vance and mega-investor Peter Thiel are among the most prominent backers of Strive, which has more than $1 billion in assets across several ETFs. One of its funds, in a seeming echo of Trump's "Drill baby, drill," slogan, invests heavily in oil and gas companies and operates under the ticker DRLL.

Between the lines: Trump's election and pressure from conservative activists are leading some of the biggest players in corporate America and higher education to drop or trim their DEI policies.

• Such programs have been designed to counter decades of bias and underrepresentation affecting minorities, women and LGBTQ+ people.
• They've also been shown to reduce employee attrition and increase motivation. But Trump and his allies have cast the programs as creating bias, particularly against white people.
• Walmart rolled back its DEI programs last month, announcing it would not renew a racial equity center or participate in the Human Rights Campaign's annual benchmark index that measures workplace inclusion for LGBTQ+ employees.
• Conservatives also are reviving an effort to push for "fair access" rules aimed at ensuring that politically controversial businesses such as gun manufacturers and fossil fuel companies can't be blocked from banking services.