Should investors bet against DEI? What to know about new anti-'woke' index fund

USA Today

08-07-2025

One S&P 500 please, hold the diversity, equity and inclusion.
That is the proposed selling point of a new index fund launching Tuesday: The exchange-traded fund mirrors the S&P 500 but excludes 37 companies that engage in DEI.
It is the brainchild of James Fishback, an ally of President Donald Trump who used to work for the hedge fund Greenlight Capital and recently became more widely known as the Department of Government Efficiency adviser who proposed sending taxpayers stimulus checks. Last week, Fishback launched a Trump super PAC to back the president in his feud with the GOP's largest individual donor and former DOGE architect Elon Musk.
With the Azoria 500 Meritocracy ETF, Fishback is piggybacking on the Trump-powered DEI backlash. He unveiled his plans in December at the president's Mar-a-Lago resort.
'I am making the bet of my career that, generally, stocks that hire on skill and merit and not on race and gender will do better,' Fishback, CEO and founder of investment firm Azoria, told USA TODAY in an exclusive interview. 'The next couple years are going to decide if this strategy is a success.'
Is anti-DEI a good investment?
Morningstar analyst Bryan Armour said he expects some investors will flock to the index fund which trades under the ticker symbol SPXM.
'Investors are often drawn to the siren song of a good narrative, especially one that speaks to their views,' Armour said. 'My guess is there will be some appetite for an ETF like this.'
But, he said, investors are best off "separating investing and politics.'
Exchange-traded funds, or ETFs, are bundles of stocks that trade on public exchanges like individual stocks, giving investors the ability to buy hundreds of securities in a single purchase. Anyone with a brokerage account can put money in ETFs, which can be bought and sold like shares during the trading day.
Ideologically driven S&P 500 trackers tend to charge high fees and attract meager investment, University of Florida finance professor Jay Ritter told USA TODAY in December.
'We will probably see some more anti-'woke' ETFs but only the biggest will survive,' Ritter said. 'Each year, a lot of small ETFs get closed or merged because there is not enough liquidity to attract investors and cover the costs of managing the ETF.'
Is there a DEI 'drag' on stocks?
Fishback told USA TODAY his index fund filters out more than three dozen companies that use explicit race and gender quotas in hiring decisions including Nike, Airbnb and Intel. Airbnb and Nike declined to comment.
In a statement, Intel said its hiring and promotion practices "follow a competitive and fair process in compliance with the law and we do not use identity based quotas.'
Initially, Fishback thought the announcement of his S&P 500 tracker would put pressure on the nation's largest companies to roll back these policies, but in conversations with business leaders, Fishback said he discovered they 'genuinely believe that their DEI hiring targets help their long-term business" and few could be persuaded to make changes.
'I thought a lot more companies would have taken these policies off the table," he said. "But the fact that six months later, there are still three dozen companies hiring on race and gender tells me that this product has to be there."
The Florida investment fund manager said his research shows a 'DEI drag' has caused these 37 stocks to underperform for the last two years.
"We identified DEI hiring targets as the likely driver of underperformance by studying a diverse set of 37 companies across 26 industries that share little in common except for one policy: explicit, quantitative DEI hiring targets. This uniformity allowed us to isolate that variable as a common denominator," Fishback said.
On average, the companies saw their stocks rise 3.8% in the 30 days after dropping diversity hiring targets, compared to the S&P 500's average monthly return of 1.24%, according to Fishback.
"Our research demonstrates a strong negative association between explicit demographic hiring targets and stock returns," he said.
Analysts were skeptical.
'I find it hard to believe that DEI hiring practices can be directly linked to stock underperformance,' Armour said.
The Azoria 500 Meritocracy ETF charges a management fee of 0.47%, meaning if an investor puts in $10,000, they will have paid approximately $48 in fees to the fund manager after one year.
Even if diversity targets were the common denominator, the omitted companies would need to "underperform by a lot" to make the fund a worthwhile investment when an investor can buy an S&P 500 fund "for three basis points of fees or less," Armour said.