- A new ETF that is picking stocks based on the character of their CEOs launched on Thursday.
- The Return on Character ETF ranks its holdings based on several different qualities of company leadership teams.
- While Apple's Tim Cook and Microsoft's Satya Nadella made the cut, Tesla's Elon Musk and Meta's Mark Zuckerberg did not.
A new ETF that is picking stocks based on the character of their CEOs doesn't see room in the portfolio for Tesla's Elon Musk or Meta Platform's Mark Zuckerberg.
The Return on Character ETF from ROC Investments ranks its stock holdings based on a character model centered around integrity, responsibility, forgiveness, and compassion. The fund, which is actively managed and rebalances its 75 to 150 portfolio holdings once per year, believes the scores distilled from its character model will deliver outperformance in the long-term.
These pillars "are the same principles parents seek to instill in their children, and yet they are often found lacking in the financial world," ROC Investments CEO Dan Cooper said, adding that the ETF does not care about exterior characteristics like education, tenure, politics, age, industry, or religion.
The ETF is based on academic research conducted by KRW International, which found a relationship between the character of senior leadership teams and a company's ability to execute on its strategy.
"Leadership teams with high character scores showed higher profitability, higher workforce engagement and lower levels of corporate risk," ROC Investments said.
The ETF launched on Thursday and trades under the ticker symbol "ROCI." It has an annual expense ratio of 0.49%.
ROC Investments uses proprietary tools to analyze the public language of company CEO's and score for behavior, controversies, and overall character. The ETF's investable universe is 1,000 of America's largest public companies.
Some of the ETF's top holdings include Apple, Microsoft, and Amazon, led by CEO's Tim Cook, Satya Nadella, and Andy Jassy, respectively. Other holdings in the portfolio include Costco, Berkshire Hathaway, and Nvidia.
Meanwhile, noticeable snubs include Musk and Zuckerberg, who both have often been embroiled in a controversy related to their personal or business lives. Musk often posts memes to Twitter and was forced to step down as chairman of Tesla after tweeting "funding secured" in 2018, while Zuckerberg has faced criticisms over his management of Meta and scandals related to Cambridge Analytica, among others.
Other stocks excluded from the ETF include Alphabet, Chevron, and Bank of America.