Anti-'Woke' Index Funds: A New Frontier in ESG Investing or a Risky Political Gamble?

As ESG investing evolves, a new frontier has emerged: anti-woke or DEI-excluding index funds. These products, such as the Azoria 500 Meritocracy ETF (SPXM), seek to capitalize on political and cultural divides by excluding companies perceived to prioritize diversity, equity, and inclusion (DEI) over profit. But are these funds a legitimate shift in ESG strategy, or a high-risk bet on ideological alignment over financial logic? Let's dissect the data and risks.

The Rise of Anti-Woke Funds: Strategy and Claims

The Azoria 500 Meritocracy ETF, launched in early 2025 by James Fishback—a political ally of former President Donald Trump—targets companies like Starbucks, Airbnb, and Intel, which Fishback claims have implemented “race and gender quotas” in hiring. By excluding these 37 firms, the fund aims to mirror the S&P 500 while avoiding what Fishback calls a “DEI drag” on performance.

Fishback's bold claims:
- Excluded companies returned 12% year-to-date (YTD) in 2025 versus the S&P 500's 27%.
- Over two years, the excluded group returned 17% compared to the S&P 500's 60%.

He attributes this gap to DEI policies allegedly deterring innovation and efficiency. The fund's stated goal is to pressure corporations to abandon such policies, leveraging a “Trump trade” momentum among politically aligned investors.

Performance Claims vs. Reality: A Skeptic's Lens

While Fishback's narrative is compelling, analysts are skeptical. Morningstar's Bryan Armour notes that linking DEI policies directly to stock underperformance is “correlation, not causation.” Companies excluded by Azoria, like Starbucks, deny using quotas, and Intel asserts its hiring practices comply with legal standards.

Even if DEI policies did harm performance, the underperformance Fishback cites (a 15% YTD gap) would need to outweigh the fund's steep fees. SPXM charges 0.47% annually, versus 0.03% for the iShares S&P 500 ETF (IVV). Over a decade, that fee difference could erode returns by 4%, according to Morningstar calculations.

The Risks: Political Bets vs. Market Realities

1. Structural Headwinds:
2. Liquidity: Small anti-woke ETFs like the Point Bridge America First ETF (MAGA) and American Conservative Values ETF (ACVF) face liquidity risks. University of Florida's Jay Ritter warns that niche funds often fail within a year due to low trading volumes.

3. Fees: High expense ratios could negate any performance edge.

4. Corporate Governance Trends:

5. DEI policies are increasingly tied to executive compensation and board accountability. A 2024 study by Institutional Shareholder Services found that 68% of S&P 500 companies now link DEI metrics to CEO pay—a trend unlikely to reverse quickly.

6. Market Sentiment:

7. While anti-woke funds may attract ideological investors, the broader market has largely shrugged off DEI debates. The S&P 500 hit record highs in Q3 2025, driven by tech stocks like NVIDIA (NVDA) and Microsoft (MSFT), which are not excluded by SPXM.

The Bottom Line: A Gamble with Uncertain Odds

Anti-woke index funds like SPXM represent a radical departure from traditional ESG strategies. While they may appeal to investors seeking to “vote with their wallets” against DEI policies, their financial viability hinges on unproven assumptions:
- That DEI policies directly harm corporate performance.
- That political alignment can override market fundamentals.

For now, these funds remain a niche play. Their high fees, liquidity risks, and lack of empirical support make them better suited for speculative portfolios than core holdings.

Investment Takeaway:
- Avoid: If you prioritize low-cost, broad-market exposure. Stick with S&P 500 ETFs like IVV or VOO.
- Consider: Only if you strongly believe DEI policies will hurt corporate performance long-term—and can tolerate higher fees and potential underperformance.

In a market where tech-driven growth and geopolitical stability dominate, betting on a politically charged narrative may prove a costly distraction.

Ben Levisohn's final thought: Invest in what works, not what you wish were true.