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Published: Jun 25, 2024 12 min read

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While most professional fund managers fail to consistently beat the market, one institution has proven it's capable of outpacing the benchmark S&P 500 index: Congress.

Quiver Quantitative, a platform that aggregates alternative stock data from across the internet, reports that members of Congress routinely execute trades that outperform the market.

Rep. Nancy Pelosi, D-Calif., for example, has seen her various positions in chipmaker Nvidia return an average of 586.56% since 2021, Quiver Quantitative data shows. Pelosi, whose net worth is estimated at around $250 million, conducted trades totaling $123.98 million in volume last year, with 24 transactions of $1 million or more dating back to 2017.

Sen. Tommy Tuberville, R-Ala., last year's most active trader on the Republican side of the aisle, had his Nvidia trades return 605.87% since 2021. Over the past year, Rep. Daniel Meuser, R-Pa., saw his portfolio gain 104.42%, while Sen. Rick Scott, R-Fla., whose net worth is estimated at over $325 million, conducted trades accounting for nearly $219 million over the same time.

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As more reports like these stoke the idea that senators and representatives are getting rich due to their positions of authority and access to special information, bipartisan calls for reform are growing. Most Americans and dozens of political leaders in Washington even say members of Congress should be banned entirely from trading individual stocks while in office.

Meanwhile, it's gotten easier for average Americans to potentially profit like politicians thanks to two exchange-traded funds that mirror the stock trading done by members of each party of Congress.

Should Congress be banned from trading stocks?

The main reason we know about Congress's stock trading habits is the Stop Trading on Congressional Knowledge (STOCK) Act, which became law in 2012. The STOCK Act's principal aim was to address perceived conflicts of interest for representatives, senators and other federal government personnel who have access to privileged information and could potentially use that knowledge to buy and sell stocks.

The STOCK Act stops short of precluding members of Congress from participating in the market. Instead, the law requires them to file disclosure forms within 45 days of a transaction with a value exceeding $1,000.

But the vast majority of Americans across the political spectrum think this law doesn't go far enough. A 2023 survey conducted by the University of Maryland's School of Public Policy found that over 80% of Republicans, Democrats and independents support a full ban on trading for members of the House and Senate, as well as the president, vice president and Supreme Court justices.

Rep. Abigail Spanberger, D-Va., is one member of Congress who agrees a stock trading ban is needed. "People have such a distrust for Congress," Spanberger says. "Anything we can do to just affirm a bit more that we should be trustworthy or we’re making decisions on behalf of and for the American people, and anything we can do to negate that perception of impropriety is really valuable and worth doing."

In January 2023, Spanberger sponsored H.R. 345, the Transparent Representation Upholding Service and Trust in Congress Act, or simply the TRUST in Congress Act, which has the central aim of banning members of Congress from trading individual stocks — a move she says "transcends partisanship and transcends ideology." The bill requires congresspeople, their spouses and their dependent children to place certain assets (i.e., shares of individual stocks) into blind trusts, where they must remain for 180 days after they cease to be members of Congress.

"I don’t think there are massive numbers of people in Congress who are attending meetings and leaving saying, 'Now I'm going to trade stocks and make money off this,'" she says. Yet, given the access that politicians have to prospective legislation and business deals, the potential for abuse is great. "We're just exposed to so much information. Whether you realize it or not, you end up having special information."

The congresswoman notes that there are instances when elected officials' trades raise eyebrows, as was well-documented during the first weeks of the pandemic. "There are obvious cases, like when we were having classified briefings in the early days of COVID, and then people are going and buying Clorox stock. That I find deeply offensive," she says. "Some [instances of congressional stock trading] are sort of egregious."

Former Sen. Kelly Loeffler, R-Ga., and her husband Jeffrey C. Sprecher, founder and CEO of Intercontinental Exchange and chairman of the New York Stock Exchange, were criticized for selling upwards of $20 million in stocks via 27 transactions beginning on Jan. 24, 2020, the day she attended a Senate briefing on the looming COVID-19 pandemic.

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Resistance in the House to stock trading ban

In total, a group of 74 bipartisan members of Congress have cosponsored the TRUST in Congress Act, the majority of whom did so in 2023. Through the first six months of 2024, five additional members signed on.

Thus far, however, members of both parties have rejected the call for reform. Former Speaker Pelosi has vocally expressed her opposition to a stock trading ban for politicians. In 2021, the Associated Press reported that she defended her stance saying, "We are a free market economy. [Members of Congress] should be able to participate in that."

While her assertion about the right of congresspeople to trade stocks was made publicly, other colleagues haven't been as forthright. According to Spanberger, former Speaker of the House Kevin McCarthy, R-Calif., had previously promised to hold a vote banning members of Congress from trading stocks while in office. "Unfortunately, there was no significant movement on this issue in the nine months of Speaker Emeritus McCarthy's tenure," Spanberger said.

The congresswoman isn't hopeful the proposal will be brought to the floor under current Speaker Mike Johnson, R-La., remarking that the Republican-controlled House isn't prioritizing legislation with bipartisan support.

"Continued momentum could force his hand," she says. "But Speaker Johnson is making choices that are resulting in us burning up floor time on issues that essentially they know are going to waste time."

(Johnson hasn't replied to Money's request for comment. Neither have any of the other current or former members of Congress mentioned in this article, aside from Spanberger.)

For now, the bill remains in limbo. Spanberger has announced that instead of seeking re-election, she will run for 75th governor of Virginia in 2025. Whether or not the TRUST in Congress Act is brought to the floor during the remainder of her term, Spanberger remains steadfast in her belief that the bill would be a positive development for Americans who want more transparency from their elected officials.

"This isn’t about us saying Congress is corrupt — this is just about us removing any perception of wrongdoing," she says. "If this is what we can do to help and restore some faith in our government, then it’s worth it."

How to invest like a member of Congress

If you can't beat 'em, join 'em. That's the idea behind two actively managed funds that allow the general public to gain exposure to politicians' portfolios, launched by New York-based Subversive ETFs last year.

The two funds — the Unusual Whales Subversive Democratic Trading ETF (NANC) and the Unusual Whales Subversive Republican Trading ETF (KRUZ) — have ticker symbols that are nods to two prominent politicians: Nancy Pelosi and Sen. Ted Cruz, R-Texas. Each fund holds a basket of stocks based on more than 1,000 individual securities held by members of Congress. The funds are rebalanced roughly once a week according to the inflows of disclosures.

"None of this is automated," says portfolio manager Christian H. Cooper. "I'm trading 1,300 names, and so I'm looking at disclosures as they come in [and] I'm updating the portfolios."

Based on the response Cooper has seen, the public likes the idea of trying to get wealthy like a congressperson. "The growth has been explosive. We went from nothing to $128 million in just over 250 business days," he says. "So certainly the interest is there."

Can NANC and KRUZ ETFs beat the market?

The two ETFs have performed admirably since their inception, with NANC outperforming the market so far in 2024 with a 20% return and a 47% return since its debut in February 2023. KRUZ has posted a 20% gain since debuting at the same time. For context, the S&P 500 has posted a 15.5% return through the first half of 2024 and is up nearly 33% since February 2023.

Though there's no guaranteed way to outperform the S&P 500, Cooper believes the investing approach offered by these ETFs has merit. "I think there's a fundamental misunderstanding of what it takes to beat the market," he says. "In order for a security to get on this list to be held by a member of Congress, there's an immense number of filters that has to get through in terms of getting the attention of the member of Congress who has all of these briefings, and all of this staff, and all this research and access to information."

Cooper adds that "when you are constructing a portfolio out of all of this information ... it's more of a big picture: What does the collective intelligence of the 535 people [in Congress] who write the rules tell us about the state of the world?"

That collective intelligence has led to around 750 holdings in NANC and around 500 in KRUZ, the former of which are heavily focused on cloud and tech stocks, while the latter significantly lean into energy and health care stocks.

Subversive ETFs and its data provider Unusual Whales have found a niche following of investors who want to mirror the securities held by members of Congress. In the 16 months Subversive ETFs have been on the market, there's evidence that the strategy of replicating congressional stock holdings is proving effective under current market conditions.

"If you apply the wisdom of the crowd and use congressional trading, you can beat the market," Cooper says. "We'll see how long that holds true, but for now, it's the case."

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