December saw the launch of the antidote to ESG with the BAD Investment Company’s first ETF, based on betting, alcohol and drugs.
Tommy Mancuso, president of the BAD Investment Company, stoutly defends his approach, which, all irony aside, sees his ETF invested in sectors that are, as he puts it, historically unbothered by the volatility of certain market conditions.
Mancuso comes to ETFs from the wealth sector having worked for a large, registered investment adviser firm in Kansas. “I liked the RIA structure which allowed me to identify what consumers are looking for which morphed into my interest in the ETF sector,” he says.
His frustrations with ESG lie in what he sees as a lack of clarity in ESG funds. “There has been a huge flood of ESG funds that have hit the market, but it didn’t make a whole lot of sense to me with the ESG tag as there are no fundamental guidelines that classify it.”
While Mancuso sees there are lots of good benefits for ESG, there are no strict criteria. “Some of those ESG companies might have raised money through SPACs or not have strong cash flows or a true business model,” he says.
“I felt that investors might be interested in something sustainable but with a strong potential for growth. Betting alcohol and drugs have a diversification across different industries which offers a nice opportunity for investors,” he says.
“If we strip down the social stigma for these industries, they are being more accepted as people always get sick, drink alcohol and gamble for entertainment and the strong tailwinds for those industries offer growth for the future.”
Mancuso’s ETF raised USD8,500 million in its first two weeks and received a great deal of publicity.
“Our three industries complement each other, especially in the re-opening of the economy post pandemic. We like industries that complement each and that can withstand different cycles and pick up for each other,” he says.