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Making Money With The Blues

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As it turns out, if you age going to start a politicized investment fund, you might as well hire some guys with experience in investment management. Daniel Gross explains that this is what explains the different performances between the GOP friendly Free Enterprise Action Fun and the Democrat fund The Blue Fund.

There are a few major differences between the Blue Fund and the Red-leaning Free Enterprise Action Fund. While both have lobbyists and politicos associated with them (former Democratic National Committee Chairman Joe Andrew chairs the Blue Fund), the Blue Fund's team includes people who have experience in the asset-management business. And while the Republicans behind the Free Enterprise Action Fund want investors to take it on faith that their approach is good for investors, the Blue Fund has a white paper, complete with graphs, that shows the superiority of their methodology. While past performance is no guide to future performance, the white paper (see Page 3) shows that over the past five years, the Blue Large Cap Index would have beaten the S&P 500 by 13.1 percent annually, and beaten companies that give a majority of their political donations to Republicans by 15.6 percent annually. That's a massive difference. Of course, virtually any market-cap-weighted portfolio in which Google and Apple constitute 10 percent of holdings would have put up similar numbers in the past several years. But Adamson notes that even if you remove the three companies in the Blue Fund with a market capitalization of over $25 billion (Google, Apple, and Costco), the blue companies still outperformed the S&P 500 by three percentage points per year.

Blue Is Green [Slate]