By Suzanne McGee

(Reuters) – A fledgling asset manager plans to unveil an exchange-traded fund that avoids companies committed to quantitative diversity, equity, and inclusion (DEI) measures, with the rollout planned at U.S. President-elect Donald Trump's Mar-a-Lago residence on Thursday.

The fund, named the Azoria Meritocracy ETF, will invest in companies in the Standard & Poor's 500 index, excluding a few dozen that the managers conclude employ quantitative commitments to diversity when recruiting employees, according to CEO James Fishback in an interview.

Fishback, who previously worked for David Einhorn's Greenlight Capital as a trader until a contentious split in summer 2023, aims to raise $1 billion by the end of 2025.

> "A few dozen companies … embraced anti-meritocratic hiring practices," said Fishback, explaining the exclusions.

The event is being held at Mar-a-Lago, the Florida mansion and private club that Trump calls home. Fishback chose this location because he supports Trump, whose Republican backers include many critics of environmental, social, and governance (ESG)-based investing, including companies emphasizing demographic diversity in hiring.

In remarks prepared for the event, Fishback noted that returns from excluded companies have lagged the S&P 500 in recent years, but he did not disclose the names of the companies. The Financial Times mentioned that one of Azoria's targets is Starbucks (NASDAQ:SBUX), which stated it currently has no diversity recruiting targets or quotas.

Two unnamed industry analysts expressed skepticism about demonstrating a correlation between underperformance and a company's recruiting policies. Some questioned whether the ETF would gain traction, suggesting ESG-focused funds remain in demand. Todd Rosenbluth, head of ETF research at VettaFi, mentioned that investors might lean towards ESG ETFs, believing the government won't fully support their personal objectives.

Bryan Armour, ETF analyst at Morningstar, commented that a small ETF might struggle to influence corporate America. He noted that successful mutual funds and ETFs have engaged as shareholders rather than excluded companies from their portfolios.

According to Morningstar, there are now 223 U.S.-based ETFs with an ESG focus, totaling $110 billion in assets. The largest, the Vanguard ESG US Stock ETF, has gained 27.45% so far this year, compared to 28% for the S&P 500. ESG funds have recorded an average return of 10.7% in 2024.

Azoria Partners intends to play an activist role, persuading companies to reverse their policies. Among the speakers at the launch event is Cathie Wood of Ark Investment, scheduled to discuss the macro investment environment. Other attendees include Kevin Roberts, president of the Heritage Foundation, a conservative think tank.

Wood declined to comment, and Roberts could not be reached. Fishback was uncertain whether the president-elect would attend, and the Trump transition team did not respond to a request for comment.