Ramaswamy Pivots From Anti-ESG Base at Expanding Investment Firm

Biotech entrepreneur and GOP presidential hopeful Vivek Ramaswamy founded Strive Asset Management to counter the “woke” investment practices of more established firms like BlackRock Inc. that factor environmental, social, and governance issues into their decision-making.

Now, as the company enters its sophomore year and barrels past the $1 billion mark in assets under management, its leaders are trying to move beyond “anti-ESG” or “anti-woke” labels to help fuel further growth.

Strive’s leaders have become proselytizers, of sorts, of the philosophy that companies should prioritize shareholders’ views on operating to maximize profit. That mantra, “shareholder primacy,” differs from the World Economic Forum’s “stakeholder capitalism,” which means companies should take into account how their operations affect a much broader group of people than just investors.

“We are trying to change corporate behavior back to shareholder primacy and away from stakeholder primacy,” said Justin Danhof, Strive’s executive vice president and head of corporate governance.

That could prove a tall order. The company’s rapid rise in the wealth-management world over just 13 months places it well ahead of competitors in the anti-ESG space.

But Strive is still tiny compared to the biggest asset managers—BlackRock, Vanguard, and State Street—which together hold almost $20 trillion in assets. Combined, the $2.1 billion in anti-ESG funds are a drop in the bucket compared to the money nearly $270 billion ESG-fund market, according to an analysis by Morningstar.

The big three asset managers also have bigger stakes in companies, translating to more weight in shareholder proxy votes—should they choose to use it.

“Why would the CEO of Apple listen to you if you own .02% of stock?” said Shivaram Rajgopal, a finance professor at Columbia Business School.

Ramaswamy declined to comment.

Team Building

Strive now has 11 exchange-traded funds. Its most basic offering—the Strive 500, which invests in 500 of the largest publicly traded US companies—is not unlike options an investor might find at one of the more established asset managers.

Other offerings are more reflective of Strive’s values, among them an ETF—whose ticker is aptly named DRLL—that’s full of fossil-fuel companies like ExxonMobil Corp., Chevron Corp. and Occidental Petroleum Corp. There are also ETFs focused on the semiconductor industry, ticker: SHOC, and emerging-markets—sans China.

While its investment products are its main business, Strive started a proxy-advisory service in January to compete with Institutional Shareholder Services and Glass Lewis—which have nearly all the market share in that space—and it has been beefing up its staff in that area as a service to investors. Support for ESG-related proposals hit a five-year low this year, according to financial services company Broadridge, but Strive is still expecting an active 2024 proxy season.

The company has five full-time employees working on the governance team out of the 32 employees it lists on its website, and is “recruiting at all levels” from interns to senior associates, Danhof said. It’s difficult to quantify how many of the new hires will work on proxy advisory issues because the company is still “young” and many employees “wear multiple hats,” he added.

Strive’s goal is to hold shares in a range of companies, including those that aren’t being run according to Ramaswamy’s shareholder primacy vision. This is a different approach, Danhof said, than purely anti-ESG organizations that boycott companies that don’t share their goals, effectively vacating their seat at the table and losing any influence they might have over those companies.

“Having our voice in the room is going to be a lot more powerful than taking it out of the discussion,” he said. “And I think that that’s resonated with the market.”

Maximizing Profit

Large, established asset managers such as BlackRock have used the proxy vote system to “advance social and political causes,” Strive said in a March white paper titled “Proxy Voting 101.”

Strive, on the other hand, is interested only in supporting shareholder proposals that help companies’ bottom lines, the asset manager said in the white paper. The goal is to “restore the proxy vote’s original purpose and use it as it was always intended: to exercise ownership to maximize shareholder value,” the paper said.

According to data compiled by investment research firm Morningstar, 47 anti-ESG shareholder resolutions addressing environmental and social issues have made it onto the proxy ballots of S&P 100 companies in 2023. Vanguard Asset Management Ltd., BlackRock and pro-ESG hedge fund Engine No. 1 voted against them all; Strive, on the other hand, took a more nuanced approach, supporting 30, voting against 10 and abstaining from seven.

All of the anti-ESG resolutions ultimately failed, garnering about 3% of the vote on average.

Strive also voted against 60 out of 94 CEOs who were up for election or reelection in S&P 100 companies, while established asset managers BlackRock, Vanguard and State Street supported all of them.

That was surprising, since none of Strive’s documents say the firm plans to vote against CEOs, and CEOs have historically been well supported by shareholders, said Alyssa Stankiewicz, head of Morningstar’s North America ESG research division.

“It seems like a lot of their guidance was aimed at letting companies and CEOs operate as they see fit in the best interest of shareholders and trying to quiet some of the noise from government actors or non-government actors,” Stankiewicz said, “and get them to really focus on on shareholder value.”

Danhof said he sees the CEO votes as consistent with the firm’s goals. Corporate governance, he said, is a big gray area that requires Strive to look at each set of circumstances separately. The firm’s team members debate amongst themselves on every vote, he said, but Strive has a paradigm: If a company is engaged in non-pecuniary, or non-financial, activities and there isn’t a board member to blame, it’s on the CEO.

“Heavy is the head that wears the crown,” Danhof said. “The company can be performing well—[but] they’re not the best version of themselves.”

Eyes on 2024

While Ramaswamy gave up the day-to-day management of Strive to focus on his presidential campaign, he continues to promote the company in political circles and maintains a majority ownership stake.

According to Strive’s latest investment advisory form filed with the Securities and Exchange Commission last month, Ramaswamy owns between 50% and 75% of the company. Top executives, including CEO Matt Cole, own less than 5% each.

Ramaswamy said during the September 27 GOP presidential primary debate that he founded the company to compete with BlackRock—and still intends to do so.

For all the bluster, Strive remains a $1 billion-small fish in an ocean of whales. Whatever the firm’s size, its contribution to the proxy-proposal debates is a positive development, Columbia University’s Rajgopal said. Active debate can only strengthen the democratic proxy-voting process, he said.

“Frankly, shareholders don’t feel like they have a voice,” he said. A remedy, he added, would be to invest with asset managers that share the same values, whether that is Strive or another firm.

ESG proponents and companies have nothing to fear with Strive in the arena, said Andy Behar, CEO of shareholder and ESG advocacy group As You Sow.

Ramaswamy’s firm may get a bump from the politicization of the term “ESG,” but the investment strategy isn’t going away, Behar said. ESG values aren’t necessarily at odds with the goal of growing profits, he added.

As You Sow will continue to vote for ESG shareholder resolutions like diversifying the ranks of companies, for example, because the data show that greater diversity contributes to positive financial metrics, Behar said.

“We’re going to be voting for more diversity at companies because we want to outperform” the market, he said. “If people want to underperform, they can stick with Strive, it’s their choice—that’s America, everybody can have a choice.”