A fund copying Congress’s stock trades beat the S&P 500, thanks mostly to one stock

An investment fund that follows stock trades reported by US lawmakers has managed to beat the S&P 500 since its launch in February 2023. The Unusual Whales Subversive Democratic Trading ETF, known as NANC, now manages around $258 million.

It uses public records of stock transactions made by Democratic members of Congress to build its portfolio. This gives investors a way to follow the companies that lawmakers are buying and selling.

But its strong returns raise a bigger question. Does following congressional stock trades actually help investors make money, or has NANC benefited mainly from the rise of major technology and AI companies?

NANC does not follow congressional trades in real time

The fund relies on stock transaction reports filed by members of Congress under the STOCK Act. The law requires lawmakers to disclose their personal stock trades within 45 days of making them.

That reporting period creates a problem for investors. By the time a transaction becomes public, the stock may have already moved. NANC cannot offer a real-time picture of what lawmakers are buying or selling. It works with information that may be several weeks old.

The fund also does not copy every reported transaction. It is actively managed, meaning its managers study the available disclosures and decide which stocks to include and how much to invest in them.

This makes an important difference. NANC's returns depend on two things: the trades reported by lawmakers and the investment decisions made by the fund's managers.

NVIDIA and other technology stocks dominate NANC's holdings

NVIDIA is NANC's biggest holding, accounting for 10.45% of its portfolio. Microsoft comes next at 7.49%. Alphabet makes up 5.65%, while Amazon accounts for another 5.32%.

Together, these four companies represent about 28.9% of the fund's total holdings. NANC also has 39.3% of its portfolio invested in information technology.

The fund's wider exposure to technology is worth considering. Alphabet is classified under communication services, while Amazon is placed in the consumer discretionary sector. However, both companies have major technology businesses.

This means NANC's performance is closely linked to a small group of large technology companies. When these stocks rise, the fund benefits. But a fall in the AI and technology sector could also hurt its returns.

NVIDIA's financial performance helps explain why its shares have been important for NANC.

The company reported revenue of $68.13 billion in its most recent quarter, an increase of 73% from a year earlier. Much of this growth came from demand for its data centre products.

Revenue is the money a company receives from selling its products and services before deducting expenses. It should not be confused with profit. Even so, such strong sales growth shows the scale of demand for NVIDIA's technology.

NANC has invested more than one-tenth of its portfolio in the company. This means a strong rise in NVIDIA shares can have a direct effect on the fund's returns. Its investments in Microsoft, Alphabet and Amazon add further exposure to the same broad technology trend.

Can NANC continue to beat the S&P 500?

The most useful way to judge NANC is to compare its performance with a conventional technology ETF over the same period.

If both funds deliver similar returns, it would suggest that NANC's technology holdings, rather than its congressional trading strategy, explain much of its success. If NANC consistently performs better, there may be a stronger case that its stock selection adds value.

However, the available track record is still short. The fund started in February 2023 and has not yet been tested across several different market cycles.