A small new exchange-traded fund launched today with an eye-catching concept: It plans to invest in companies that have large numbers of government contracts, which it thinks will protect them from the trade wars launched by US president Donald Trump.
MCAM International, a small outfit based in Charlottesville, Virginia, has chosen the ticker symbol “TWAR” for its fund. It targets multinationals that have close relationships with states around the world—often benefitting from what it calls “government patronage”—and strong records on innovation and intellectual property.
They are bucking the now received wisdom that technology transfer is a threat to companies by looking at firms that have shared their intellectual property as part of contracts with governments, CEO David Martin told Quartz. He argues that selling intellectual property to a government actually spurs more work and information-sharing with that state, and incentivizes the states to favor those firms.
“[Governments] typically do not subject those types of technologies to the same penalties that they’ve put on other products and services that are subject to tariffs and other trade sanctions,” Martin said. “They are less likely to allow adverse trade policies to harm that particular company.”
Analysts greeted the fund with some skepticism. Many of the companies in the fund are the kind of massive multinationals you’d expect to be safe investments, such as GE, Amazon, and Microsoft.
The fund’s top five holdings have earned a combined total of approximately $100 billion in US federal contracts since 2008.
But even big contractors aren’t always safe. “There are some very large federal contractors that are included, as well as other companies that have a strong foothold in the energy, pharmaceutical, IT, and consumer product sectors,” said Scott Amey, general counsel at the Project On Government Oversight, a nonprofit that acts as a watchdog on federal spending. “The government contractors might be the most protected, but even they might take a hit if a prolonged trade war takes place.”
Here are the companies listed in the fund, according to SEC filings: