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An investing strategy that actually tracks Nancy Pelosi doesn't beat the S&P anymore
If you follow Quantbase you know we build aggressive, algorithmic funds that drive serious returns for our investors. What you may not know is that we also build some more, well, exotic funds. We like to say they put the “fun” in funds. We approach them with the same mathematical rigor as our flagship funds, and see if we can build a sound strategy from a simple idea or meme.
One of these fun, exotic funds we run is a Nancy Pelosi Tracker. Representative Nancy Pelosi is known for her consistently high returns among members of congress. Is she using insider information? Who knows. We do know that:
A congressional bill known as the STOCK Act requires congresspeople to disclose their trades
It gives them a 45-day buffer period to make this disclosure. While they aren’t required to disclose their exact investment amount, they do have to give a dollar range their position size falls in, e.g. $250,000 to $500,000.
These disclosures are all free and available to peruse at the United States House/Senate Financial Disclosure Forms and Reports
To form our portfolio, then, we make an educated estimate, guided by a number of factors. The top three are the tightness of the range, her current equity exposure to the company, and the amount of trading she’s done around the time of that purchase/sale. Then we choose an exposure amount from within the provided range to include in her ongoing portfolio, in the hopes of mimicking it. On the roadmap is including her options exposure, as there could be some truly interesting hedging/informed risk-taking being done in the options flow.
We built an algorithm that listens to this disclosure report and rebalances the tracker immediately upon release of new info. The last time a trade was disclosed was 02/26/2022, when Pelosi upped her stake in Amazon and removed her stake in Apple. For the record, Apple is down 7.7% since this move, and Amazon is down 24% (with the S&P down 8%), so maybe not the best move.
So, do Pelosi’s predictive powers measure up? Can she beat the S&P 500? We started tracking Pelosi’s portfolio in January, 2020. It doubled in three months. And even when factoring in the market downturn over the past few months, which has destroyed a lot of the tech stocks that Pelosi holds, she’s still outperforming the S&P 500 by a wide margin. It seems the Speaker may have missed her calling! Or perhaps her success is a result of certain “synergies” that come from her role in Congress. Either way, Nancy Pelosi’s side hustle as the Oracle of DC has been paying serious dividends.
There are still some challenges to overcome in crafting the perfect Pelosi portfolio. The STOCK Act gives members of congress a 45 day grace period before they must disclose their positions. A lot can happen in 45 days. Pelosi could be making meaningful returns on short term trades, and keeping them secret on a technicality. Managing this time gap is our key area of focus as we continue to improve our Pelosi Tracker fund.
Pelosi holds a small, top-heavy portfolio of stocks. MSFT, NVDA, DIS, CRM, GOOGL, AAPL, NFLX, PYPL, AB, and RBLX make up 90% of her portfolio, with MSFT, GOOGL, and NVDA making up 50% alone.
In recent months, however, her returns have, well, reverted to the mean. Maybe she’s not the Oracle of DC, but rather just another day-trader. Reminds me of Cathie Wood’s returns with ARKK
A fully updated list of Pelosi’s ever changing equity exposure can be found here.
This strategy has certainly worked for the Speaker, pushing her net worth north of $100 million. Can it work for us, or does the 45 day grace period block us from riding her coattails to investing glory? Backtesting suggests there’s alpha to be had here, but only time will tell if Pelosi will continue to outperform. Meanwhile, we’ll keep improving our approach, and testing strategies that look to track other politicians consistently beating the market.
The Pelosi Tracker Fund is live on our site, and pulls in more AUM than almost any other portfolio.
Check out the Pelosi Tracker here.