A New Investment Fund Declines to Support DEI-Focused Companies.

In the competition to attract top talent, American companies have consistently aimed for excellence. Apple invests heavily to attract leading executives, and Nvidia spares no effort in recruiting elite AI researchers. The rationale is clear: securing the most skilled and capable individuals is the cornerstone of American innovation.

Unfortunately, some organizations have shifted their focus away from skill and ability, opting instead to base hiring decisions on race and gender.

My investment firm, Azoria, has pinpointed roughly three dozen S&P 500 companies with clearly defined racial and gender hiring goals. Early next year, we plan to launch an ETF fund that will invest in every S&P 500 company — excluding those with these hiring targets.

The idea is simple: companies that prioritize skill and ability will outperform those that hire based on race and gender.

Best Buy is one of the three dozen firms we will not invest in. This $20 billion corporation has a written mandate that “1 in 3 new corporate salaried positions” are “to be filled by BIPOC.”

Companies like Best Buy present these hiring goals as “inclusive,” yet the reality is that they undermine all employees, especially those they claim to champion.

When Best Buy asserts that “one in three new . . . positions” will be designated for BIPOC Americans, they imply that people of color cannot achieve these roles without preferential treatment.

We reject this line of thinking. It undermines the qualifications of minority candidates and perpetuates the divisive narrative that their achievements are only attainable through lowered standards rather than merit.

Supreme Court Justice Clarence Thomas — a distinguished black legal scholar — has articulated the burden that affirmative action placed on his accomplishments, unfairly labeling him as a token and suggesting he could not succeed without special considerations.

We witnessed a similar trend in 2022 when President Biden announced he would nominate a black woman for the Supreme Court — irrespective of qualifications. He then nominated Ketanji Brown Jackson, an exceptionally skilled legal expert, even though many conservatives, including myself, may disagree with her jurisprudential views.

By presenting her nomination as fulfilling a racial and gender hiring goal, Biden unfairly branded her as a “diversity hire.” She does not deserve that distinction.

I can relate personally; my mother, a legal immigrant from South America, worked her way through community college. She always felt hesitant about applying to firms with affirmative action policies because she desired to be hired based on her achievements—not someone else’s diversity requirement.

My father shared similar concerns when applying to companies fixated on identity—but for different reasons: he is white and worried that his race might be held against him.

No matter which perspective you hold in this race and gender dynamic, this reverse caste system creates fear and uncertainty, which is unacceptable.

Every American deserves dignity in employment — free from being reduced to an arbitrary diversity checkbox or excluded for not meeting one.

These policies do not only affect employees negatively. Shareholders also suffer financial repercussions as a result of these racial and gender hiring targets, reflected in diminished stock returns.

Why is this happening? Because top-performing companies are led by exceptional individuals. Talented employees create world-class products and services, generating revenue that fuels further growth.

These hiring initiatives push companies to prioritize identity politics instead of selecting the most qualified individuals from diverse backgrounds, ultimately hampering their capacity to innovate and provide profitable goods and services.

The adverse impacts of these hiring strategies are unmistakable.

Over the past year, a portfolio composed of three dozen S&P 500 firms with racial and gender hiring goals achieved just a 12% return, compared to the S&P 500’s 30%. Over a two-year period, this portfolio returned 17%, while the S&P 500 led with 60%, according to our internal analysis.

Throughout both time frames, 70% of these companies underperformed compared to the standard S&P 500 index, meaning the overall S&P 500 would have performed even better if these firms had been excluded.

Firms like BlackRock and Vanguard have yet to adapt to this shift. They continue to fund all S&P 500 companies, including those implementing racial and gender hiring targets that hinder stock performance.

Azoria has recently completed a $25 million investment round with support from institutional investors across the political spectrum to create an investment firm committed to free-thinking and meritocracy. Our upcoming Meritocracy ETF (ticker ‘SPXM’) will be accessible to investors who wish to steer clear of S&P 500 companies utilizing racial and gender hiring targets.

By excluding the stocks of these anti-meritocratic underperformers, Azoria aims to help investors exceed the standard S&P 500 returns.

To clarify, we won’t permanently exclude these anti-meritocratic companies. Those that recognize their missteps and discard their hiring targets will be reintegrated into the fund, allowing our investors to benefit from their renewed focus on merit; meanwhile, those that continue to operate like high school Model UN competitions will be left out.

America’s leading companies now face a critical choice: they can persist in implementing racial and gender hiring targets and endure financial repercussions, or they can restore meritocracy to honor the interests of their shareholders and employees.

At Azoria, we are confidently placing our bets on merit. We envision an America where talent, skill, and diligence — not identity — define success.

James Fishback is CEO and co-founder of Azoria