Why this super giant just bought a stake in Trump
Millions of Australians own a small portion of Donald Trump’s business empire after the country’s second-largest retirement fund bought a stake in the US president’s Nasdaq-listed media arm ahead of his inauguration.
Australian Retirement Trust has become the first major superannuation fund to disclose a holding in Trump Media & Technology Group – the parent company of Truth Social, the president’s Twitter-like social media platform.
Trump Media was listed on the Nasdaq last year. It rallied as Donald Trump neared victory in the presidential election campaign, but has slumped since his inauguration. AP
Australian Retirement Trust disclosed the stake in filings detailing the holdings in its $300 billion portfolio on December 31. The filings included several stakes in the Trump Media spread across Australian Retirement Trust’s various plans, which cover more than 2.4 million members.
Across all plans, Australian Retirement Trust owns around 11,000 shares in Trump Media, valued on December 31 at $650,000. The bulk of that holding resides in the investment giant’s High Growth Lifecycle plan, although the stake remains small compared to the size of the overall fund.
Based on the stock’s weight at the end of last year, for every $10,000 in super invested in ART’s High Growth plan roughly 3¢ is allocated toward Trump Media shares. The stake did not appear in Australian Retirement Trust’s previous filings from June 30, pointing to the fund having purchased the stake in the six months surrounding Trump’s election win in November.
Vanguard Super, a much smaller and relatively new entrant in the superannuation market, also disclosed similarly sized holdings in Trump Media across most of its super and retirement plans.
What is Trump Media?
Trump Media was listed on the Nasdaq in March last year as a campaign fundraising effort by Trump. The company’s primary business is Truth Social, which describes itself as America’s “big tent” social media platform, and one that the US president regularly uses as a public megaphone to announce policy changes, rally support and decry critics.
In the months leading to election day, Trump Media became synonymous with a series of so-called meme stocks that acted as bellwethers for Trump’s election odds. The stock jumped more than 50 per cent on its first day trading and a further 30 per cent following an assassination attempt on Trump in July, seen as a boon for his chances of securing a second term.
However, since Trump took office, the stock has struggled, sinking more than 25 per cent since the start of the year and reporting a $US400 million ($627 million) loss for the 12 months to December 31.
Shares sank further last month, after Trump Media filed to re-register shares that would allow Trump’s trust to potentially sell the company’s stock. Trump’s majority stake in the company is valued at around $US3 billion, though he has said he does not intend to sell down his stake.
Why is my super fund buying Trump Media?
Rather than choosing to invest in the stock, Australian Retirement Trust said the purchase was related to one of its passive investment strategies. “We invest a portion of our equity investments in passive index tracking holdings,” the fund’s spokesman said this week.
Passive investing, a strategy used by investment managers, requires a fund to mirror the composition of an index to replicate its performance.
The appearance of Trump Media in some super portfolios follows the stock entry into several share indices last year, including the Russell 2000 Index, which tracks the performance of small-cap stocks listed in the US, as well as some global stock indices. Trump Media was added to its index in July and triggered funds tracking that index to buy the stock to replicate the index’s composition through a process called passive investing.
“This small holding [in Trump Media] is part of a broad index which is designed to reflect 99 per cent of global equity investment opportunities,” the Australian Retirement Trust spokesman said.
With a market capitalisation of just $US5.4 billion, Trump Media’s size has prevented it from being introduced to more widely tracked indices like the S&P 500 or Nasdaq 100. Were that to happen in the future, more super funds may be compelled to buy the stock to replicate the index’s returns.
Who else owns Trump Media?
An analysis of more than 60 prominent superannuation and retirement plans found no shares in Trump Media were disclosed in options offered by AustralianSuper, CBUS, HostPlus, HESTA, UniSuper and AwareSuper.
Other Australians invested in the stock include Australia’s richest person, Gina Rinehart, who disclosed 150,000 shares in Trump Media earlier this year in filings to the Securities and Exchange Commission.
In September, Macquarie became the first major Australian investment manager to reveal a holding in Trump Media, disclosing 25,000 shares in its quarterly filings to the markets regulator in the United States. At the time, Macquarie said that the group’s disclosed stake was held for just four days and “was solely for the management of a client-initiated transaction”.
