Anyone with $25 to invest can quite literally buy stock in Nashville starting next week. A fund that will begin trading on the New York Stock Exchange Thursday holds shares in publicly traded companies based in the Nashville area.
The founders of this fund are – of course – trying to make money themselves. But they say it’s an opportunity for residents to invest in something they know.
“They have a relative that has been to an HCA hospital. They eat at Cracker Barrel. They shop at Dollar General or they go to church with somebody at Tractor Supply,” said Mike Shmerling, chairman of LocalShares. “There’s a sense of comfort in that – knowing the people, knowing the companies and knowing the products.”
The new investment company plans to launch similar city-based funds, presuming Nashville is successful.
There’s nothing new about using geography to create mutual funds. But they’re more often restricted to companies on the same continent, not in a mid-size city.
So-called “exchange traded funds” (ETF) have been based on a single state. But one for Oklahoma and another for Texas both flopped just a year after launching in 2009. Several investment writers are dubious about the Nashville fund’s prospects. One calls it “the most absurd product to hit the market.”
Wealth manager Bill Decker – who is helping start the Nashville Area fund – says he believes there are synergies between companies in the same city. Even in different industries, he points out companies do end up pulling from the same pool of talent.
“We think we can show that there’s something about those local economic ecosystems that seems to be especially supportive of companies that are headquartered there,” he said.
At the moment, 24 companies are part of the fund. They range from discount retail giant Dollar General to prison manager Corrections Corporation of America. Fully half of the companies are somehow related to healthcare.
The Nashville Area ETF is scheduled to begin trading with the ticker symbol “NASH” at the opening bell on August 1st.