Nashville’s Investment Fund Hanging In There After Year One

The Nashville Area exchange traded fund will invest in public companies headquartered in Davidson and adjacent counties. Founders, including Bill Decker of Decker Wealth Management, announced the fund Friday on the east bank of the Cumberland River. Credit: Blake Farmer / WPLN

The Nashville Area exchange traded fund was announced in 2013 by its founders, including Bill Decker of Decker Wealth Management, on the east bank of the Cumberland River. Mayor Karl Dean even gave the ETF a plug. Credit: Blake Farmer / WPLN

CNBC called it a “wacky” idea when it launched a year ago: a fund that invests in companies solely because they’re based in a particular city — in this case, Nashville. The Nashville exchange-traded fund has beat the odds, but maybe not for long.

Having a single share of this exchange-traded fund, or ETF, is like buying stock in all the public companies headquartered in Nashville. It’s heavy in health care, with hospital chains like HCA. There are also companies like Dollar General and Cracker Barrel in the mix. The pitch to locals was “invest in companies you know.”

“You can say you are investing in Nashville,” says financial advisor Stephen Frohsin of Woodmont Investment Counsel. “There’s a story that goes along with that, that people can understand a little bit easier.”

Frohsin attended the first annual shareholders meeting Thursday. Personally, he is trying out the ETF. He says his clients are dipping their toe in the water as well.

Shareholders range from community leaders and politicians who see it as an exercise in civic pride. One woman said she asked for a few shares for her birthday.

It’s got a real “support-your-community” feel to it, which is why analyst Paul Britt says he’s got a soft spot for the concept. But he also says it probably won’t last.

“The short answer is yes, I am surprised it’s still with us,” says Britt.

Britt’s company ETF.com has a rating for funds, and the ticker symbol NASH may not last long on the New York Stock Exchange. A year in, the fund has fewer than $9 million in assets. Many investors won’t touch an ETF with less than $50 or $100 million.

Without more money in the fund, there’s not enough trading volume for big investors to be able to sell on a moment’s notice, which is supposed to be one of the selling points of an ETF. And trading volume creates fees to operate the fund.

“We see [Nashville ETF] as a high risk for fund closure right now,” he says.

Currently, the Nashville ETF is operating at a loss, but founder Beth Courtney says that’s not unusual for any one-year-old start-up business. She says she knows there’s some proving left to do.

“You know, we’re the first in the country. I think that there were obviously people who wanted to take a closer look at it and watch it,” Courtney says. “And they might continue to watch it and see the performance and that will speak for itself and the fund will grow.”

While the fund is still tiny, investors aren’t complaining. They earned a nearly 20 percent return for year one.

For full disclosure, Beth Courtney is on the WPLN board of directors.

The headline has been edited from original posting for clarity.

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