Author: James Fishback

If we eliminated the type of mortgage fraud Lisa Cook is alleged to have committed, Americans would save $14,000 over the life of a 30-year mortgage. It’s what we at Azoria call the “Lisa Cook Tax,” or the hidden cost every honest borrower pays when mortgage fraud drives up mortgage rates.

In a 2023 study, the Federal Reserve Bank of Philadelphia showed how “owner-occupancy fraud” distorted the mortgage market. In the mid-2000s, about 1 in 15 borrowers lied about living in the homes they bought. By fraudulently posing as owner-occupants, they secured lower owner-occupant mortgage rates instead of the higher investor mortgage rates they should have paid. But once those loans entered the books, they performed far worse: 14% of fraudulent borrowers went delinquent within two years, compared to just 8% of declared investors (75% higher delinquency rate).

That higher-than-expected delinquency forced mortgage lends to absorb those unexpected losses and raise mortgage rates on everyone else as a result. We estimate that this fraud inflated average mortgage rates by about 0.14%.¹ On today’s median U.S. home price of $422,400, that 0.14% equates to $14,000 in extra cost over the life of a 30-year fixed mortgage.²

The “Lisa Cook Tax” is real, and is raising costs for honest families who work hard, save up, and seek a mortgage. Mortgage fraud anywhere is a threat to homeownership everywhere.

Learn more about the Azoria 500 Meritocracy ETF (ticker: SPXM)

1. Derived from Philadelphia Fed working paper: in 2005–07, fraudulent loans were ~6% of all originations and ~7.2% of the owner-occupied pool; fraudulent vs true owner-occupant two-year default gap ≈ 6.4 pp; assume LGD ≈ 40%. Expected-loss uplift inside the owner-occupied pool ≈ 0.072 × 0.064 × 0.40 = 0.00185 (≈18.5 bps). Weighted by the owner-occupied share (~0.83) gives −15.3 bps. Offsetting that misreporters would have paid investor mortgage rates ≈26 bps higher on ~6% of loans adds back +1.6 bps. Net market-wide effect ≈ −13.7 bps (≈0.14%). ↩︎
2. A 0.14% bump in mortgage rates means the monthly payment on a $422,400, 30-year fixed loan rises by about $39; multiplying that extra cost by 360 months (30 years × 12) gives $39 × 360 = $14,040, which rounds to roughly $14,000 in additional lifetime payments. ↩︎

How DEI Hiring Targets Hurt Stock Returns
July 8, 2025

Executive Summary

There are 38 companies in the S&P 500 that have DEI hiring targets, or explicit, quantitative goals for employee racial and gender representation. Together, these 38 companies have underperformed the S&P 500 Index by a staggering 19 percentage points over the last two years and 9.4 percentage points over the last year.¹ We at Azoria call this persistent underperformance the “DEI drag.”

These three-dozen companies span 26 different industries, from railroads to software. They employ over 2 million people, and have a combined market cap of $2.6 trillion. Despite their differences in products, services, and markets, they share one critical flaw: they reject meritocracy in favor of DEI hiring targets.

This report attempts to explain why the “DEI drag” exists and what investors can do to remove it from their portfolios.

There are Three Mechanisms by which DEI Targets Hurt Stock Returns

1. They Prevent Companies from Hiring the Best Talent
2. They Encourage Companies to Hire Not-Yet-Qualified Candidates
3. They Disrupt Workforce Cohesion and Belonging.

Mechanism 1: DEI Targets Prevent Companies from Hiring the Best Talent

DEI targets compel companies to hire talent not based on skill and merit, but on race and gender, therefore limiting companies from hiring the best.

Let’s look at how Nike, one of the 38 S&P 500 companies with DEI targets, does this:

Nike: “By 2025, Nike…targets 35% representation of racial and ethnic minorities in its U.S. corporate workforce…”

With this DEI hiring target, Nike must choose between one of the two opposing approaches.

A: Hire so that 35% of its corporate workforce are racial and ethnic minorities.

B: Hire the best talent from all walks of life.

Nike has chosen “Approach A,” forcing itself to overlook upwards of 70% of the U.S. population.

Consider, for example, a highly qualified white female—Stanford graduate, five years of experience at a fast-growing startup, and a proven track record of designing athletic apparel.

Her experience would likely make her a top contender at Nike except for the fact that white women are not deemed racial and ethnic minorities. Because her candidacy does not help Nike reach its DEI hiring target, her chances of being hired plummet.

The effect of not hiring one qualified employee is surely negative, but in all honesty, likely trivial. The effect, however, of not hiring hundreds (or even thousands) of employees is disastrous beyond comprehension. It means Nike and companies like it will be permanently separated from great talent and the ideas, innovation, and perspective these employees would have brought. That permanent separation might have something to do with the fact that Nike has failed to meaningfully innovate and compete in the past five years, which is perhaps best reflected in Nike stock having underperformed the S&P 500 by a whopping 48 percentage points over the past 12 months through the end of June 2025.

Nike is not alone: More than half (57%) of S&P 500 stocks with DEI hiring targets underperformed the S&P 500 in the two year period after adopting these targets. Of the underperformers, the average margin of underperformance was a staggering 34 percentage points.

DEI targets → Highly Qualified Candidates Overlooked → Weaker Internal Teams → Missed Opportunities / Fewer Innovations → Lower Revenue and Earnings Growth → Stock Underperformance

Mechanism 2: DEI Targets Encourage Companies to Hire Not-Yet-Qualified Candidates

Nike’s DEI targets encourage it to hit numerical representation goals based on race and gender. When there are not enough qualified candidates in a given race or gender to hit a company’s DEI hiring target, Nike must then hire candidates who are not yet qualified in order to meet its self-imposed goals.

Because of the qualification mismatch, these newly hired, underqualified employees undercut productivity and weaken the operating leverage that drives Nike’s long-term returns.

A workforce comprised of underqualified candidates—even in the low single digits as a percentage of the company’s total workforce—can result in slower execution of essential tasks, higher error rates, and more oversight required from senior leaders, pulling them away from higher-level responsibilities. This weakens productivity, lowers output, and ultimately reduces the company’s revenue and earnings, driving stock underperformance.

What’s incredible is that markets appear to grasp this concept fully—not just punishing the stocks of companies that adopt DEI hiring targets, but rewarding them when they drop them. Our research found that on average, companies saw their stocks go up 3.8% in the 30 days after abandoning their DEI hiring targets (compared to the S&P 500 average monthly return of 1.24%²), further evidence that markets recognize the negative drag of DEI targets and are quick to positively reprice companies that abandon them.

DEI targets → Hire Candidates Who are Not-Yet-Qualified → Slower Execution / More Errors / Increased Oversight Burden → Lower Productivity and Output → Reduced Earnings → Stock Underperformance

Mechanism 3: They Disrupt Workforce Cohesion and Belonging

When hiring decisions are publicly associated with a DEI target, qualified hires begin to question whether they earned their job on their merits or whether they were simply hired to meet their company’s DEI hiring target.

As one black engineer at Meta (which fortunately abandoned its DEI targets in January 2025) put it: “It always bothered me that people would think I was here because of DEI, not because I am qualified.”

Here’s the truth: DEI targets fuel imposter syndrome, increase workplace anxiety, and lower workplace belonging — an essential driver of performance.

Research from Harvard Business Review shows that high workplace belonging is linked to a 56% increase in job performance, a 50% drop in turnover risk, and a 75% reduction in sick days.

The opposite is presumably true, as well: low workplace belonging is linked to a decrease in job performance, an increase in turnover risk, and an increase in sick days. None of these are good for a company’s top line, bottom line, and consequently, long-term stock returns.

DEI targets → Qualified Employees Question Whether They Belong → Workplace Belonging Declines → Lower Job Performance / Higher Turnover / More Sick Days → Reduced Output Lower Earnings → Stock Underperformance

How to Remove the “DEI Drag” From Your Portfolio

As discussed, the “DEI drag” represents the persistent negative underperformance of companies with DEI hiring targets. To remove this drag from your investment portfolio, we believe investors have two choices:

1. Neutralize Exposure by Shorting Companies with DEI Targets

Investors can ask a trusted financial advisor to identify and individually short the 38 companies within the S&P 500 that have explicit DEI hiring targets. This strategy is not designed to profit from stock declines, but to neutralize exposure to these companies since they are still held long through a standard S&P 500 ETF. A complete list of these companies is provided in the appendix for your convenience.

2. Buy the Azoria 500 Meritocracy ETF (ticker: SPXM)

A more streamlined approach involves replacing your existing S&P 500 ETF with the Azoria 500 Meritocracy ETF (ticker: SPXM). SPXM invests exclusively in S&P 500 companies that do not have DEI hiring targets.

It’s designed to both exclude the companies with DEI hiring targets, and reallocate those dollars into the remaining 463 merit-based companies that hire the best and brightest without apology.

The result: investors in SPXM will have bigger stakes in companies like Nvidia and Tesla and zero stake in companies with DEI hiring targets.

About SPXM: The Azoria 500 Meritocracy ETF (ticker: SPXM) begins with an initial universe of the 500 largest publicly traded U.S. companies by market capitalization. Azoria then applies a proprietary research methodology to evaluate whether each company has publicly disclosed an explicit quantitative demographic hiring target, goal, quota, or aspiration. Companies that have disclosed such policies are excluded from the ETF’s portfolio.

About Azoria: Azoria is an American investment firm founded by James T. Fishback, who previously served as an advisor to the Department of Government Efficiency (or DOGE) and prior to DOGE was the Founder and Chief Investment Officer of Macrovoyant, a global macro hedge fund. Azoria’s mission is to generate positive returns for investors through a commitment to free thinking, excellence, and meritocracy. Learn more at investazoria.com.

Appendix – Stocks Excluded from SPXM as of July 8, 2025 

Click here for SPXM holdings. Please note that holdings are subject to change without notice. 

Company	Ticker	DEI Hiring Target
Schlumberger	SLB	“SLB is on track to achieve its gender balance milestones of 25% women in salaried positions by 2025, and 30% by 2030.”
Hartford Insurance	HIG	“Our Aspirational Goal: Senior Leadership Roles Filled 50% by Women and 20% by People of Color by 2030”
Air Products & Chemicals	APD	“28% female representation in global professional and managerial roles by 2025 30% minority representation in U.S. professional and managerial roles by 2025”
Starbucks	SBUX	“In the U.S., our goal is to achieve racial and ethnic diversity of at least 30 percent at all corporate levels and at least 40 percent at all retail and manufacturing roles by 2025”… “We also aim to achieve at least 50 percent women working across all corporate levels, 55 percent women working across all retail roles and 30 percent women working in manufacturing roles.”
Nike	NKE	“By 2025, Nike aims for women to comprise 50% of its global corporate workforce and 45% of its leadership roles (VP-level and above)”… “It also targets 35% representation of racial and ethnic minorities in its U.S. corporate workforce, including 30% of director-level-and-above roles”
Marriott	MAR	“Committed to gender representation parity in global leadership by 2025 (50% women in leadership roles by 2025)”
Intel	INTC	“Achieve 25% representation of women in senior leadership roles (globally)”… “Achieve 12% representation of URMs in US senior leadership roles”… “Achieve 5% representation of Black/African American employees in senior, director, and executive roles in the US”… “Exceed 40% representation of women in technical positions”… “Achieve 10% representation of employees with a disability in our global workforce by 2030.”
Coca-Cola	KO	“We aspire for our diverse workforce to mirror the markets we serve. It’s our ambition by 2030 to have women hold 50% of senior leadership roles at the company, to have race and ethnicity representation reflect national census data at all levels in the US.”
ServiceNow	NOW	“By 2025, we intend to increase the percentage of underrepresented groups across the United States to 16% of our workforce and increase the representation of women across our organization globally to 34%.”
LyondellBasell	LYB	“Appoint at least one-third female directors to the Board”… “Increase women in global senior leadership roles to 33% and U.S. URP1 in U.S. senior leadership roles to 29%, by 2027 (in each case, a 50% increase relative to a 2022 baseline)”… “Achieve gender parity in global senior roles, and population parity in U.S. senior roles, by 2032”
Boston Scientific	BSX	“50% women in mid-level leadership roles (global), from a 43.5% baseline in 2023”… “27% multicultural talent in mid-level leadership roles (U.S./Puerto Rico), from a 22.6% baseline in 2023”
United Rentals	URI	“Achieve 40% diverse representation in sales and management job groups by 2030”
Viatris	VTRS	“Increase women’s representation in senior management globally to at least 35% by the end of 2027”… “At least double Black representation in all management levels in the U.S. by the end of 2027”… “At least double Hispanic/Latinx representation in senior management in the U.S. by the end of 2027.”
Ingersoll Rand	IR	“Increase under-represented talent in the U.S. workforce to at least 30%”… “Increase global employment of women to at least 25%”
International Flavors & Fragrances	IFF	“Milestones include strengthening diversity, equity & inclusion within its workforce by having 40% people of color in management roles in the United States by 2030, with equitable representation in other markets globally; and aiming for greater gender balance with women holding 50% of all management roles, companywide.”
Ecolab Inc	ECL	“Our 2030 Impact aspirations reflect this commitment, aiming to increase management-level gender diversity to 35% and ethnic/racial diversity to 25%, thereby underscoring our dedication to diversity and access to equal opportunities for individuals from all backgrounds.”
AvalonBay Communities	AVB	“Increase the representation of women in leadership from our 2020 level of 35% to a level at parity with the overall presence of women in the relevant workforce by 2025. In 2021, we increased by 2% to 37%”… “Increase under-represented communities in leadership from 15% to 20% by 2025 and to 25% by 2030. In 2021, we increased by 2% to 17%.”
Hershey	HSY	“47–50% women representation across all employees globally and 30–40% people of color (POC) representation across U.S. employees”
Hilton	HLT	“Achieve 50% Gender Diversity at our leadership levels globally by 2027”… “Achieve 25% Ethnic Diversity at our leadership levels in the U.S. by 2027”
Airbnb	ABNB	“To drive progress and hold ourselves accountable, we committed ourselves in 2020 to reach the following goals by the end of 2025: 20 percent of US employees will identify as underrepresented minorities. At every level, 50 percent of our global employees who identify in the gender binary will be women.”
Allegion	ALLE	“By 2030, reach 30% global gender diversity and 20% U.S. racial and ethnic diversity in our people manager roles”
Baxter International	BAX	“Through hiring, promotion and retention, aspire to increase representation of women in leadership roles globally to 40%”… “Through hiring, promotion and retention, aspire to increase representation of ethnic minorities in leadership roles in the United States to 25%.”
Cardinal Health	CAH	“In the U.S., increased representation of African American and Black employees at the manager level and above to 11% (up from 5%)”… “In the U.S., increased representation of Asian, Latinx, Indigenous and all other ethnically diverse groups at the manager level and above to 23% (up from 17%)”… “Globally, increased representation of women at the manager level and above to 48% (up from 40%).”
Dell Technologies	DELL	“By 2030, 50% of our global workforce and 40% of our global people leaders will be women…25% of our U.S. workforce and 15% of our U.S. people leaders will be Black/African American and Hispanic/Latino minorities”
Eaton Corporation	ETN	“In support of our aspirations, by 2030, we aim to: Strive for representation of women and U.S. minorities on our board of directors and senior leadership team… Increase representation of professional global women to 40%… Increase representation of professional U.S. minorities to 34%”
Emerson Electric	EMR	“40% of global leadership targeted to be women by 2030”,.. “30% of U.S. leadership targeted to be minorities by 2030”
Expedia Group	EXPE	“Progress on I&D hiring goals, including targeting a binary gender goal of 50/50 balance across all levels by the end of 2025 and for 25% of external US hires to come from racially and ethnically under-represented identities (URI) by the end of 2021”
Fortive	FTV	“50% women by 2025, 48% professional & management women, 37% BIPOC, 36% professional and management BIPOC”
HP	HPQ	“Achieve 50/50 gender equality in HP leadership by 2030”… “Achieve greater than 30 percent technical women and women in engineering by 2030”… “Meet or exceed labor market representation for racial/ethnic minorities in the U.S. by 2030”
NXP Semiconductor	NXPI	“40% Women in Overall Global Workforce”… “30% Women in Global IDL Workforce”… “20% Women in Executive Positions”… “25% Women in R&D Positions”… “50% Minority Representation in the United States”
Trimble	TRMB	“Set 2021 DEI targets including doubling underrepresented BIPOC representation in U.S. workforce by 2025 (aiming 31% from 15% baseline)”
Vulcan Materials	VMC	“Increase employee diversity at the director level and above 20% by 2030”
Linde	LIN	“Achieve 30% representation of women globally”
Republic Services	RSG	“We’ve committed to increasing our diversity in leadership positions, defined by race/ ethnicity or gender, to 50% by 2030, and we continue to make progress”
Albemarle	ALB	“Increase global gender diversity by 2.5% with an emphasis on manufacturing, engineering, and mining roles”… “Increase global gender diversity in director level and above positions by 1.5%”… “Increase US racial diversity at director level and above positions by 1.5%”
Autodesk	ADSK	“25% women in tech roles globally”… “31% women in commission-eligible sales roles globally”… “7.5% Black, Latinx, and Indigenous individuals in senior director and above roles in the US and Canada”… “12% Black, Latinx, and Indigenous employees in the US and Canada”… “Maintain a 4-point or smaller difference between all demographic groups and company-wide survey scores on belonging and care.”
Biogen	BIIB	“In 2023, our efforts resulted in a U.S. employee population that is broadly reflective of the composition of the U.S. workforce overall, with 31.2% of roles Manager-level and above in the U.S. held by racially and ethnically diverse employees as we progress toward our goal of 34% in these positions by 2026.”
Union Pacific	UNP	“We set aggressive diversity goals in 2020: to increase our people of color population from 29.4% to 40% and double our female population to 11% by 2030”

IMPORTANT INFORMATION

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (833) 777-7232 or visit our website at investazoria.com.
Read the prospectus or summary prospectus carefully before investing.

Equity Market Risk. Common stocks are generally exposed to greater risk than other types of securities, such as preferred stock and debt obligations, because common stockholders generally have inferior rights to receive payment from specific issuers. The equity securities held in the Fund’s portfolio may experience sudden, unpredictable drops in value or long periods of decline in value.

Thematic Investing Risk. The Fund’s investment strategy focuses on companies that exemplify meritocratic principles. This thematic approach may prevent the Fund from buying or selling certain securities and could impact performance compared to broader, more diversified funds. There is no guarantee that the Sub-Adviser’s views, security selection, or judgment will align with any investor’s beliefs or that the Fund’s holdings will successfully reflect meritocratic values in practice.

New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions.

Distributed by Foreside Fund Services, LLC.

1. A portfolio of the 38 S&P 500 companies with DEI hiring targets underperformed the S&P 500 by 19 percentage points over the past two years. (6.23.2023 to 6.23.2025). This same portfolio underperformed the S&P 500 by 9.4 percentage points over the past year (6.21.2024 to 6.23.2025). Data available upon request. ↩︎
2. S&P average monthly return measured over ~5 years from 6.30.2020 to 6.25.2025 ↩︎