The now 67-year-old Cathie Wood founded investment company ARK Invest in 2014. The economist’s intention was, firstly, to focus solely on disruptive innovation, primarily in the public equity markets, and, secondly, to open up research and become a ‘sharing economy’ company in the asset management space. “We're all about finding the next big thing,” is one of Wood’s core statements. The global company has six ETFs under active management: ARK Innovation, ARK Autonomous Technology & Robotics, ARK Next Generation Internet, ARK Genomic Revolution, ARK Fintech Innovation and, since March 2021, the ARK Space Exploration & Innovation ETF as well. Other products offered include the 3D-Printing and Israel Innovative Technology index ETFs. In total, the firm currently manages some USDbn 11. The five biggest ETFs – ARK Innovation, ARK Autonomous Technology & Robotics, ARK Next Generation Internet, ARK Genomic Revolution and ARK Fintech Innovation – feature in the Disruptive Innovation Index launched at the end of 2020.
Although the ARK specialists can look back on more than 40 years of experience in investment in technologies, they are not immune to setbacks. Soaring inflation coupled with hefty rises in interest rates have had a tangible impact on tech stocks – and thus ARK ETFs – over the past year. The flagship, the ARK Innovation ETF, for instance, lost around two thirds of its value in 2022. Genomic Revolution and Autonomous Technology & Robotics performed rather better, shedding “only” around half their value. Although Cathie Wood has recently made several adjustments in her portfolio, such as selling the stake in Nvidia and buying Tesla shares, she is still essentially following a clear strategy of investing in companies that own world-changing products. Satisfying the needs of investors focused on the short term, however, is not on her agenda. The funds are still ahead on a long-term view, with the biggest ETF, ARK Innovation, boasting a return of 10.00% p.a. since its launch. Even better were the performances of the two portfolios based on Genomic Revolution (12.20% p.a.) and Autonomous Technology & Robotics (14.40% p.a.).
The Genomic Revolution ETF is dominated by molecular diagnostics, which accounts for just under a quarter. It is hardly surprising, then, that industry representative Exact Sciences leads the top 10 components in the portfolio. The company has specialised in the detection of cancer at an early stage, bringing the first stool DNA test for bowel cancer onto the market in 2014. Operationally, things are going well at Exact just now: at the beginning of January, the group issued a sales forecast above analysts’ estimates. The heavyweights of what has been the strongest ETF since its launch, Autonomous Technology & Robotics, are Trimble, Kratos Defense & Security Solutions and Tesla. Cathie Wood has been particularly fortunate with Tesla of late: at the turn of the year investors reached eagerly for the e-car pioneer, true to the motto “buy the dip”. They were right to do so – Tesla’s share price has almost doubled so far this year.
The ARK Invest ETFs have delivered an impressive turnaround in what is still a relatively young stock market year. The ARK quintet in the Disruptive Innovation Index have posted double-digit percentage growth overall. The front runner so far is the ARK Next Generation Internet ETF, which is up 29.60%. As a consequence, the tracker on the Disruptive Innovation Index that was brought into being by Leonteq in November 2020 also turned sharply upwards again. The CHF version of the participation instrument has appreciated by a fifth since New Year, while the USD-denominated instrument has advanced by as much as 22%. The index, in which the five actively managed ARK ETFs have equal weighting, also considers the dividends, which are reinvested in the respective ETFs. The tracker gives investors access to a broad range of technology mega-trends in a single trade. There is a fee of 0.75% p.a. An annual rebalancing ensures that the five underlyings always start the year with equal weightings.
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