ARK Innovation ETF (NYSEARCA:ARKK) and chief stockpicker Cathie Wood have become such investor favourites over the past year they have the power to move markets.
Although the ETFs are not tradeable in the UK, the strong record from the asset manager’s range of funds, and her regular appearances on financial TV channels, means Wood and her multi-billion dollar vehicles are followed closely on Wall Street and by investors congregating on Reddit and other social media platforms.
The ARK Innovation ETF and its siblings are among the leading example of active ETF investing, where funds don’t track indices but instead will have a manager or team picking and choosing what goes in and out of the portfolio.
On an annualised basis, the Innovation fund has notched up a 175.2% gain in net asset value (NAV) and 177.1% in terms of its market price, with the gains both just under 48% over three years, and either side of 34% since the fund’s inception.
With most active ETFs obliged to disclose their portfolio holdings on a daily basis, the current top 10 holdings as of Tuesday were Tesla Inc (NASDAQ:TSLA), Square inc (NYSE:SQ), Teladoc Health Inc (NYSE:TDOC), Roku Inc (NASDAQ:ROKU), Zillow Group Inc (NASDAQ:Z), Zoom Video Communications (NASDAQ:ZM), Spotify Technology (NASDAQ:SPOT), Shopify Inc (NYSE:SHOP), Baidu Inc (NASDAQ:BIDU) and Exact Sciences Corp (NASDAQ:EXAS).
Other notables among its 56 current positions include consumer-facing tech names like Twitter and Draftkings as well as data cruncher Palantir and biotechs like gene editing companies Crispr Therapeutics Inc (NASDAQ:CRSP) and Syros Pharmaceuticals Inc (NASDAQ:SYRS).
ARK Investment, the asset manager founded and led by Wood as CEO, also runs two index ETFs, 3D Printing (PRNT) and Israeli Innovative Technology (IZRL), and five other actively managed ETFs focused on autonomous technology and robotics, next generation internet, genomics, fintech, and space.
The active funds are ARK Autonomous Technology and Robotics ETF (BATS:ARKX), ARK Next Generation Internet ETF (NYSEARCA:ARKW), ARK Genomic Revolution ETF (BATS:ARKG), Ark Fintech Innovation ETF (NYSEARCA:ARKF) and ARK Space Exploration & Innovation ETF (BATS:ARKX).
The launch of the Space ETF in March this year, the first new ETF from Wood in two years and the eighth in total, gave a big boost to a number of stocks in the sector, including Virgin Galactic.
It is likely that Wood’s success has inspired launches of other active ETFs, such as the innovation-focused Direxion Moonshot Innovators ETF and the VanEck Vectors Social Sentiment ETF, which aims to pick ‘meme stocks’ based on whether they are being favourably talked about on blogs, social media or forums such as Reddit.
ARK’s approach has remained resilient despite challenges but some moves have raised eyebrows in the City.
Recently the ARK Innovation fund (ARKK) added a new position in software company Trimble Inc, which is also the number one holding in the space ETF (ARKX) and a major holding in the Autonomous Technology & Robotics ETF.
Similarly, sort of, the ARK space ETF’s second-largest holding is actually another ARK ETF, the 3D Printing ETF (PRNT).
“I’m no ETF expert but I don’t like the look of all this,” says market analysts Neil Wilson at Markets.com.
“Loading up ETFs with other ETFs – which you are promoting – seems kind of wrong. You could rightly ask: is it a pyramid?”
As Wilson also noted, the Space fund saw ARK changed the language in its ETF prospectuses to remove the limits on single-company exposure, while also adding a reference to blank-check companies (SPACs) to the risk section.