Ark Investment Management overtook the established titans of Wall Street, BlackRock and State Street last month as the asset manager founded by a longtime Tesla bull reaped the rewards of his bets on disruptive tech companies.
In a feverish market that draws comparisons to the internet boom of the late 1990s, actively managed exchange-traded funds by Ark attracted $ 8.2 billion this year, overtaking BlackRock’s iShares division and operations. State Street ETF, according to Morningstar data. It has only been improved by Vanguard.
January’s performance ends a remarkable year for New York-based Ark, solidifying his position as one of the biggest winners of a scholarship whose exuberance has thwarted the economic damage caused by the pandemic.
Founded and led by Cathie Wood, former chief investment officer at AllianceBernstein, Ark’s assets under management reached $ 46.7 billion in January, according to Morningstar. Last year they went from $ 3.4 billion to over $ 30 billion.
Launched in 2014 with an investment strategy aimed at identifying “disruptive innovation”, Ark has ETFs focused on innovation, genomics, fintech, autonomous technology and the next generation internet.
Its flagship fund, the Innovation ETF, which is dominated by stakes in electric car maker Tesla, streaming company Roku and biotech Crispr Therapeutics, appreciated 150% last year. After rising sharply earlier in January, Ark’s ETFs fell last week.
ETF Innovation has registered a gain of 10.4% so far this year. With a weighting of over 9%, Tesla remains the largest holding in the fund.
“The ARK line of actively managed ETFs has generated mind-blowing returns and mind-blowing inflows from investors in recent months,” said Ben Johnson, director of global ETF and passive strategy research at Morningstar. “Stories sell at the end of the day.”
Unlike much of the ETF universe, Ark actively manages its holdings, orienting its portfolios to companies that it believes can outperform the market. Rather than passively following an index, Ark functions more like an old-fashioned mutual fund manager. It charges an expense ratio of 0.75%.
Analysts say the investment firm’s ability to tap into the buzz of the market has been aided by regular videos of Ms Wood discussing market and economic trends, as well as webinars.
“Something interesting and different has happened with Ark,” compared to other actively managed ETFs, said David Nadig, chief investment officer at ETF Trends. In addition to taking “aggressively concentrated bets”, the company is “very good at taking complex stories about companies and explaining them to investors,” he added.
However, Ark’s astonishing record drew uncomfortable comparisons to a group of thematic funds that were popular as the dotcom boom peaked in the late 1990s. It also set the bar high for the future performance of the company. group.
Ark’s Innovation ETF has, on an annualized basis, returned 45.47% over the past five years, according to Morningstar’s Mr Johnson. Between 1995 and 1999, only four funds produced higher returns than Ark. All of them fell sharply between 2000 and 2003, and finally closed.
“History shows that the chances of waiting for this success [of the past five years] replicates in the next five years are infinitely small, ”Mr Johnson said.