Ark Invest Explained

ARK Investment Management LLC
Type:Privately held company
Industry:Asset management
Founder:Cathie Wood
Location:St. Petersburg, Florida
Key People:Cathie Wood, CEO
Products:Exchange-traded funds
Aum: $6.71 billion [1]
Owner:
Num Employees:45 [2]

ARK Investment Management LLC (commonly referred to as "ARK" or "ARK Invest") is an American investment management firm based in St. Petersburg, Florida, that manages several actively managed exchange-traded funds (ETFs).[3] It was founded by Cathie Wood in 2014.[4] [5] At the height of February 2021, the company had US$50 billion in assets under management.[6], assets had dropped to $6.71 billion, after a period of poor performance.[7]

History

In 2014, after Cathie Wood's idea for actively managed exchange-traded funds based on disruptive innovation was deemed too risky by AllianceBernstein, where she was chief investment officer of global thematic strategies, she left and founded Ark Invest. The company is named after the Ark of the Covenant. Wood, a devout Christian, was reading the One-Year Bible at the time of founding.[8] It is also a backronym for Active Research Knowledge.[9] [10]

In October 2014, the company launched its first four active funds: the Innovation ETF, the Genomic Revolution ETF, the Next Generation Internet ETF and the Autonomous Technology & Robotics ETF. These were followed by the Fintech Innovation ETF in 2019 and the Space Exploration & Innovation ETF in 2021.[11] [12]

In 2017, Nikko Asset Management acquired a 15% stake in ARK following the success of a Global Fintech Equity Fund it partnered with ARK to launch in 2016.[13] [14] As part of the deal, Nikko has exclusive rights to offer ARK products and investment strategies in Japan and the broader Asia-Pacific region.

The company also maintains two index funds: the 3D Printing ETF, launched in 2016, and the Israel Innovative Technology ETF, launched in 2017. It formerly maintained the Transparency ETF, launched in 2021.[15] [16] In July 2022, ARK announced that it would shutter the Transparency ETF (CTRU), effective July 31, 2022, after it was notified that Transparency Global would stop calculating the Transparency Index.[17]

In November 2020, Resolute Investment Managers announced it would exercise its option to acquire a majority stake in the company.[18] [19] [20] However, in December 2020, Cathie Wood repurchased the option, maintaining control of the company, while continuing to use Resolute's distribution services, obtaining financing from Eldridge Industries.[21] [22] Resolute Investment remains a minority shareholder.[23] [24]

In December 2020, the Innovation ETF became the largest actively managed ETF, with $17 billion in assets under management and a 170% return in 2020.[25] [26] On January 11, 2021, the company became one of the top 10 issuers of exchange-traded funds.[27]

In June 2021, the firm filed to create a bitcoin ETF under the ticker ARKB, pending approval of the SEC, which had yet to approve any ETF based on the asset.[28] They re-filed to launch the spot bitcoin ETF in the US on April 25, 2023; it was approved on January 10, 2024, and began trading the following day.[29] [30]

In October 2021, the firm moved its office from New York City to St. Petersburg, Florida.[31]

Investment strategy

ARK Invest focuses on investing in disruptive technology.[32] These technologies include artificial intelligence, DNA sequencing, CRISPR gene editing, robotics, electric vehicles, energy storage, fintech, 3D printing and blockchain technology. It has also invested in cryptocurrencies. The company invests in stocks it projects to double in value over a five-year period.[33]

On November 22, 2022, Cathie Wood stated her $1 million bitcoin price by 2030 during an interview on Bloomberg TV. On that date, November 22, 2022, Bitcoin closed at $16,174; so, Bitcoin's price must increase 61 fold over the next 8 years to reach the $1M price target.[34] [35] [36]

From 2014 to 2021, the ARK Innovation ETF averaged an annual 39% return on investment, over three times the return of the S&P 500 during that time.[37] Street.com published on December 9, 2022: "Ark innovation ETF has dropped 63% so far in 2022 and is down 78% from its February 2021 peak. Wood has defended her strategy by noting that she has a five year investment horizon."[38]

As its funds cannot hold cash, the firm also invests in numerous Big Tech stocks it refers to as "cash-like innovation stocks".[39]

ARK publishes current analyses, transactions and portfolios, and also opens its research reviews to the public. In addition to financial analysts, ARK employs scientists and computer scientists, believing they can better assess the impact of disruptive technologies.[40] [41] [42] Most of the company's analysts are millennials without prior Wall Street experience.[43]

Risks

Critics such as James Grant and Jason Zweig warn that investors chasing outsized returns by investing in ARK ETFs may be disappointed, as "hot" funds and thematic ETFs generally cannot sustain their performance.[37]

The flagship ARK Innovation ETF has received accolades for its performance in 2017, 2020 and 2023, but is also considered by Morningstar to be the third highest "wealth destroyer" investment fund from 2014–2023, losing US$7.1 billion of shareholder value in ten years.[44] The ARK Innovation ETF was down 24% for the year 2021.[45] The Short Innovation ETF launched in November 2021 as the first ETF in the United States to provide inverse exposure to another ETF, using swap contracts to provide returns on a single-day basis inverse to the ARK Innovation ETF.[46]

Morningstar noted concerns over ARK's sizable ownership in several of its smaller holdings.[47] [48]

Funds

ARK Invest managed or manages the following exchange-traded funds:[49]

Fund nameTickerTypeCreated
Innovation ETFActive2014
Next Generation Internet ETFActive2014
Genomic Revolution ETFActive2014
Autonomous Technology & Robotics ETFActive2014
Fintech Innovation ETFActive2019
Space Exploration & Innovation ETFActive2021
The 3D Printing ETFIndex-based2016
Israel Innovative Technology ETFIndex-based2017
Transparency ETFIndex-based2021 (closed 2022)
Bitcoin ETFIndex-based2024
In September of 2022 ARK launched the ARK Venture Fund,[50] a venture capital investment fund which is separate from their exchange-traded funds.

Notes and References

  1. Web site: ARKK Total Assets Under Management . ycharts.com . 4 October 2023.
  2. Web site: Meet the ARK Team . ark-invest.com . 4 October 2023.
  3. News: Tesla, Bitcoin Bull Cathie Wood Targets 20% ETF Returns . Erik . Schatzker . . December 18, 2020 . subscription.
  4. News: Fitzgerald . Maggie . December 23, 2020 . Cathie Wood's ARK Innovation becomes largest actively managed ETF, amid 170% 2020 return . . live . https://web.archive.org/web/20210119123217/https://www.cnbc.com/2020/12/22/ark-innovation-becomes-largest-actively-managed-etf-as-innovation-hits-escape-velocit.html . January 19, 2021.
  5. News: Cuccinello . Hayley C. . 'Go For It': America's Richest Self-Made Women On Founding Businesses After 40 . . live . https://web.archive.org/web/20210119075323/https://www.forbes.com/sites/hayleycuccinello/2020/10/13/american-self-made-women-founders-over-40/ . January 19, 2021 . subscription.
  6. News: February 5, 2020 . Cathie Wood Amasses $50 Billion and a New Nickname: 'Money Tree' . Claire . Ballentine . . live . https://web.archive.org/web/20210219000856/https://www.bloomberg.com/news/articles/2021-02-05/cathie-wood-amasses-50-billion-and-a-new-nickname-money-tree . February 19, 2021 . subscription.
  7. News: Agnew . Harriet . 2022-12-21 . Cathie Wood’s Ark sheds almost $50bn in assets since 2021 peak . 2024-03-05 . Financial Times.
  8. News: So. Dorothy. March 3, 2021. Cathie Wood: religious, Reddit hit, Trump supporter? Meet Ark Invest's rock star stock picker who even has her own merchandise. South China Morning Post.
  9. Web site: FAQs. Ark Invest.
  10. Web site: Norton. Evie Liu and Leslie P.. ARK's Cathie Wood Disrupted Investment Management. She's Not Done Yet.. 2021-04-22. www.barrons.com. en-US. "Wood named it for the Ark of the Covenant, a chest that in Jewish and Christian tradition holds the tablets bearing the Ten Commandments, although she told clients later that it was an acronym for Active Research Knowledge."
  11. ARK Investment Management Launches Two Additional Thematic Active Equity ETFs . . October 31, 2014.
  12. News: Cathie Woods' Ark Investment launches Space ETF . Paul . Best . . March 30, 2021.
  13. Web site: Stefanie Drews president of Nikko Asset Management discusses ETFs and their 10-year growth plan on ETF TV . 2024-05-06 . ETF TV . en-US.
  14. News: Appell . Douglas . 2017-08-04 . Nikko Asset Management takes 15% stake in ETF boutique ARK Investment Management . 2024-05-06 . Pensions and Investments.
  15. ARK Investment Management Launches The 3D Printing ETF (PRNT) On The BATS ETF Marketplace . . July 19, 2016.
  16. Web site: ARK Launches 'Transparency' ETF. 2021-12-09. www.yahoo.com. en-US.
  17. Web site: Bell . Heather . ARK to Close Transparency-Themed ETF . 15 December 2022 . Yahoo! Finance . Yahoo.
  18. News: November 13, 2020 . Resolute to take majority ownership of ARK Investment Management . live . https://web.archive.org/web/20210204222934/https://www.pionline.com/money-management/resolute-take-majority-ownership-ark-investment-management . Pensions & Investments . February 4, 2021.
  19. News: Cathie Wood's ARK Invest Rocked as Shareholder Seeks Control . Claire . Ballentine . . November 16, 2020 . subscription.
  20. News: Liu . Evie . Cathie Wood Might Lose Control of ARK, the Company She Founded . live . https://web.archive.org/web/20201230143745/https://www.barrons.com/articles/cathie-wood-might-lose-control-of-ark-investment-51605699000 . December 30, 2020 . . November 18, 2020 . subscription.
  21. News: Ballentine . Claire . Cathie Wood Buys Back Option That Had Threatened Control of Ark . live . https://web.archive.org/web/20201229115743/https://www.bloomberg.com/news/articles/2020-12-28/cathie-wood-buys-back-option-that-had-threatened-control-of-ark . December 29, 2020 . December 28, 2020 . . subscription.
  22. News: Liu . Evie . December 30, 2020 . ARK Founder Cathie Wood Will Retain Control of the Firm . live . . https://web.archive.org/web/20210115170600/https://www.barrons.com/articles/ark-founder-cathie-wood-to-retain-control-of-firm-51609283196 . January 15, 2021 . subscription.
  23. News: Cathie Wood retains majority ownership of ARK Invest following bid for control by minority shareholder . live . https://web.archive.org/web/20210204222937/https://markets.businessinsider.com/news/stocks/cathie-wood-retains-majority-ownership-ark-invest-after-bid-control-2020-12-1029921823 . Matthew . Fox . . February 4, 2021.
  24. December 28, 2020 . ARK Investment Management and Resolute Investment Managers Reaffirm Long-term Partnership . live . https://web.archive.org/web/20210128063540/https://www.businesswire.com/news/home/20201228005048/en/ARK-Investment-Management-and-Resolute-Investment-Managers-Reaffirm-Long-term-Partnership . . January 28, 2021.
  25. News: Fitzgerald . Maggie . December 23, 2020 . Cathie Wood's ARK Innovation becomes largest actively managed ETF, amid 170% 2020 return . . live . January 20, 2021 . https://web.archive.org/web/20210119123217/https://www.cnbc.com/2020/12/22/ark-innovation-becomes-largest-actively-managed-etf-as-innovation-hits-escape-velocit.html . January 19, 2021.
  26. News: Ballentine . Claire . Greifeld . Katherine . Cathie Wood Takes Crown From JPMorgan for Largest Active ETF . . live . December 11, 2020 . https://web.archive.org/web/20210128105905/https://www.bloomberg.com/news/articles/2020-12-11/cathie-wood-takes-crown-from-jpmorgan-for-largest-active-etf . January 28, 2021 . subscription.
  27. News: Ballentine . Claire . Raimonde . Olivia . Cathie Wood's ARK Joins Top 10 ETFs With Tesla-Heavy Fund . . live . January 11, 2021 . https://web.archive.org/web/20210129141624/https://www.bloomberg.com/news/articles/2021-01-11/cathie-wood-s-ark-joins-top-10-etf-giants-with-tesla-heavy-fund . January 29, 2021 . subscription.
  28. Web site: Fitzgerald. Maggie. 2021-06-28. Cathie Wood's Ark Invest to create a bitcoin ETF under the symbol 'ARKB'. 2021-08-11. CNBC. en.
  29. Web site: 31 August 2023 . ARK 21Shares Bitcoin ETF Application - ETF Details . 4 October 2023 . en.coinotag.com.
  30. Web site: Sahadi . Jeanne . 2024-01-10 . SEC gives bitcoin ETFs the green light CNN Business . 2024-01-11 . CNN . en.
  31. Web site: Charles Riley . October 7, 2021 . Cathie Wood's Ark Invest is quitting Wall Street and moving to Florida . 2021-10-09 . CNN.
  32. News: The Best Stock Picker of 2020 Wins With Disruptive DNA . . December 31, 2020 . subscription.
  33. . Event occurs at 1:21.
  34. Web site: Bitcoin Price . Markets Insider . Insider Inc. . 15 December 2022.
  35. Web site: Why Cathy Wood Trusts Crypto Despite FTX Collapse . Bloomberg.com . Bloomberg L.P. . 15 December 2022.
  36. Web site: Bitcoin Price . Markets Insider . Insider Inc . 15 December 2022.
  37. News: Zweig. Jason. February 5, 2021. Cathie Wood Has Wall Street's Hottest Hand. Maybe Too Hot.. The Wall Street Journal. subscription. 0099-9660.
  38. Web site: Weil . Dan . A Look Back at Cathie Wood's Disastrous Year . TheStreet.com . The Arena Group . 15 December 2022.
  39. Web site: Stevens. Pippa. 2021-05-07. Cathie Wood loves the setup for her stocks after sell-off, expects big returns from her strategies. 2021-08-11. CNBC. en.
  40. News: Secret Sauce Behind ARK's Success Is Cathie Wood's Diverse Team . Claire . Ballentine . . live . September 26, 2020 . https://web.archive.org/web/20201120201520/https://www.bloomberg.com/news/articles/2020-09-26/secret-sauce-behind-ark-success-is-cathie-wood-s-diverse-team . November 20, 2020 . subscription.
  41. ARK Investment Management LLC Celebrates Five Years Of Disruptive Innovation Investing . . live . https://web.archive.org/web/20210204222942/https://www.prnewswire.com/news-releases/ark-investment-management-llc-celebrates-five-years-of-disruptive-innovation-investing-300783457.html . February 4, 2021 . January 24, 2019.
  42. News: Alster . Norm . A New Kind of Fund That Is Stingier With Information . . live . October 8, 2020 . https://web.archive.org/web/20210129123708/https://www.nytimes.com/article/etf-funds.html . January 29, 2021 . subscription . 0362-4331.
  43. News: Liu . Evie . ARK's Cathie Wood Disrupted Investment Management. She's Not Done Yet. . . March 8, 2021 . subscription.
  44. Web site: 2024-02-02 . 15 Funds That Have Destroyed the Most Wealth Over the Past Decade . 2024-02-08 . . en.
  45. Web site: Fitzgerald. Maggie. Sell-off in Cathie Wood's ARK Innovation fund reached 48% at low point Thursday. 2022-01-06. CNBC. EN-US.
  46. News: Johnson. Steve. Boyde. Emma. 2021-11-11. SARK launches as short interest in ARKK jumps to new record. Financial Times. 2022-02-13.
  47. News: Ballantine . Claire . Ponczek . Sarah . Cathie Wood's Power in Some Stocks Is Even Bigger Than It Seems . . February 27, 2021 . subscription.
  48. News: Johnson . Ben . No Room on the ARK?. . March 3, 2021.
  49. Web site: ARK Innovation ETFs . live . https://web.archive.org/web/20210204222940/https://ark-funds.com/ . Ark Invest . February 4, 2021.
  50. Web site: ARKVX Quote . 2024-06-25 . www.bloomberg.com.

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