soared 152%, according toYahoo Finance. In early 2020Ark ETFs had $3 billion inassets and a year later had
At Ark, Wood employs amulti-layered strategy toinvesting. She initially takesa top-down approach andfocuses on big tech-orientedideas. Next, she works fromthe bottom up, selecting thestrongest (usually small tomid-cap growth) stocks ineach of the sectors Ark covers. She also emphasizes along-term horizon (of five to10 years), which is both different and volatile.
This year began well forArk. However, when themarket got volatile startingin late February, so did itsreturns. The Innovation ETFhit a low of $110.26 on March8, down 30% from its peak of$156.58 of Feb. 12.
That downward pathturned around on March 9,though, when the tech-laden Nasdaq rose 3.7%. ARKK endedup 10% for the day at $121.75, which put it down 2% year todate. Such is the life of Ark.
“You definitely have to give Cathie Wood credit for the amazing performance run she’s had with the fund,” Morningstarportfolio strategist Amy Arnott told Investment Advisor priorto the drop in early March.
“But it’s also worth being aware of the risk inherent in hav-
ing this full-throttle growth style and investing in stocks with
very high valuation,” Arnott explained. She added presciently:
“If anything goes wrong, either in the market overall or the
stock specifically, [the fund] can fall really rapidly and show a
lot of volatility.”
There’s the rub. Although the Ark team sees many down-
turns as opportunities to buy stocks it is committed to, such as
Tesla — which makes up roughly 10% of the Innovation ETF
portfolio — and to adjusting other holdings accordingly, its
style may not be a good fit for the fainthearted.
How closely linked to Tesla is ARKK? From March 1 to March8, Tesla stock dropped 21%, and ARKK fell almost 20%.
“The approach is one with conviction, concentrated posi-
tions in favorite stocks, which … is distinct in the ETF world
though relatively common in the active management world,”
said Todd Rosenbluth, senior
director of ETF and mutu-
al fund research at CFRA
Research. “But the approach
can underperform for peri-
ods of time in the same way it
can significantly outperform
for periods of time.”
Her fans don’t seem to
mind. In late February when
the fund took a hit, ARKK’s
outflows remained muted
at $665 million, accord-
ing to ETF.com. Then in
early March, it experienced
inflows of $510 million.
Apparently, like Wood, her
investors like to buy the dip.
Flows don’t concern her,
Wood told Benzinga in early
March. “We are being oppor-
tunistic during a volatile
market, and we trade around
volatility. We are liquid-
ity providers. When investors
and speculators are selling
our stocks, creaming them,
we will be buying our highest
conviction stocks,” she said.
Asked on a March 9 conference call how she stays calm inthe face of such volatility, Wood stated that “our conviction [is]that innovation solves problems and is probably going to beaccelerated in a risk-off period ... . [Falling markets] are usuallyreally good buying opportunities. We know that our long-termreturns are galvanized during these risk-off periods.”
As Bloomberg Intelligence senior ETF analyst EricBalchunas said March 4 on Twitter, while tech stocks werefalling: “ARK selling the relatively safe mega caps and buyingthe banged up smaller stuff. Nerves of steel, altho that’s whatgot her here.”
Wood approaches the market by thinking big and zooming in
on disruptive technologies. As she explains in Ark’s recent “Big
Ideas 2021” report, the team identifies “large-scale investment
opportunities by focusing on who we believe to be the leaders,
enablers and beneficiaries of disruptive innovation.”
This largely means technology, but Ark has tech-oriented
healthcare advancements included in the investment mix, as well.
Ark highlights electric vehicles and digital wallets as technology
ideas that will continue to disrupt the status quo, for instance.
From there, its analysts work from the bottom up to find the
The current list of its exchange traded funds (including theirassets under management and expense ratio) is as follows:
• Ark Innovation (ARKK) ($21.4 billion, 0.75%)
• Ark Genomic Revolution (ARKG) ($9.07 billion; 0.75%)
• Ark Next Generation Internet (ARKW) ($6.93 billion;
• Ark Fintech Innovation (ARKF) ($4.0 billion; 0.75%)
• Ark Autonomous Tech & Robotics (ARKQ) ($3.2 billion;
• 3D Printing (PRNT) ($527 million; 0.66%)
• Ark Israel Innovative Technology (IZRL) ($347 million
Source: ETFDatabase.com/Factset Research Systems (as of 3/9/21)Ark Invest’s ETF Lineup