Cathie Wood, founder of ARK Investment Management
Kindness ARK Invest
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The funds traded on the stock exchange from ARK Invest suffered a major obstacle this week.
In the worst week since March last year, the company’s flagship product, the $ 24 billion
ARK Innovation
the exchange traded fund (ticker: ARKK) decreased by 14.6%, as some of its top holdings – including
adze
(TSLA) and
Year
(ROKU) – fell suddenly.
S&P 500,
meanwhile, it fell by 2.4%.
An improved economic outlook – which could lead to higher prices and higher interest rates – has lowered stocks this week, especially those of the highest-flying tech companies. At the top, on February 12, ARK Innovation grew by 26% for 2021, compared to 5% in S&P. By the end of the month, ARK Innovation was up 4.7% and S&P was up 1.5%. Investors pulled more than $ 1 billion from ARK ETFs on Wednesday and Thursday, the largest net outflows in the company’s seven-year history and a sharp reversal in previous weeks. The funds have grossed $ 16 billion so far this year.
As the saying goes on Wall Street, when ducks quarrel, it feeds the ducks. Funding companies have taken note of ARK’s inflows and implemented similar, similarly specialized ARK funds that focus on innovative and disruptive companies.
Cathie Wood, the economist who founded ARK Investment Management, is a keen observer and an excellent stock provider. But the phenomenal growth of ARK is more than just the ability: five of ARK’s seven ETFs returned more than 100% last year, a historic anomaly. Returns like this attract hot money from people who are in a hurry and “sell” as soon as the stock shakes – hence the $ 1 billion outflows in two days.
Fidelity launched a series of six actively managed disturbance funds in April last year. Five are focused on specific areas such as automation, communications, finance, medicine and technology; one,
Disruptors of fidelity
(FGDFX) covers all five topics. Together, the suite has $ 558 million in assets; so far, they have increased by an average of 3.3%.
Its disruption funds use a new time-based fee model. Annual fees start at 1%, decrease to 0.75% after one year and 0.5% after another two years. “The overall goal is to stimulate investors for long-term investments,” says Chris Peixotto, vice president of Fidelity Investment Products Group. This makes great sense for disruptive funds, which can be volatile and last for years.
The $ 421 million
Goldman Sachs innovates equity
ETF (GINN), launched in November, follows an index of almost 500 shares – about 10 times more than ARK Innovation. This lack of concentration and lack of active management makes this ETF much more like the broad market, with top holdings such as
Alphabet
(GOOG),
Nvidia
(NVDA) and
Facebook
(FB), none of which is in the ARK Innovation ETF. Goldman Innovate ETF has returned 4.8% so far this year.
The $ 181 million
ETF Direxion Moonshot Innovators
(MOON), launched in November, is probably the most similar ARK fund. It holds only 50 shares, but unlike most ARK ETFs, it is not actively managed. Instead, it tracks an index that uses natural language processing to examine the company’s filings, identify innovation-related observations, and select early-stage disruptive firms. The fund has grown by 34% this year.
The $ 1.1 billion
Invesco NASDAQ Next Gen 100
ETF (QQQJ), a mid-cap version of the popular
Invesco QQQ Trust
(QQQ) was a huge success when it was released in October. It tracks between 101 and 200 large “emerging” companies listed on the Nasdaq, mainly in technology and other innovation-based industries. Many of today’s mega-names were once in the Next Gen basket. The fund grew 7.1% this year.
All these innovation funds have fallen in the last week, but none have seen the kind of outflows that ARK has made. Maybe being the first engine is not always an advantage.
Write to Evie Liu at [email protected]