Cathie Wood, founder of ARK Investment Management
Courtesy of ARK Invest
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ARK Invest’s exchange-traded funds suffered a major setback this week.
In the worst week of last March, the company’s flagship product, $ 24 billion
ARK Innovation
the exchange traded fund (ticker: ARKK) fell 14.6%, as some of its main holdings, including
Tesla
(TSLA) i
Course
(ROKU): He fell abruptly. He
S&P 500,
meanwhile, it fell 2.4%.
The improved economic outlook – which could lead to higher prices and higher interest rates – caused stocks to fall this week, especially those of the fastest-growing tech companies. At its peak on February 12, ARK Innovation rose 26% in 2021, compared to 5% for S&P. At the end of the month, ARK Innovation rose 4.7% and the S&P rose 1.5%. Investors pulled more than $ 1 billion from the ARK ETFs on Wednesday and Thursday, the largest net outflow in the firm’s seven-year history and a strong investment from previous weeks. The funds have recorded $ 16 billion in revenue so far this year.
As the Wall Street proverb says, when ducks are charlatans, they feed the ducks. Fund companies took note of ARK’s entries and have been deploying specialized ARK-like funds focused on innovative and disruptive companies.
Cathie Wood, the economist who founded ARK Investment Management, is a thoughtful observer and excellent stock selector. But ARK’s phenomenal rise is due more than to skill: five of ARK’s seven ETFs returned more than 100% last year, a historic anomaly. Yields like this attract hot money from people rushing to a “safe thing” and sell as soon as the shares are missing, hence the $ 1 billion exit in two days.
Fidelity launched a set of six actively managed disruption funds last April. Five focus on specific areas such as automation, communications, finance, medicine, and technology; a,
Disturbance of fidelity
(FGDFX), encompasses all five topics. Altogether, the suite has $ 558 million in assets; to date, they have increased by an average of 3.3%.
Their disruption funds use a new time-based pricing model. Annual fees start at 1%, fall to 0.75% after one year and 0.5% after two years. “The overall goal is to encourage investors to invest long-term,” says Chris Peixotto, vice president of Fidelity’s investment products group. This makes particular sense for disturbing funds, which can be volatile and take years to complete.
The $ 421 million
Goldman Sachs Innovate Equity
ETF (GINN), launched in November, tracks an index of nearly 500 shares, about ten times more than ARK Innovation. This lack of concentration and lack of active management make this ETF much more like the broad market, with prominent stakes such as
Alphabet
(GOOG),
Nvidia
(NVDA) i
Facebook
(FB), none of which is in the ARK Innovation ETF. The Goldman Innovate ETF has returned 4.8% so far this year.
The $ 181 million
ETF Direxion Moonshot Innovators
(MOON), also released in November, is probably the most ARK-like fund. It has only 50 shares, however, unlike most ARK ETFs, it is not actively managed. Instead, it tracks an index that uses natural language processing to review business applications, identify innovation-related feedback, and select disruptive start-up companies. The fund is up 34% this year.
The $ 1.1 billion
Invesco NASDAQ Next Gen 100
ETF (QQQJ), a medium capital version of the popular
Invesco QQQ Trust
(QQQ) was a huge success when it was released in October. It tracks the 101st to 200th “emerging” company listed on the Nasdaq, mostly in technology and other innovation industries. Many of the current mega names were in the Next Gen basket. The fund is up 7.1% this year.
All of these innovation funds have fallen last week, but none have seen the kind of outings ARK made. Perhaps being the first engine is not always an advantage.
Write to Evie Liu to [email protected]