Page 31 - Investment Advisor April 2021

soared 152%, according to said Todd Rosenbluth, senior
Yahoo Finance. In early 2020 director of ETF and mutu-
Ark ETFs had $3 billion in al fund research at CFRA
assets and a year later had Research. “But the approach
$50 billion. can underperform for peri-
At Ark, Wood employs a ods of time in the same way it
multi-layered strategy to can significantly outperform
investing. She initially takes for periods of time.”
a top-down approach and Her fans don’t seem to
focuses on big tech-oriented mind. In late February when
ideas. Next, she works from Ark Invest’s ETF Lineup the fund took a hit, ARKK’s
the bottom up, selecting the outflows remained muted
strongest (usually small to The current list of its exchange traded funds (including their at $665 million, accord-
mid-cap growth) stocks in assets under management and expense ratio) is as follows: ing to ETF.com. Then in
each of the sectors Ark cov- • Ark Innovation (ARKK) ($21.4 billion, 0.75%) early March, it experienced
ers. She also emphasizes a inflows of $510 million.
long-term horizon (of five to • Ark Genomic Revolution (ARKG) ($9.07 billion; 0.75%) Apparently, like Wood, her
10 years), which is both dif- • Ark Next Generation Internet (ARKW) ($6.93 billion; investors like to buy the dip.
ferent and volatile. 0.79%) Flows don’t concern her,
This year began well for • Ark Fintech Innovation (ARKF) ($4.0 billion; 0.75%) Wood told Benzinga in early
Ark. However, when the March. “We are being oppor-
market got volatile starting • Ark Autonomous Tech & Robotics (ARKQ) ($3.2 billion; tunistic during a volatile
in late February, so did its 0.75%) market, and we trade around
returns. The Innovation ETF • 3D Printing (PRNT) ($527 million; 0.66%) volatility. We are liquid-
hit a low of $110.26 on March • Ark Israel Innovative Technology (IZRL) ($347 million ity providers. When investors
8, down 30% from its peak of 0.49%) and speculators are selling
$156.58 of Feb. 12. Source: ETFDatabase.com/Factset Research Systems (as of 3/9/21) our stocks, creaming them,
That downward path we will be buying our highest
turned around on March 9, conviction stocks,” she said.
though, when the tech-laden Nasdaq rose 3.7%. ARKK ended Asked on a March 9 conference call how she stays calm in
up 10% for the day at $121.75, which put it down 2% year to the face of such volatility, Wood stated that “our conviction [is]
date. Such is the life of Ark. that innovation solves problems and is probably going to be
“You definitely have to give Cathie Wood credit for the amaz- accelerated in a risk-off period ... . [Falling markets] are usually
ing performance run she’s had with the fund,” Morningstar really good buying opportunities. We know that our long-term
portfolio strategist Amy Arnott told Investment Advisor prior returns are galvanized during these risk-off periods.”
to the drop in early March. As Bloomberg Intelligence senior ETF analyst Eric
“But it’s also worth being aware of the risk inherent in hav- Balchunas said March 4 on Twitter, while tech stocks were
ing this full-throttle growth style and investing in stocks with falling: “ARK selling the relatively safe mega caps and buying
very high valuation,” Arnott explained. She added presciently: the banged up smaller stuff. Nerves of steel, altho that’s what
“If anything goes wrong, either in the market overall or the got her here.”
stock specifically, [the fund] can fall really rapidly and show a
lot of volatility.” Portfolio Management
There’s the rub. Although the Ark team sees many down- Wood approaches the market by thinking big and zooming in
turns as opportunities to buy stocks it is committed to, such as on disruptive technologies. As she explains in Ark’s recent “Big
Tesla — which makes up roughly 10% of the Innovation ETF Ideas 2021” report, the team identifies “large-scale investment
portfolio — and to adjusting other holdings accordingly, its opportunities by focusing on who we believe to be the leaders,
style may not be a good fit for the fainthearted. enablers and beneficiaries of disruptive innovation.”
How closely linked to Tesla is ARKK? From March 1 to March This largely means technology, but Ark has tech-oriented
8, Tesla stock dropped 21%, and ARKK fell almost 20%. healthcare advancements included in the investment mix, as well.
“The approach is one with conviction, concentrated posi- Ark highlights electric vehicles and digital wallets as technology
tions in favorite stocks, which … is distinct in the ETF world ideas that will continue to disrupt the status quo, for instance.
though relatively common in the active management world,” From there, its analysts work from the bottom up to find the

APRIL 2021 INVESTMENT ADVISOR 29