ARK ETFs: Everything Singaporeans Should Know About Them (Includes the New ARK Transparency ETF)
Sudhan Pâ—Ź
ARK Investment Management’s ARK ETFs have been getting quite a considerable amount of interest in our community here at Seedly.
One such example is this, with 20 discussions in the thread alone:
But what exactly are ARK ETFs? Should you even consider buying them?
Let’s answer those questions and more right here to clear your doubts!
What Are ARK ETFs?
An exchange-traded fund (ETF) is an investment commonly holding a collection of stocks often tracking an underlying index.
For example, the Straits Times Index (STI) ETF tracks the fundamentals of the STI, which consists of the 30 largest and most liquid companies listed in Singapore.
The STI ETF is a passive ETF as it merely mirrors the index. Investors who buy into such an investment are unable to beat the market but would get market returns.
On the other hand, there are active ETFs and the ARK ETFs, which have been popular of late, mostly belong to this camp.
Active ETFs, as the name might suggest, are actively-managed and have an aim to give investors market-beating returns.
An advantage for investors to buy active ETFs as opposed to unit trusts is that the former usually have lower fees.
ARK ETFs are managed by ARK Investment Management LLC, whose founder is Catherine Wood.
According to the company’s website, it seeks to “capture long-term growth and capital appreciation created by disruptive innovation”.
Such innovations are centred around artificial intelligence, robotics/automation, energy storage, genomic sequencing, and blockchain technology.
ARK currently has six active ETFs and three passive ETFs.
Different ARK ETFs Available and Their Underlying Stocks
Active ETFs
ARK’s active ETFs invest across sectors, geographies, and market capitalisations, with an aim to identify companies missed by traditional sector-based strategies.
Here’s an overview of the six active ARK ETFs:
Name of ARK ETF Ticker Fund Description Expense Ratio Typical Number of Holdings Top 5 Holdings
(as of 9/12/2021)Inception Date Annualised Performance Since Inception
(as of 31/10/2021)
ARK Innovation ETF ARKK Gives exposure to the best risk-reward opportunities from ARK’s innovation-based themes 0.75% 35-55
Tesla (8.52%), Roku (6.29%), Teladoc (6.00%), Zoom Video (5.40%), Coinbase (5.27%) 31/10/2014
30.95%
Autonomous Technology & Robotics ETF (previously known as ARK Industrial Innovation ETF) ARKQ Provides exposure to autonomous vehicles, energy storage, robotics and automation, 3D printing, and space exploration 0.75% 30-50 Tesla (11.37%), Trimble (7.26%), Kratos (6.77%), Unity (5.61%), UiPath (6.52%), Iridium Communications (4.64%) 30/9/2014 23.69%
Next Generation Internet ETF (previously known as ARK Web x.0 ETF) ARKW Gives exposure to the “Next Generation Internet” such as artificial intelligence, big data, cloud computing, cybersecurity, and blockchain technology 0.79% 35-55 Tesla (9.61%), Graysacle Bitcoin Trust BTC (6.74%), Coinbase (6.30%), Roku (5.44%), Twitter (5.05%) 30/9/2014 37.17%
Genomic Revolution ETF ARKG Provides exposure to CRISPR, gene editing, therapeutics, agricultural biology and health care innovation 0.75% 40-60 Teladoc (7.59%), Exact Sciences (6.80%), Pacific Biosciences (5.54%), Ionis Pharmaceuticals (4.40%), Fate Therapeutics (4.30%) 31/10/2014 22.05%
Fintech Innovation ETF ARKF Gives exposure to fintech innovations including mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and risk transformation 0.75% 35-55 Square (9.78%), Coinbase (7.94%), Shopify (7.92%), Twilio (5.72%), Adyen (3.95%) 04/02/2019 43.86%
Space Exploration & Innovation ETF ARKX Gives exposure to space exploration, including orbital and sub-orbital aerospace, enabling technologies, and beneficiaries of aerospace activities, such as agriculture, Internet access, global positioning system, construction, and imaging 0.75% 35-55 Trimble (9.98%), 3D Printing ETF (7.70%), Kratos (6.28%), Iridium Communications (5.81%), L3Harris (5.14%) 30/03/2021 0.67%
The latest active ETF that ARK Investment Management created is called ARK Space Exploration ETF (ticker: ARKX), which was launched on 30 March 2021.
The actively managed ETF tracks U.S. and global companies involved in space exploration and innovation.
More specifically, the companies in the ETF can belong to either of the four categories:
- Orbital Aerospace Companies — companies that launch, make, service, or operate platforms in orbital space, including satellites and launch vehicles.
- Suborbital Aerospace Companies — firms that launch, make, service, or operate platforms in the suborbital space, including drones, air taxis and electric aviation vehicles.
- Enabling Technologies Companies — companies that create technologies required for successful value-add aerospace operations, including artificial intelligence, robotics, 3D printing, materials and energy storage.
- Aerospace Beneficiary Companies — firms that can benefit from aerospace activities, including agriculture, internet access, global positioning system (GPS), construction and imaging.
Passive ETFs
ARK launched its newest index ETF — the ARK Transparency ETF (ticker: CTRU) — this week.
The transparency ETF tracks the Transparency Index, which is designed to track the price movements of stocks of the 100 most transparent companies.
On its website, ARK stated that it “believes that transparency enhances the performance of companies while benefiting the well-being of people”. Transparency means having openness, communication, accountability and trust.
Here’s a look at three index ETFs that are under ARK:
Name of ARK ETF Ticker Underlying Index Expense Ratio Top 5 Holdings
(as of 09/12/2021)Inception Date Annualised Performance Since Inception
(as of 31/10/2021)
The 3D Printing ETF PRNT Total 3D-Printing Index, which is designed to track companies involved in the 3D printing sector 0.66% Desktop Metal (7.06%), HP (5.24%), Straumann (4.55%), Materialise (4.54%), Dassault Systems (4.41%) 19/07/2016
13.21%
Israel Innovative Technology ETF IZRL ARK Israeli Innovation Index, which is designed to track listed Israeli companies whose main business operations are causing disruptive innovation 0.49% Partner Communications (2.18%), Cellcom Israel (2.16%), Nova (1.80%), Innoviz (1.78%), Bezeq (1.75%) 05/12/2017 13.20%
ARK Transparency ETF CTRU Transparency Index 0.55% Nvidia (1.48%), Enphase Energy (1.46%), Maxlinear (1.45%), Teradyne (1.42%), Cloudfare (1.38%) 08/12/2021 N/A
Are ARK ETFs for You?
The active ARK ETFs, especially have performed extremely well over the long-term, giving an annualised return of upwards of 20% since inception (with the exception of the recently-launched Space Exploration & Innovation ETF).
Talk about beating the market!
However, in the short term, confidence in ARK ETFs has been hit, having fallen hard from their February 2021 peaks.
According to Barron’s, investors have withdrawn a net US$2.7 billion from the funds since the end of June 2021. ARK Innovation ETF, the company’s flagship, was the hardest hit with an exodus of US$1.4 billion during the time frame.
But over the longer run, many companies in the active ARK ETFs should do well as they are at the forefront of innovation.
Having said that, we shouldn’t be buying the ARK ETFs just because they have performed well in the past. As they say, past performance is no guarantee of future results.
We should also ensure that the ETFs suit our overall investment strategy.
Investing in ARK ETFs could be part of your thematic investing strategy if that’s what you are gunning for.
If you are looking to invest in companies that are disrupting how things are traditionally done, ARK ETFs can also be a consideration.
How to Buy ARK ETFs?
The ARK ETFs can be purchased from your local broker, but you have to meet certain criteria as the ETFs are most likely to be classified as Specific Investment Products (SIPs) by your broker.
It’s best to check with your broker on how to go about purchasing the ARK ETFs if you wish to invest in them.
According to our Seedly community, robo-advisor Kristal.AI also offers access to the ARK ETFs as well.
One Major Risk to Note With ARK ETFs
ARK’s investment team is led by founder, chief executive officer, and chief investment officer, Catherine Wood, who has the ultimate responsibility for investment decisions.
This brings about a key person risk for the active ARK ETFs.
In November 2020, Resolute Investment Managers, a minority shareholder in ARK and ARK funds’ US distributor, has exercised its option (part of a 2016 agreement) to take a controlling stake in Wood’s business.
However, ARK Investment Management and Resolute Investment Managers have come to a new agreement, ending the planned takeover.
Resolute remains as ARK’s distribution partner, while Catherine Wood will remain ARK’s largest shareholder.
Despite the resolution, the key person risk with Catherine Wood remains. If Wood leaves ARK for any reason, ARK ETFs’ returns could suffer.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own shares in any companies mentioned.
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