What You Need to Know

  • They all fit within the firm's 5-year time horizon for investments in disruptive technologies.
  • Wood cited the transformational changes created or accelerated by the coronavirus pandemic.
  • Also, she sees inflation as a bigger risk than deflation.

So far, 2021 hasn’t been a very good year for Ark Investment Management, whose actively managed ETFs crushed almost all other ETFs in terms of performance in 2020. Year-to-date, five of its six actively managed equity ETFs have underperformed major market indexes, and its Space Exploration & Innovation ETF (ARKX) has hardly changed in price since its launch in March.

But things are looking up for Ark Invest. Performance of most of its ETFs, excluding the Autonomous Technology & Robotics ETF (ARKQ), has picked up in the second quarter.

On Thursday, the firm held its latest quarterly webinar reviewing performance and highlights of the previous quarter, where CEO and Chief Investment Officer Cathie Wood and fund managers offered their analyses of the recent past and outlooks for the future performance of their funds as well as the broader economy and market and selected industries.

Wood appeared confident about the future and about the stocks in which the firm invests. Ark is focused on the longer term — a five-year holding period for stocks that it believes will deliver 15% compounded annual return. Here are some highlights.

1.”The coronavirus crisis has transformed the world significantly and permanently, which suggests that many innovation-driven stocks could be productive holdings during the next five to 10 years,” Wood said. “In Ark’s view, autonomous electric vehicles and digital wallets, including cryptocurrencies and decentralized financial services (DeFi) associated more broadly with blockchain technologies, will disrupt and dis-intermediate both energy and financial services significantly during the next five years.”

She referred to the strong performance of the Ark Autonomous Technology & Robotics ETF, which outperformed all other active ARK ETFs year-to-date through June 30, and the Ark Fintech Innovation ETF (ARKF), which is one of the firm’s strongest second-quarter performers (up 6.34% by NAV and 5.89% by price) for the quarter and about 9% stronger by both measures year-to-date.

2. Among the transformations brought about by the pandemic is the work-from-home setup for many workers. “The stay-at-home phenomenon …. is here to stay,” Wood said, noting many companies including Roku, Shopify and Zoom have benefited, performing well in the second quarter.

She noted that some companies fit for more home-based services — like Teladoc Health, which is a top holding in the Ark Next Generation Internet ETF (ARKW) and flagship Ark Innovation ETF (ARKK) — didn’t do so well not because of the work-from-home transformation but because of competitive fears about other online companies, like Amazon, moving into health care. The giant retailer has plans to expand its Amazon Care on-demand health care service from serving its own employees to other companies nationwide.

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