McCreath: High correlation between Ark Innovation and unprofitable tech stocks
Cathie Wood is getting ready to debut a new exchange-traded fund focused on transparency.
Ark Investment Management’s Transparency ETF will closely follow an index that excludes industries including alcohol, banking, gambling and oil and gas. The top holdings in the 100-company gauge are largely tech and consumer firms such as Salesforce.com Inc., Microsoft Corp., Apple Inc., Nike Inc. and Chipotle Mexican Grill Inc. An old Ark favorite, Elon Musk’s Tesla Inc., also makes the cut.
Wood’s company made the announcement in a filing on Tuesday, and if approved, the ETF would be the second that it has launched this year. Ark in March started a fund focused on space-related investments, which has risen about 4 per cent since its debut and drawn more than US$600 million in assets. Meanwhile, the firm’s flagship ARK Innovation ETF (ARKK) is up to US$22.5 billion, although it’s down 2 per cent year-to-date, compared with a gain of more than 20 per cent for the S&P 500.
“This is kind of Ark’s version of ESG,” said Eric Balchunas at Bloomberg Intelligence. “It’s intriguing because it doesn’t have a moralizing vibe to it, it’s like they’re saying if you go after transparency, you’re probably going to buy good companies.”
Ark didn’t immediately respond to a request for comment.
The transparency fund will join eight other ETFs from Ark, six that are actively managed and two that passively track indexes. Ark currently has about US$45 billion in its ETFs, making it the 11th largest ETF issuer in the U.S.
“An index-based ESG ETF doesn’t necessarily scream ‘disruptive innovation,’ which ARK has branded themselves around,” said Nate Geraci, president of the ETF Store. “It will be very interesting seeing how they approach marketing this ETF given the strategy seems at odds with companies such as Tesla and DraftKings, large core holdings in other ARK ETFs.”