ARK ETFs: What Are They And How You Can Invest In The Biggest Disruption Trends Globally

This article was originally published on 29 March 2021 and updated to reflect the latest information on ARK ETFs.

ARK ETFs have been gaining huge interest globally, especially since 2020 and into 2021. This is partly driven by the COVID-19 pandemic, which cast a spotlight on disruptive technology trends spearheading growth in the #NewNormal world we now live in. ARK ETFs are practically defined by the notion that they are investing in the most disruptive technologies globally.

Of course, another reason for its popularity among investors has been its monster returns in 2020 – with its flagship ARK Innovation Fund (ARKK) delivering over 152% in 2020. To-date, ARKK is trading 12.7% lower, and since its peak in mid-February 2021, it has declined 30.6%.

On its website, ARK describes its investment philosophy as:

“While traditional investors seek safety in benchmarks and passive strategies, ARK believes this behaviour is counterproductive. Innovation is causing disruption and the risks associated with the traditional world order are rising. We strive to invest at the pace of innovation.”

According to a NASDAQ report in February 2021, ARK has seen a spike in money pouring into its ARK ETFs over the past year. ETFs managed by ARK have grown to over US$50 billion in assets under management (AUM), from about US$3.6 billion a year ago.

Along with the rise in prominence of ARK ETFs, its founder, CEO and CIO Catherine Wood has also gained widespread recognition globally, if not already held in a cult status among investors.

Which Is The Best ARK ETF To Invest In?

There are actually 8 ARK ETFs that we can invest in. While most ETFs tend to be passively managed by replicating an index, there is a fraction of actively managed ETFs as well.

6 of ARK’s 8 ETFs are actively managed ETFs (first 6 in list), while the other 2 ETFs track indexes that are heavily geared towards innovation (last 2 list). The newest ARK ETF – ARK Space Exploration & Innovation ETF was incepted on 30 March 2021, and is understandably exposed to another field of disruptive technology.

Read Also: Active Vs Passive ETF – Which Is Better To Invest In?

The 8 ARK ETFs are:

1. ARK Innovation ETF (ARKK)
2. ARK Autonomous Technology & Robotics ETF (ARKQ)
3. ARK Next Generation Internet ETF (ARKW)
4. ARK Genomic Revolution ETF (ARKG)
5. ARK Fintech Innovation ETF (ARKF)
6. ARK Space exploration and Innovation ETF (ARKX)
7. The 3D Printing ETF (PRNT) – tracking the Total 3D-Printing Index
8. Israel Innovative Technology Fund (IZRL) – tracking the ARK Israeli Innovative Index

 

The ARK Innovation ETF (ARKK) is its flagship fund, with US$22.3 billion in assets under management (as of 31 March 2020). This number is 26.0% higher than at the end of 2020.

Read Also: Complete Guide To ETF Investing In Singapore

According to its factsheet, companies within ARKK “rely on or benefit from” advancements in these 4 business sectors:

1. Genomic Revolution
2. Industrial Innovation
3. Next Generation Internet
4. Fintech Innovation

In essence, there is no “best” ARK ETF as its flagship ETF comprises parts of its other actively managed ETFs. This gives us the option to invest in either the flagship ETF, or within the sub-sectors if we have a greater conviction in the themes.

Another thing to note when investing in ARK ETFs, or any other ETFs, is the expense ratio. According to the ARKK factsheet, its expense ratio is 0.75%. This is relatively high compared to other ETFs, but we have to understand that it is an actively managed ETF. This means that there will be higher costs associated with having fund managers actively researching and managing the investments.

In comparison, passive ETFs in Singapore, such as the SPDR S&P 500 ETF (SGX: S27) charges an expense ratio of 0.0945%, the NikkoAM STI ETF (SGX: G3B) charges 0.30%, and the Lion-Global S-REIT ETF (SGX: CLR) charges 0.60%.

What Companies Are Within ARK Innovation Fund (ARKK)?

The flagship ARKK was incepted in 2014 and typically invests in 35 to 55 companies at any point – it is invested in 54 companies as of 25 May 2021. As mentioned, these companies will be within the four sectors – Genomic Revolution, Industrial Innovation, Next Generation Internet and Fintech.

ARKK ETF has an 82.3% exposure to investments in North America, 9.6% to Asia Pacific and 7.8% to Western Europe.

Its biggest holdings (as of 25 May 2021) are in:

No.	Company	Ticker	Weigtage (in ARKK)
1	TESLA INC	TSLA	10.3
2	TELADOC HEALTH INC	TDOC	5.9
3	ROKU INC	ROKU	5.9
4	SQUARE INC – A	SQ	4.6
5	SHOPIFY INC – CLASS A	SHOP	4.3
6	ZOOM VIDEO COMMUNICATIONS-A	ZM	4.1
7	TWILIO INC – A	TWLO	3.6
8	UNITY SOFTWARE INC	U	3.5
9	SPOTIFY TECHNOLOGY SA	SPOT	3.5
10	ZILLOW GROUP INC – C	Z	3.5
11	COINBASE GLOBAL INC -CLASS A	COIN	3.5
12	EXACT SCIENCES CORP	EXAS	2.9
13	CRISPR THERAPEUTICS AG	CRSP	2.7
14	PALANTIR TECHNOLOGIES INC-A	PLTR	2.3
15	DOCUSIGN INC	DOCU	2.2
16	10X GENOMICS INC-CLASS A	TXG	2.2
17	INVITAE CORP	NVTA	1.9
18	DRAFTKINGS INC – CL A	DKNG	1.9
19	TWITTER INC	TWTR	1.8
20	SEA LTD-ADR	SE	1.7

 

As you can see, many of the top companies are instantly recognisable to those who are already exposed to investing. Even for new investors, Tesla, Zoom, Shopify, Spotify, Coinbase, Docusign, and Twitter are very recognisable. For the full list of the 54 companies, you can refer to the ARK website.

How Has ARKK ETF Performed?

ARKK has delivered phenomenal returns in the past few years. This has definitely contributed to its rise in popularity among new and existing investors. Being exposed to the most exciting business sectors and companies has also captured the imagination of many.

Since its inception in 2014, ARKK has delivered an annualised return of over 33.9%. This is about 3 times better than the S&P 500 and 6.5 times better than the Straits Times Index (STI).

Source: ARK Investment Management

In 2020, ARKK delivered a return of over 152%. In 2021, the market has seen a downward correction in technology stocks since mid-February, which has seen ARKK down 12.7% in 2021 (as of 25 May 2021).

Source: Google

How Singapore Investors Can Invest In The ARKK ETF?

ARKK is listed on the New York Stock Exchange (NYSE) in the US. This means that we can simply invest in it similar to how we invest in other companies listed on the NYSE – through a stock brokerage firm that gives us access to that market.

Most local stock brokerage accounts allow us to invest in the US markets. We can compare the stock brokerage charges to see which gives us the best rate to invest in US-based stocks. Stock brokerages such as FSMOne, moomoo, Tiger Brokers, Interactive Brokers, Saxo Capital Markets and others can offer competitive rates and convenience when investing in US-based stocks.

Read Also: Singapore Online Stock Brokerage Account Fees (2021 Edition)

For Singapore investors, another way to gain (relatively similar) exposure to the ARKK ETF is via the NikkoAM ARK Disruptive Innovation Fund. According to the fund factsheet, it looks like a replica of the ARKK ETF, but may not exactly track its performance. We can buy this fund on platforms such as FSMOne, iFAST Central, dollarDEX, Navigator and POEMS.

However, when investing in this fund, we have to note that there is a 1.5% fund management fee – not even including any sales charges – and this is twice as costly as the ARKK ETF.

Source: NikkoAM

We can also invest in the ARKK ETF (and the other ARK ETFs) via robo-advisory platform Kristal.AI. However, on top of the expense ratio charged by the ETF, we will also have to fork out an additional management fee of 0.3% charged by Kristal.AI. The first $10,000 of investments on Kristal.AI does not attract this charge though.

Source: Kristal.AI

Read Also: Robo-Advisors In Singapore (2021): What You Need To Know Before Investing

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