ARK IM launches Israel innovative technology ETF

Dec 14th, 2017 | By | Category: Equities

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New York-based investment adviser ARK Investment Management has launched the ARK Israel Innovative Technology ETF (IZRL US) on Cboe ETF Marketplace. The fund provides exposure to Israel-listed companies whose main business operations are causing disruptive innovation in the internet, technology, genomics, health care, biotechnology, industrials, and manufacturing sectors.

Israel Technology ETFs Middle East

The ARK Israel Innovative Technology ETF becomes the lowest priced ETF listed in the US to track Israeli equities.

Israel has historically been one of the world’s leaders in research and development, a trait that has allowed it to remain economically competitive globally despite its geopolitical instability. The country is ranked first in the world for number of start-up businesses per capita and receives the third largest amount of venture capital financing globally. The country also boasts the second highest concentration of high-tech firms (after the US) and is home to more than 60 research and development centres for foreign multi-national companies such as Google, Deutsch Telekom, and Microsoft. Annually, more than 5% of GDP is spent on research and development.

Despite this, ARK believes that since the country’s promotion to developed market status in early 2010, many portfolios significantly underweight the country relative to growth and innovation projections. The firm notes that, as of 30 September 2017, Israel represented only 0.14% of the developed market MSCI World Index.

“Unintentionally, and often unknowingly, benchmark-sensitive investors lowered their exposure to Israel dramatically after its promotion to developed market status in 2010,” stated Catherine D. Wood, ARK’s founder, CEO, and CIO. “Consequently, Israel has lost access to $365 billion of exposure in global equity market indices. For perspective, Israel’s GDP should approximate $340 billion in 2017.”

“ARK believes that innovation is the key to growth and countless rankings show the innovative capacity of Israeli companies,” added Tom Staudt, ARK’s chief operating officer and director of product development. “Most investors would have significantly more exposure to these companies if Israel were geographically located within traditional index regions. ARK believes that IZRL will help take advantage of significant growth opportunities and market inefficiencies, and provide exposure to a truly unique growth story.”

The underlying ARK Israeli Innovation Index spans all capitalizations of the Israel stock market. Since its inception on 1 October 2015, the index has returned a compound annual growth rate of 17.9% as of 30 September 2017, outperforming the MSCI Israel Index (-10.1% annualized), the MSCI Israel Capped Investable Market Index (4.3% annualized), and the BlueStar Israel Global Index (3.3% annualized).

IZRL has a total expense ratio (TER) of 0.49%, under-pricing existing US-listed Israel-focused ETFs which have TERs ranging between 0.59% and 0.75% annually.

The only European-listed ETF to offer pure-play exposure to Israeli equities is the iShares TA-35 Israel UCITS ETF (ISRL LN). Launched in January 2016, the fund provides exposure to Israel’s national index, the TA-25, which tracks the largest 25 securities listed on the Tel Aviv Stock Exchange. ISRL has AUM of just £10 million and a TER of 0.60%.

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