ARK Investment Management has launched the ARK Fintech Innovation ETF (ARKF US) on NYSE Arca, providing actively managed exposure to companies at the forefront of financial technology (fintech) innovation.
Catherine Wood, Founder and Chief Executive Officer at ARK Investment Management
Catherine Wood, Founder and Chief Executive Officer at ARK Investment Management, commented, “Powered by innovations within mobile, artificial intelligence, and blockchain technology, companies within fintech are working to disintermediate or bypass incumbent financial players and challenge traditional institutions by offering new solutions that are better, cheaper, faster, and more novel and secure.”
Wood continued, “Fintech reimagines the generation, transfer, and storage of value in today’s increasingly digital economy, and its impact will extend across every industry. Through facilitating peer-to-peer transfers, gifting, intermediary products, and other non-GDP related economic activity, the companies in ARKF, in our view, will touch more than the $80 trillion in GDP today.”
The fund seeks long-term growth of capital and will typically invest in between 30 and 50 companies from issuers globally.
According to ARK, a company is deemed to be engaged in fintech innovation if it derives a significant portion of its revenue or market value from this theme, or its primary business is in products and services focused on fintech innovation.
Looking deeper at the fund’s methodology, it becomes clear that the ETF will invest not only in companies that develop fintech but also in those that significantly rely on fintech to conduct their business. This includes firms making use of innovative payment platforms and methodologies, point-of-sale providers, e-commerce, transactional innovations, business analytics, fraud reduction, frictionless funding platforms, peer-to-peer lending, blockchain technologies, intermediary exchanges, asset allocation technology, mobile payments, and risk pricing and pooling aggregators.
In selecting the firm’s highest conviction stocks for the portfolio, the managers combine top-down (including rate of growth, cost declines, unit economics, sizing of markets, price levels, and business and technology cycle trends) with bottom-up (including fundamental metrics such as revenue growth, profitability, and return on invested capital) analysis.
Tom Staudt, Chief Operating Officer at ARK Investment Management, said, “We believe all investors, both retail and institutional, should have access to investment opportunities in disruptive innovation and are excited that ARKF will fill a hole in US public equity markets for an actively managed, research-based fintech fund.”
As of the end of January 2019, ARKF is primarily exposed to the information technology sector with a weight of 40.3%, followed by significant exposure to the financials (21.9%), consumer services (16.6%), and consumer discretionary (14.8%) sectors.
Its largest holdings are Square (8.8%), Tencent (6.6%), LendingTree (6.3%), Amazon (5.0%) and Apple (5.0%).
ARKF comes with an expense ratio of 0.75%.
ARK’s ETF suite contains over $2.2 billion in assets under management. Most of that AUM is housed within the firm’s other four actively managed, innovation-focused ETFs, the largest of which is the $1.1bn ARK Innovation ETF (ARKK US). ARKK provides exposure to a portfolio of companies across a wide range of sectors that are leaders in technological innovation. Its expense ratio is also 0.75%.