American ETF fund founders over JPMorgan Chase talk about investing: why are Bitcoin and Tesla worth investing?
2020 is over. In this unusual year, the US fund industry has also undergone dramatic changes. The reputation of a once-unknown fund Ark Innovation surpassed j. p. morgan last christmas as the largest ETF fund in the U.S.
the Ark Innovation fund manager, Ark Invest founder and CEO Cathie Wood, her rise delivered the message to investors :” choose to stand on the right side of the change and stick to the right side, because after the new crown virus epidemic, its development has reached’ escape speed’.”
She graduated from the University of Southern California in Cathie Wood 1981 years, then became a stock research analyst, and became director of investment in asset management in 2001. She began to explore her personal investment style and gradually develop her ambition. Six years ago, she left ARK Invest, company to manage five active ETF and two passive ETF.
In recent years, With the blessing of Tesla and Bitcoin, Cathie Wood rise at a phenomenal rate. According to FactSet data, Assets under Ark Innovation management climbed sharply to $17 billion in 2020. The fund is pouring in more than $8 billion this year, Has become the largest active management ETF. For the past, such inflows have only occurred in index funds or popular passive management ETF. Only five stock ETF have more than Ark Innovation, inflows this year Among these are the large-scale, passive investment technology industry leader QQQ Trust. Yang Jingshun (Unlike active funds, Passive funds have fund managers, But it’s just data maintenance, major issues, General non-direct intervention in fund operations)
Ark Innovation added $2.5 billion in assets last December alone. Ark Innovation is Ark Invest flagship fund, listed on the New York Stock Exchange under the ARKK. code As of this year, the fund’s yield in the new crown virus epidemic exceeded 170%, mainly due to the strong performance of Tesla, Square、Teladoc and other stocks.
The fund’s investment theme is “disruptive innovation “, focusing on industrial innovation, molecular biology and network development. Disruptive innovation has now become an extremely fashionable word with Ark Innovation phenomenal success.
“Innovation is the answer to a lot of problems, and it will continue to be, because we haven’t gotten rid of the new crown virus ,” Cathie Wood said. The epidemic has created many problems for the global economy, and innovation is helping to address or improve them .”
By 2020, the Ark Innovation rate of return reached three digits. At this point, Mr. Wood reminded his investors that Ark investments were long term. If the fund achieves its target, she said, the five-year annualized return would exceed 20 percent.
According to her, large inflows were due to the fact that many investors had seen Ark research during the outbreak. Wood will release a 30-minute video every Friday on how innovation can solve the problem and how Ark see the difference between the impact of the epidemic on the economy and the traditional recession.
“We believe that the epidemic is more similar to the failure of portfolio insurance in 1987 and the impact of the 9/11 terrorist attacks. During these two periods, the potential energy or trend before the impact event continues after the impact .” “Cathie Wood explained ,” In 1987, we were in a very strong market and strong economic growth, and this trend continued. In 2001, a bubble burst in the technology and telecommunications industries. After the shock receded, we continued to see the effects of the bust .”
“This time, we think economic growth was very strong before the new crown outbreak. So after the outbreak, we will still see strong economic growth and strong markets. Eventually, both will prove to be true .” Cathie Wood.
Ark Innovation and high-growth technology stocks are not synonymous
A number of investors see Ark Invest funds as synonymous with high-growth technology stocks. However, the situation in the fourth quarter was not in line with that view.
In the last quarter of 2020, the worst-hit stocks of the year rebounded strongly. Energy, financial and industrial stocks rose the most, with the sector rising 37 percent ,23 percent and 16 percent, respectively. As a result, despite the weak rise in technology stocks, Ark Innovation momentum has not stalled.
Cathie Wood said she was also surprised by Ark Innovation excellent performance during the period. Over the past three months, the Fund has returned 47 per cent.
“The situation seems to be that cyclical stocks and innovation stocks are both strong ,” she said. More and more investors are beginning to realize that innovative stocks that have reached the speed of escape due to the impact of the new crown epidemic will cause great subversion to many value-based enterprises. I think you need to do more in value stocks and focus on the most cyclical stocks .”
However, she believed that, to be sure, Ark Innovation would adjust at any time. “We are talking about the stock market, which is bound to be adjusted as long as it is .”
The biggest shareholding and rising secret recipe: Tesla
An annual return of 37 per cent has been Ark Innovation since its inception in October 2014. The fund holds the most shares is Tesla, the total assets of the fund account for more than 10%. Cathie Wood has long looked at dortzla, who set a target price of $7,000 at the end of 2024, and even $15000 in the most optimistic scenario.
Tesla became a component of the S & P 500 last Monday. Since 2020, Tesla shares have risen more than 665.
Cathie Wood said :” We see that global transport electrification is accelerating. Tesla has maintained its market share, a big surprise this year .” At present, Tesla’s share in the electric vehicle market is about 25.
Ark Invest hope Tesla carries out network car-sharing business and competes with Uber and Lyft. This will help Tesla enter the world of autopilot faster.
“To get into the world of self-driving, Tesla must develop mapping and route planning systems and develop payment ecology. So, why not push the development of car-sharing by entering the network ?” Cathie Wood suggests ,” if tesla does, I think it can also optimize their cash flow .”
It’s worth noting, Cathie Wood strongly opposed Elon Musk’s privatization of Tesla. 8 August 2018, Elon Musk internal letters, “Consider privatizing Tesla for $420 a share for $71.3 billion, And sufficient sources of funding have been found. However, Cathie Wood then issued a strongly worded open letter, Strong opposition to Tesla privatization, And reaffirming that Tesla is a valuable stock, “$4,000 is Tesla’s target price “. Her opinion ultimately influenced Musk, Musk abandoned the privatization program. Funny thing is, On 24 December last year, Elon Musk talked about privatization, He tweeted in response to a tweet, “Engineering, design, company operations, These things have exhausted me, There is little energy to do anything else .”
According to the tweet, Elon Musk should optimize their time in areas such as innovation. Capital distribution is important, but the CPU load is too low. Tesla’s responsibility as a listed company is a bigger factor, but now it is impossible to privatize .” Elon Musk also mentioned that SpaceX’s Starlink is the most likely future listing.
Ark Other Shareholdings: Outbreak Beneficiaries
Ark Innovation other company with a large stake is the payment giant Square (Twitter CEO Jack Dorsey’s digital payment company). As the epidemic changed the way money was paid, Square shares rose nearly 286 percent this year.
To Square,Cathie Wood :” eventually Square will eliminate the intermediary of the bank and rob the bank of a lot of business. I think many tech companies are starting to realize that .”
Other companies Ark Innovation hold more shares include Crispr Therapeutics and Invitae. Invitae shares rose more than 230% this year.
“Invitae collect a lot of data to identify human gene mutations, build people’s gene files, and match them to the right therapies ,” Cathie Wood said. We think it will be a winner-take-all market .”
The winner Roku and Teladoc Health of the epidemic are also Ark Innovation key investment targets, with the two stocks rising 165 percent and 146 percent this year, respectively. And so is investment in Slack. As telecommuting spurred demand for instant-messaging platforms, Slack shares rose 90% this year.
Other stocks held by Ark Innovation include Proto Labs、2U and LendingTree. The rate for the Fund is 0.75 per cent.
Future expectations: uncertain outlook
After rapidly growing into the world’s first, some market analysts expressed concern about whether Ark Innovation would soon fall back.
Bloomberg ETF analyst Eric Balchunas believes the fund has successfully shaken the pattern of active management ETF, which can be seen as the limit of active ETF.
Overall, the popularity of active management ETF has increased this year, with total inflows rising by $42 billion, compared with $26 billion a year earlier. However, such funds still account for less than 3 per cent of the total ETF assets of the United States.
Eric Balchunas that after the rapid expansion of scale, Ark Innovation may have capacity problems. If the scale is large, you can not continue to choose closure. He pointed out that the size of the $16 billion Ark Innovation may make it difficult to adjust positions on small-cap stocks. And as the size of the management assets rises rapidly, the fund will naturally turn into a large market value company.
Ark Invest an unexpected battle for control
Last november, a regulatory filing showed that Cathie Wood was boycotting Resolute Investment Managers takeover of its controlling stake. Resolute company helps distribute mutual funds and exchange-traded funds, including Ark products, which acquired minority equity investments in Ark in july 2016 and has the option to buy controlling and equity, which will be exercised in early 2021.
The dispute is that Resolute Investment Managers was previously a Ark minority shareholder whose Resolute Investment Distributors was the sole authorized participant (AP) in Ark investment, the middleman between fund managers and investors. As Ark invested more than $40 billion in its management, the cost of intermediary services rose.
After announcing on Ark November that consideration should be given to changing the authorized participants, Resolute company quickly announced that it would exercise the company options it bought in July 2016, After the completion of the transaction is expected to become the controlling shareholder of Ark investment. Expressing Cathie Wood “disappointment “, And that she and the research team may have left Ark Invest. “We think, We don’t have a stake in our business, Does not serve the best interests of ARK shareholders .”
The fact is, if Resolute really exercise power, it will cause both sides and ETF investors to “lose” the situation.
A dispute over Ark Invest control ended on 28 December. On the premise that the two sides confirm their continued cooperation, Cathie Wood can buy back the company options in Resolute Investment Managers hands.
Cathie Wood recently mentioned in an interview her expectations for future returns, confidence in Tesla, Bitcoin and gene editing technology.
She said :” We still believe there is a lot of room for growth in the future, because we believe that some areas that have not yet been fully understood have exponential growth potential .” Wood also believes that the gene technology unit may outperform Tesla.