When it comes to high-profile fund managers, few are as polarizing as Cathie Wood of Ark Invest. Her flagship ETF is the ARK Innovation ETF (NYSEARCA: ARKK), which focuses on high-growth companies involved in disruptive innovation.
Back in 2021, ARKK reached a peak price of over $150 per share. Since then, the ongoing bear market has taken a toll on the fund, and it now trades at less than one-third of that price.
In this article, we will provide an updated review of the ARKK ETF, discussing its holdings, fees, returns, and whether it’s a suitable addition to your portfolio in 2023.
As mentioned, ARKK is the flagship fund of Ark Invest, introduced in October 2014 and now boasting nearly $8 billion in investor net assets. The ETF is actively managed by Cathie Wood herself, with all trades made in the fund provided publicly daily for full transparency to shareholders.
ARKK’s portfolio encompasses a broad spectrum of technologies, including cloud computing, digital media, gene therapy, and the Internet of Things. Ark Invest typically has a five-year investment horizon, emphasizing emerging, high-growth companies.
ARKK maintains a target of holding between 35-55 stocks at any given time. As of April 30th, the weighted average market cap of its holdings is $82 billion, with a median market cap of $6 billion.
Please note that these holdings and their allocations in ARKK can change daily.
As expected for a fund investing in high-growth stocks, ARKK’s returns have been volatile during recent economic turbulence.
On a cumulative basis, ARKK has delivered a total return of 121.66% since its inception in 2014, equating to an average annual return of 9.92%. However, investors who bought into ARKK five years ago have only gained 1.82%, significantly underperforming the market during that period.
ARKK’s best year was 2020, with a return of 152%. This was followed by annual losses of -23.36% in 2021 and -66.99% in 2022. So far in 2023, ARKK has provided a return of just over 30% to shareholders.
One notable aspect of ARKK is its relatively high management fees. The ETF has a Management Expense Ratio (MER) of 0.75%. This means that for every $10,000 invested in ARKK, investors will incur fees of $75 annually. While not exorbitant, this MER is on the higher side for an ETF, primarily due to ARKK’s daily active management.
Yes, you can purchase shares of the ARK Innovation ETF through Canadian brokerages. Keep in mind that ARKK trades on the NYSEARCA exchange, so you will need to acquire shares in US dollars. To save on commission fees and foreign exchange premiums, consider Canadian discount brokerages like Questrade, Wealthsimple, and Qtrade.
Whether ARKK is a suitable investment depends on your investment strategy, time horizon, and risk tolerance. ARKK is designed for investors with a long-term perspective and a high appetite for risk.
A look at ARKK’s historical performance reveals its high volatility, with significant gains in bull markets and substantial losses in bear markets. Therefore, holding ARKK demands a robust stomach for risk and the ability to overlook day-to-day fluctuations.
That said, ARKK is an option for investors seeking substantial future growth potential. If you can endure the associated risk and remain focused on the long-term, ARKK might reward you in five or ten years.
ARKK can be a promising investment in the right market conditions. Its focus on high-growth holdings makes it well-suited for a low-interest-rate environment. However, ARKK’s performance is highly dependent on market trends, performing well in bull markets and poorly in bear markets.
As of June 2023, ARKK does not distribute dividends. While it previously paid dividends on an annual basis, the last distribution occurred in December 2021, and no dividends have been paid since then.
