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Is Transparency the Key to Ark's Success?

Published on 14 September 2021
Allan Lane
Allan Lane
Algo-Chain, Co-Founder

Like all great stories Ark Invest’s has not been an overnight success. Indeed, looking at Algo-Chain’s ETF listings database one learns that their first ETF launched in late September 2014. What exactly, though, has been the key ingredient that has driven Cathie Wood to become the best-known CEO in the ETF industry?

Ark has made a living by investing in stocks that broadly fall into the disruptive Innovation camp, and when her bold call that Tesla’s shares would hit $4,000 in 2018 came true, then the rest is history. In 2020, Ark’s Innovation ETF returned a spectacular 170%, and by February of 2021, the fund had gathered over $28bn in assets.

Not bad you might say, but back in 2014 little did we know that the performance of this ETF would soon be dwarfed by the 1,000%+ returns delivered by the 21 Shares’ Binance ETP listed in Switzerland. We do live in interesting times! Nonetheless, Wood’s Tesla call put her on the front pages of the financial press and along with that success came a coterie of naysayers predicting her downfall.

Looking at the full history of AUM growth for this ETF suggests the explosion of interest picked up pace once the Covid 19 pandemic had kicked in, but these same market conditions were available for all ETF providers to benefit from. While Ark has been at the forefront of the Active ETF movement, my understanding is that they have been one of the few firms willing to display their stock picks daily.

Maybe Ark has understood the benefits of transparency in a way that many other active managers never have. Yes, Ark might have the same fate as some hedge funds with their shorting of GameStop, but transparency is also about letting people know what they buy into. In an era where many are obsessed with social media, and an army of traders that frequent the Reddit forums, it is conceivable that Ark’s transparency around what stocks they are buying and selling is driving the perfect viral feedback loop.

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