ARKF - ARKK: The Shotgun Approach Isn't Working

2024-05-24 15:29:46 ET

Summary

• The ARK Innovation ETF has gained much investor attention for its volatility and staggering returns in 2020-2021, but has been stagnant since rates rose in 2022.
• This stagnation has given investors time to mull over potential investments in the fund, but this fund carries profound risks.
• This article discusses those risks, ARK's investing strategy, the narratives and thesis ARK invests with, and the role of ARKK in a portfolio.

Introduction

The ARK Innovation ETF ( ARKK ) launched in 2014 to little fanfare, but blew up around 2018 and moving into 2020-2021, gaining tons of popularity among investors who believe in their narrative: " disruptive innovation will drive returns. "

I am not a believer that technological revolutions beget stock market returns. If anything, technology of the caliber ARK wants to invest in is deflationary. ARK takes on the same kind of risks that venture capital funds ("VCs") try to take on, with a "shotgun approach" of hoping you get one really good winner for every ten losers. I don't believe that this is a good strategy for an ETF, as it lacks access to what makes VC firms good at what they do: private equity. By only having access to public companies, ARK is limited in its security selection despite its limitless aspirations....

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