Analyst Report
The ARK Autonomous Technology & Robotics ETF (ARKQ) is an actively-managed fund from the team at ARK Invest that tries to pick the companies best positioned to profit from advancements in energy, automation, manufacturing, materials and transportation.
The advisory firm, led by Catherine Wood, has an impressive track record doing what most stock pickers fail to do: beating the market.
Like several other ARK ETFs, the fund’s biggest holding is Tesla, reflecting ARK’s high conviction in the value of the electronic carmaker’s technology. Other top investments as of March 2020 include 3D printing companies like Stratasys Ltd. and Protolabs, Chinese online retailer JD.com, and Teradyne, a robotics and automation company.
ARKQ’s management fee of 75 basis points might seem pricey in the ultra-low-cost world of passive ETFs, but it’s cheap for active management. It appears to be worth it. In the three years through March 2020, ARKQ outperformed passive rivals like the Global X Robotics & Artificial Intelligence ETF (BOTZ) and the ROBO Global Robotics & Automation Index ETF (ROBO).
For skeptics worried ARK has been lucky rather than good, ARK’s flagship Innovation ETF (ARKK) has routinely outperformed passive rivals like State Street’s popular index-tracking Technology Select Sector SPDR Fund (XLK). But ARK is known for idiosyncratic high-conviction bets, and the firm has come under fire for its outsized wager on Tesla.
Any actively-managed product is ultimately a bet on the portfolio managers who pick the stocks. ARK’s products are geared toward investors who have the fortitude and faith to ride out short-term blips in favor of the prospect long-term alpha.
