If You Own This ETF, You Might Want to Rethink That

The ARK Innovation ETF (ARKK) is the flagship fund from ARK Invest, an advisory firm led by renowned investor Cathie Wood. This actively managed ETF seeks long-term capital gain by investing in companies that exhibit disruptive innovation. The companies within the fund cover areas including automation, artificial intelligence (AI), robotics & energy storage, and fintech.

The ETF invests at least 65% of its assets in companies relevant to disruptive innovation’s investment theme. Here, disruptive innovation refers to a technologically enabled new product or service that has the potential to bring changes to the way the world works.

After its outsized returns during the COVID-19 pandemic, ARKK has given up all its gains and declined 60% year-to-date and 68% over the past year to close the last trading session at $37.87.

The tech-heavy ETF has been under pressure since the beginning of the year due to the multi-decade high inflation and the Fed’s aggressive interest rate hikes to fight it. The major market sell-off has hit high-growth tech stocks vulnerable to rising interest rates and slowing economic growth.

Moreover, the Fed’s interest rate increases have given rise to recession risks by next year. This is expected to hurt high-multiple growth stocks, which ARKK holds. Strategas Securities’ ETF strategist Todd Sohn said, “ARKK has really been the poster child for pain from this environment – global interest rates surging and a Fed set on continuing to tighten until inflation is put to bed.”

Here’s what could influence ARKK’s performance in the upcoming months:

Fund Stats

ARKK has $7.49 billion in assets under management. Its expense ratio of 0.75% is significantly higher than the industry average of 0.51%. Over the past three months, the fund witnessed a net outflow of $516.33 million. It has a beta of 1.56 and a NAV of $37.89 as of October 28, 2022.


Top Holdings

The fund has a total of 34 holdings. Its principal holdings include Zoom Video Communications, Inc. (ZM), with a 9.46% weighting, followed by…

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