Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Ark blasts through ETF atmosphere of disruption
US-based niche thematic fund firm Ark Investment Management has jumped ahead of global giants BlackRock and State Street in exchange-traded fund (ETF) flows in January, according to a Sovereign Wealth Fund Institute (SWFI) report.
The SWFI report says Ark, which runs seven ETFs based on ‘disruptive technology’ themes, took in US$1 billion on a single day (January 22) with total flows for the first three weeks of the month just behind those of market leader Vanguard.
Since the end of 2019, Ark has seen funds under management rise from just US$3.1 billion to more than US$43 billion at the latest count as investors – including through Asia-Pacific distribution partner and shareholder Nikko Asset Management – flock to its flagship ‘Innovation Fund’, in particular.
The Ark Innovation Fund returned more than 150 per cent during the calendar year 2020, bolstered especially by a large exposure to electric car darling, Tesla, which represents more than 9 per cent of the total portfolio.
Nikko NZ released a portfolio investment entity (PIE) version of the Ark Innovation product in September 2019, adding the fund as a stand-alone option on its KiwiSaver scheme late last year in a move that has triggered membership growth above 500 after languishing below 100 since launch in 2018.
But amid the rapid rise of Ark, the company also faced a shareholder stoush late last year as US-based part-owner, Resolute Investment Managers, issued notice it would exercise an option to buy out the firm. Just prior to the takeover notice, Ark had moved to replace Resolute as its US distribution partner.
However, the two parties ended the dispute in the dying days of 2020 after Cathie Wood, Ark founder and chief executive, purchased the Resolute option for an undisclosed figure funded via a “multi-tranche term loan financing facility provided by Eldridge Corporate Funding”, according to a statement.
At the same time, Resolute was confirmed as US distribution partner for Ark, Bloomberg reported
Gene Needles, Resolute’s chief executive, said in a release: “Cathie Wood and her team have done an exemplary job building ARK Invest from the ground up, and we look forward to supporting the firm’s momentum for years to come.
“We’re pleased to continue being an instrumental part of ARK’s growth, a role we have fulfilled since acquiring a minority investment in the company in 2016.”
In addition to the seven ETFs, covering themes such as fintech and genomics, Ark offers several unlisted funds as well as separate managed accounts for institutional investors. The manager has also lined up a new ETF for launch, covering the space exploration industry.
– David Chaplin is editor of Investment News NZ
