By Michael Wursthorn
Cathie Wood's new ARK Space Exploration & Innovation ETF is
already on track to be one of the most successful fund launches
ever despite criticism that it doesn't necessarily reflect the
nascent space-exploration market.
Investors poured $445.6 million into the actively managed
exchange-traded fund, known as ARKX, in its first four days of
trading, according to FactSet data through Monday. That trounces
the industry average of three years to gather $100 million and puts
the fund on course to top $1 billion in assets within days,
Such a milestone would put the fund in rare company: The fastest
ETF to reach $1 billion was State Street's SPDR Gold Trust fund,
which hit the mark in just three days back in 2004.
"That speaks to the overall power of ARK right now," said Nate
Geraci, president of ETF Store, an investment-advisory firm. "At
this point, investors think anything Cathie Wood touches turns to
The fund is ARK Investment Management LLC's first launch in two
years and stands in contrast to the lukewarm receptions its earlier
products received. ARK's flagship innovation fund, begun in 2014,
took more than 3 1/2 years to reach $1 billion. Its last launch,
the fintech innovation ETF in 2019, took about 21 months.
A lot has changed for ARK, though. In the span of a year, Ms.
Wood's ARK has transformed from a small, upstart manager of a
handful of ETFs to one of the biggest fund managers in the U.S. The
share prices of the firm's five other actively managed ETFs doubled
or tripled last year on the back of surging growth stocks such as
Tesla Inc. and Roku Inc., earning Ms. Wood a cultlike following of
individual investors who hang on her every tweet and video.
But those growth stocks are now the epicenter of a selloff that
has left ARK's older funds down at least 14% from their highs
earlier this year. Rather than rolling out another fund primary
tied to the tech trade, ARK has tilted nearly half of its space ETF
toward manufacturers including Lockheed Martin Corp., Boeing Co.
and Deere & Co., a sector of the stock market that has
benefited in recent months from rising interest rates and inflation
The fund is different enough for investors who say they are fans
of Ms. Wood but also wary of plowing more money into a faltering
"Most of Cathie's ETFs are tech-heavy," said Tré Diemer, 20
years old, a student at William & Mary who said he bought a
couple of thousand dollars of ARKX shares Monday. "You look at this
ETF and see a lot of names she hasn't been as involved with."
He already owns a variety of growth stocks and has been eyeing
Ms. Wood's other funds as a home for some of the money he earns
from working as an emergency medical technician and running
deliveries for DoorDash Inc. But tech and Ms. Wood's other funds
seemed overvalued, a point reinforced by the recent losses he said
"You can look at this almost as a reopening ETF," said Mr.
Diemer, referring to underlying stocks poised to benefit most from
a rebounding economy.
Not everyone is a fan of the fund's makeup. Some took to social
media, creating memes to mock ARK's decision to include Deere and
other companies that appear to have no significant ties to the
fund's theme of investing in space exploration and innovation. One
showed a Deere tractor roving across a Mars landscape, another on
Deere, for its part, responded with several of its own memes,
including one showing a UFO beaming up a tractor. Some analysts
said the inclusion of Deere is less of a stretch when considering
that the company makes satellite-guided machinery.
Other stocks included in the fund that seem at odds with its
mandate include ARK's passively managed 3D-printing ETF and shares
of Netflix Inc. and Amazon.com Inc. Meanwhile, some of the few
pure-play space stocks such as the satellite and imaging company
Maxar Technologies Inc. didn't make the cut. Neither did Rocket Lab
USA Inc. nor Astra Space Inc., two rocket makers that are merging
with blank-check companies to go public.
Ren Leggi, a client portfolio manager at ARK, acknowledged that
the holdings are causing some confusion but said that they are all
in line with the fund's mandate. "When we're talking about space
exploration and innovation, we define it as everything above
ground," said Mr. Leggi.
The advancement of drone technology plays a big part in why
several companies, including Amazon, are in the fund, said Mr.
Leggi. Netflix would benefit from the rollout of satellites that
enable further adoption of broadband internet for streaming, and
some rocket parts are 3D-printed, he added. As for the space
companies left out, Mr. Leggi said valuations of some were too
rich, especially those involved with special-purpose acquisition
companies, while others didn't pass their initial evaluation of
whether the stock could sustain a 15% annualized return rate.
"We still continue to track a lot of companies in case we get a
market environment where there's a broader selloff and we can get
in at an attractive price," Mr. Leggi said.
Some investors remain unconvinced.
"I was not too fond of its holdings," said Carter Wang, who is
19 and has roughly $3,000 in four of ARK's earlier funds. He is a
fan of Ms. Wood, citing her aggressive calls on Tesla as a key
reason behind his decision to invest in several of the firm's
funds. But Mr. Wang, a business management economics major at the
University of California, Santa Cruz, called the inclusion of ARK's
3D-printing ETF odd, leading him to pass on the fund.
For several ARK investors, Ms. Wood's past performance is key.
With shares of ARKX trading around $21, some investors said they
see a chance to get into the firm's next success, likening it to
ARK's innovation fund, whose share price is six times higher since
it launched in 2014 and continues to command investors' attention.
(The ETF saw record daily inflows one day last week, pulling in
more than $700 million.)
"It doesn't really bother me," said James Carter, a 31-year-old
tech writer in Washington, D.C., who snapped up shares on the space
fund's first day of trading. He said his mind was set on investing
in the fund since he first heard about it earlier this year, even
before any of its underlying stocks had been announced. He is
holding out for the possibility that the fund ends up including
shares of Elon Musk's privately held rocket company, Space
Exploration Technologies Corp.
"I was kind of late" with the other funds, Mr. Carter said of
his other ARK investments. "So I specifically set money aside for
the new ARK fund just because of my interest in ARK. I wanted to
get in early."
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
April 07, 2021 05:44 ET (09:44 GMT)
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