Bloomberg Businessweek - USA (2020-11-09)

◼ FINANCE Bloomberg Businessweek November 9, 2020

38

● A bluntspeechaboutChina’sfinancialsystemmayhavespurred

thecancellationofAnt’sIPO

Jack Ma’s

$35 Billion

Blunder

THEBOTTOMLINE ETFshavelongbeenknownmostlyforlow

costsandindextracking.Woodis makinghernameanddrawingin

assetswithactivepicks.

12/27/19 10/30/20

90%

60

30

0

-30

▼Totalreturnsince

Dec.27,2019,weekly

ARKInnovationETF

Nasdaq 100

S&P 500

Jack Ma isa very busy man:He’s been busy

preparingforAlibabaGroupHoldingLtd.’sgrandest

four-dayDoubleElevenshoppingextravaganza,and

busyreadyingAlibaba’sfintechgiantAntGroupCo.

fora potentiallyrecord-settinginitialpublicoffer-

ing.Yetlastmonth,Masomehowfoundthetimeto

opineonChina’sbankingsystemata high-profile

financialforuminShanghai,onceagainthrowing

himselfintothecenterofa controversy.

ride-hailingandautonomousvehicles,where

shebelievesprofitmarginswillbemuchhigher.

Wood’s performance doesn’t depend on

Teslaalone.Herfundthatinvestsincompanies

involvedingenomics—afieldthatincludesgenetic

medicinesandtesting—hasreturnedabout100%

thisyear.ButalltheArkfundsleanintoindustries

whereinvestorshavebeenwillingtopayhigh

valuations on the hope of explosive future

growth.Alongwithgenomics,therearethemed

ArkETFsforfinancialtechnologycompanies,

nextgenerationinternet,andautonomoustech

androbotics.Inanemail,Woodwrotethatas

theeconomyrecoversfromthepandemicshock,

themarketmaystarttorewardvaluestocks—

thosecompaniesfromtraditionalindustriesthat

generallydon’tcommandhighpricesrelativeto

earnings.Butshestillseesplentyofpotential

inherfunds’picks.“Innovationtakesrootand

typicallygainssignificantmarketshareduringand

aftertumultuoustimes,”shewrote.

Inthegreattechinvestingboomofthe1990s,

plentyoffundmanagersrosetofameaftermaking

bigbetsona fewstocksthatcaughtthepublic’s

imagination,andalmostasmanyfelltoearth

again.Fundexpertscautionthatyoucan’tcount

onanymanager’spastperformancecontinuing.

TheInnovationfund’ssuccessthisyear“isn’t

going to be duplicated in 2021,” says Todd

Rosenbluth,directorofETFresearchforCFRA

Research.“Beingconcentratedintheselong-term

plays,they’reswingingtothefences,andthere

willbetimestheymakegreatcontact,therewill

betimestheystrikeout.If wegeta rotationinto

morevalue-oriented strategies, this fund is going

to struggle.”

Now, after big tech names powered the market

back to all-time highs, there’s skepticism that

technology and innovation-related companies can

continue expanding at such a rapid pace. Apple

Inc. and Twitter Inc. disappointed investors with

their recent earnings results, and their stocks

dropped sharply. Whether there’s more upside

for tech depends on a dizzying array of factors,

including the course of a rapidly spreading virus,

vaccine developments, what happens in the

aftermath of a contentious presidential election,

and antitrust inquiries. But comparisons to the

dot-com bubble seem to grow stronger each day,

and hardly anyone can forget the lessons from that

episode about the dangers of lofty expectations.

Wood, Ark’s chief executive officer, launched

the company in 2014 after running more than

$5 billion of assets at AllianceBernstein. Almost

none of Ark’s analysts have a finance background,

which Wood has said helps them stay up-to-date

with developments across different fields. The

27-person team—one-quarter of whom are people

of color, 30% women, and most in their 20s—

includes a cancer researcher and even a sailboat

captain. Analyst James Wang, who focuses on AI,

previously worked for the technology company

Nvidia Corp. and wrote tech columns for an

Australian magazine.

To help spark more discussion, Ark publishes

much of its research on its site, hosts a podcast,

and promotes its ideas on social media. One

oddity of an actively managed ETF is that its daily

holdingsusuallyhavetobeintheopentoensure

thatthesharepriceis inlinewiththevalueofthe

stocksit holds.(Afewnew“nontransparent” ETFs

have worked out a way around this.) Managers

of traditional mutual funds have to publish their

holdings less frequently, and many guard their

ideas in search of a short-termtradingedge.Butthis

matters less for funds like Ark’s,whichseektowin

with big, if risky, long-term bets.�Claire Ballentine

MA: VISUAL CHINA GROUP/GETTY IMAGES. DATA COMPILED BY BLOOMBERG