This season of “The Switch” is focused on how transparency can impact an organization’s success. Thomas Hartmann-Boyce, client portfolio manager with ARK Invest, is joined by ETF Trends’ CEO, Tom Lydon, to discuss the ARK Transparency ETF (CTRU).
Lydon opens the discussion by acknowledging the different approach for CTRU from ARK’s standard active, high-conviction thematic approach. Hartmann-Boyce counters, though, explaining that the current suite of active ETFs that ARK offers are already transparent with their dissemination of daily trades.
ARK is also transparent in regards to its funds and its approach both on social media and through the use of its open research that includes external input on thematics and disruptive technologies.
“Transparency is at the core ethos of ARK, so for that reason transparency makes a lot of sense from our angle in terms of a new product added to our lineup, and it is differentiated in our approach,” Hartmann-Boyce says.
ARK utilizes the six key performance indicators (KPIs) that relate to transparency when finding the top 100 transparent companies. Those KPIs are: transparency standards, terms, total accountability, truth, transparent costs, and trust.
The fund takes an ESG tilt because it excludes specific industries that are not transparent and then utilizes the six KPIs to identify the top 100 most transparent companies.
“You have an impact focus because of this methodology,” explains Hartmann-Boyce, which includes a 95% reduction in environmental violations by the securities within the fund compared to the S&P 500 as well as 98% reduction in financial crimes.
ARK Invest estimates the positive impact using its screeners to be $2.3 trillion over the last six years as well as a positive impact on 22 million lives by excluding the nine industries that are not transparent.
Transparency Invest is the sub-advisor for the fund and created the index that CTRU draws from. The fund utilizes an equal-weight approach in order to diversify exposures across sectors.
“It’s also the purest play in terms of accessing transparency and investing in transparency. Once you introduce market cap, you’re obviously tilting the companies outside of transparency. We want to be fully focused on transparency for this particular product,” says Hartmann-Boyce.
CTRU is rebalanced and reconstituted quarterly.
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