Actively managed ETFs, particularly equity-based products, are small but growing contributors to the broader ETF universe. Some are growing more than others as highlighted by the ARK Innovation ETF (NYSEArca: ARKK).
Now home to $2.9 billion in assets under management, ARKK is the largest equity-based actively managed ETF in the U.S., recently moving past the First Trust North American Energy Infrastructure Fund (NASDAQ: EMLP). Currently, the gap between the two ETFs is wide with $1.1 billion advantage of favor ARKK.
ARKK is often known as one of the Tesla (NASDAQ: TSLA) ETFs due in part to its 11.67% weight to the electric vehicle, among the largest among ETFs, active or passive. However, there’s much more to the ARRK story.
“Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (‘’Genomic Revolution’), industrial innovation in energy, automation, and manufacturing (‘Industrial Innovation’), the increased use of shared technology, infrastructure and services (‘’Next Generation Internet’), and technologies that make financial services more efficient (‘Fintech Innovation’),” according to ARK Invest.
Disruptive technology is not relegated to certain sectors as it will permeate into all industries in some form or fashion. For example, augmented reality is technology comprised of digital images superimposed over the real world, and its use is primed to drive industry growth–industries like real estate and manufacturing are already putting the technology to use in a variety of ways.
For companies that can afford to implement both artificial intelligence and robotics, it can be a dichotomy of disruptive technologies that can work hand-in-hand if deployed correctly. As barriers to entry like cost begin to lower for disruptive technology, more companies could be using both as part of their core businesses, which should only propel disruptive-focused exchange-traded funds (ETFs).
What makes ARKK increasingly relevant in today’s investing landscape is that it features a harmonious approach to accessing automation and innovation whereas some rival funds emphasize one, but not both of those concepts. Additionally, automation often gets a bum rap because it’s seen as a jobs killer, but the opposite could prove true over time.
At the sector level, beyond the obvious of technology, healthcare is fertile ground for automation and ARKK reflects as much, allocating 36% of its weight to that group, making it the fund’s largest sector exposure. Technology is second at 36.1% followed by communication services at 12.8%.
For more on disruptive technologies, visit our Disruptive Technology Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.