The conversation about what makes new ETFs successful almost always leads to dollars, meaning assets under management, but that topic should be discussed in relative terms. For instance, some rookie ETFs addressing refined market segments or disruptive niches can take a while to catch investors’ eyes.
On that basis, the ARK Fintech Innovation ETF (NYSEARCA: ARKF), which debuted in February, is off to a stellar start. The first actively managed ETF in the fintech space, ARKF already has $72 million in assets under management.
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
ARKF can hold between 35 and 55 stocks and as of Dec. 19, the fund was home to 43 names, led by Square (NYSE: SQ) and Apple (NASDAQ: AAPL) with that duo combing for over 15% of the fund’s weight. Integral to the ARKF thesis is the fact that ARK sets credible standards for defines a fintech investment.
“A company is deemed to be engaged in the theme of Fintech innovation if (i) it derives a significant portion of its revenue or market value from the theme of Fintech innovation, or (ii) it has stated its primary business to be in products and services focused on the theme of Fintech innovation,” according to the issuer.
Primed For Growth In 2020
ARK is higher by nearly 11% in the current quarter, indicating it could ready for more upside in 2020. Fortunately, that thesis is bolstered by credible fundamental factors.
“The global fintech market was valued at about $127.66 billion in 2018 and is expected to grow to $309.98 billion at an annual growth rate of 24.8% through 2022,” according to a recent Business Research report.
ARKF’s active management style has been a boon as the fund has averted lagging fintech lenders, such as Elevate Credit (ELVT), Enova (ENVA), FlexShopper (FPAY), LendingClub (LC), and OnDeck Capital (ONDK), Each of those names was spotted trading below their initial public offering prices earlier this month.
Likewise, if ARK’s team sees opportunities in those names or areas of the fintech market, it can exploit those odds more effectively than index-based rivals because ARKF isn’t constrained by a benchmark.
In terms of fintech niches on more solid ground, the booming mobile payments could again be a catalyst for ARKF in 2020.
Payments are increasingly going digital with a number of start-ups seeing venture capital seed money to help facilitate online purchases. According to the research company Pitchbook, data shows that investors put $18.5 billion into the payment processing sector in 2018–an increase of five times the previous year.
For more market trends, visit ETF Trends.
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.