Staudt also warned that innovation cannot be boxed into sectors, geographies, or market caps, which leaves indexing strategies missing out on forward looking growth opportunities, while analysts covering disruptive companies have trouble understanding technology cost curves. To address this inefficiency ARK’s analysts are organized by cross-sector disruptive innovation themes to capitalize on the convergence of research.
Lastly, Staudt contended that disruptive innovation requires an open-source approach for a deeper understanding of the convergence and full market potential. Consequently, ARK uses an Open Research Ecosystem that combines top-down and bottom-up research to identify disruptive innovation early, allowing for an organized exchange of insights between the portfolio manager, director of research, analysts, and external sources.
As a way to access disruptive innovations through a targeted fund strategy, ARK Invest offers a suite of actively managed ETFs focused specifically on the three main innovative segments, including the ARK Industrial Innovation ETF (NYSEArca: ARKQ), ARK Web x.0 ETF (NYSEArca: ARKW), ARK Genomic Revolution Multi-Sector Fund (NYSEArca: ARKG) and the broader ARK Innovation Fund (NYSEArca: ARKK).
ARKQ captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies.
The ARK Web x.0 ETF targets next-gen internet innovations like artificial intelligence, cloud computing, cryptocurrencies, and blockchain technology.
The ARK Genomic Revolution Multi-Sector ETF tracks the convergence of tech and health care.
The ARK Innovation ETF is a catch-all for or a broader theme based on the investments across all of the firm’s three innovation themes.
Staudt explained that the disruptive innovation strategies may provide enhanced portfolio diversification since thematic investing in disruptive innovation can offer a low correlation of relative returns to traditional growth strategies and negative correlation to value strategies. The component holdings are not focused any single area of the market as a top-down approach looks at secular trends and ecosystems to find attractive growth opportunities across sectors. In addition, a constant focus on secular changes and disruptive innovation can generate a portfolio hedge in a rapidly changing world and complement traditional strategies.
Financial advisors who are interested in learning more about disruptive technologies can watch the webcast here on demand.