ETF OF THE YEAR
WINNER: ARK Innovation ETF (ARKK)
The choice for ETF of the Year for 2020 is hardly surprising. It and its issuer dominated the financial news the entire 12 months, and it finished the year with a breath-stealing return of more than 150%.
It also trades an average of roughly $1.8 billion a day, putting it in the top 10 of U.S.-listed ETFs. That winning ETF is the ARK Innovation ETF (ARKK).
ARKK is the jewel in the crown of Cathie Wood’s lineup of funds focusing on disruptive innovation. In fact, it could be described as rather a “best ideas” fund, as it covers the themes of ARK’s other disruptive innovation ETFs, including ones that launched after ARKK’s debut in 2014. Accordingly, the actively managed fund’s mandate encompasses artificial intelligence, autonomous vehicles, fintech, DNA sequencing, robotics and 3D printing.
At the end of March, the top companies in the ETF included Tesla, Square, Teladoc, Roku and Zillow—a mix that reflects the wide latitude ARKK has to pursue disruptive innovation themes. But despite its broad mandate, the fund holds a fairly concentrated portfolio of around 50 stocks.
But that illustrates the devotion of ARKK’s managers to research-driven active management. ARK Invest, the firm behind ARKK and its sister funds, is known for its rigorous research and how it communicates that research to its investor base. ARKK’s issuer is all in on getting its ideas across to the public. Its research area on its website includes podcasts, white papers, webinars, videos and articles in abundance.
BEST NEW ETF & BEST NEW U.S. EQUITY ETF
WINNER: Invesco NASDAQ Next Gen 100 ETF (QQQJ)
The Invesco QQQ Trust (QQQ) is a long-standing staple in the ETF ecosystem, boasting nearly $155 billion in assets gathered over two decades. Its new sibling, the Invesco NASDAQ Next Gen 100 ETF (QQQJ), is its clever following act.
The new fund, launched in October 2020 as part of a pair (the other being the so-called mini QQQ or the Invesco NASDAQ 100 ETF (QQQM)) is essentially a feeder strategy for QQQ. QQQJ invests in the 100 stocks—excluding financials—that are next in line to enter the Nasdaq-100 Index, the benchmark underlying QQQ.
This next generation of the “Q’s” is in some ways more than a bit late to the game given how successful QQQ has been in the 21 years since it came to market. Yet QQQJ’s launch was surprisingly timely—if not flat out lucky—by offering another vector into the Q’s tech-related appeal in a year when investors couldn’t get enough of technology and growth names.
Like QQQ, newcomer QQQJ carries a perceived legacy of being a technology fund. But like its older sibling, it isn’t that; it’s merely an equity strategy that excludes financial stocks and ends up with a heavy allocation to tech names by default. QQQJ is nearly half allocated to the next wave of technology names bound for the Nasdaq-100.
The fund was an asset-gathering success right out of the gate, growing quickly, and crossing the $1 billion asset mark less than five months since it launched. That pace puts QQQJ among some of the most successful ETF launches ever—quite a feat for a new equity fund.