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ARK's Next ETF Nears Landing | ETF.com

ARK's Next ETF Nears Landing

February 18, 2021

Just about every day since ARK put in registration the ARK Space Exploration ETF (ARKX), investors have reached out to ask, when is this ETF going live?

Due to rules and so-called quiet periods, that’s not a question we can get a direct answer to. But we can estimate that based on when the filing was made—Jan. 13—a launch could come March 29 at the earliest.

That’s clearly, to many, not soon enough. Investor anticipation for ARK’s latest offering is palpable. And it’s not all that surprising.

Investor interest in ARKX has probably less to do with excitement about the space exploration theme as it has to do with ARK’s high-conviction stock-picking DNA.

Midas Touch

In 2020, everything ARK touched turned to gold. As a firm, the ETF issuer saw assets grow more than 15-fold in about 12 months, crossing $50 billion in assets under management recently as its lineup of funds focused on disruption delivered gains.

You could say the assumption is that ARK’s stock-picking skills will carry through the space exploration theme. The question is, will ARKX be a repeat of the company’s massive success with its flagship offering, the ARK Innovation ETF (ARKK)?

ARKK—which comprises the firm’s best ideas across various segments, including genomic revolution, automation, energy transformation, artificial intelligence, internet and fintech disruptors—is now a $28 billion fund that has rallied 162% in the past year.

If you plot the fund’s trajectory since the March 23, 2020 U.S. market low, ARKK is up 306% in less than 11 months. That’s more than 3x the gains of the Invesco QQQ Trust (QQQ), and massively higher than the SPDR S&P 500 ETF Trust (SPY):

 

 

Chart courtesy of StockCharts.com

 

To be fair, ARKK has been around since 2014, and it didn’t really hum at this level until the pandemic put some of these disruptive trends in sharp focus. But according to Cathie Wood, head of ARK, these trends aren’t short-term fads, but long-term transformational growth opportunities. They just sometimes take a little time to hit their stride.

The ARK stock-picking prowess has been widely covered. In 2020, no story was bigger in the ETF space, and it’s fascinated passive and active investors alike.

As it pertains to space exploration, however, it’s not clear yet what companies will make the cut into ARKX. If you peruse social media chatter, there are all sorts of guesses as to who’s in and who’s out in this portfolio.

Halo Effect

What is clear is that the ARK halo effect is a real thing. Since ARK detailed its plans to enter this segment on Jan. 13, other space-linked ETFs have been both rising and gathering assets relatively quickly.

The Procure Space ETF (UFO), launched in April 2019, has now picked up almost $80 million in net creations since Jan. 13. That’s roughly 3x its asset haul in the entire 2020 calendar year.

In fact, UFO hasn’t seen a single day of outflows since ARKX’s filing, growing to a $140 million ETF. And, to boot, it’s rallied 19% since that day. In 2020, the fund’s performance struggled, and UFO ended the calendar year down about 2%.

UFO was the first global-in-scope fund in this aerospace, and it’s an index-based strategy that’s built around two segments in an 80/20 split: 80% of the portfolio invests in companies that generate at least 50% of their revenues from space-linked businesses; 20% invest in diversified companies that support space exploration through technology, equipment and services.

Some of the fund’s best-performing names so far in 2021, each delivering triple-digit gains, include Gilat Satellite Networks (GILT), Loral Space & Communications (LORL) and Virgin Galactic Holdings (SPCE), all names sitting among UFO’s top holdings.

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

Only Virgin Galactic (SPCE), however, is found in the competing SPDR S&P Kensho Final Frontiers ETF (ROKT). This much smaller ETF that splits its focus between space exploration and deep sea exploration has also gained assets since ARK’s move, picking up about $9 million since Jan. 13. At face value, that’s not all that much, but ROKT is already outpacing its entire asset creations for calendar 2020.

ARK hasn’t disclosed fees for ARKX, but the firm’s other ETFs cost 0.75% in expense ratio, or $75 per $10,000 invested. Assuming they stick with that same price tag, ARKX will cost as much as index-based UFO, and notably higher than ROKT, which has a 0.45% price tag.

Contact Cinthia Murphy at cmurphy@etf.com

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