Bitcoins In This ETF Not What It Seems

September 16, 2015

Yesterday’s surprise news that the ARK Web x.0 ETF (ARKW | D-30) will start including bitcoins is a bit of a headscratcher to me. There are issues on a few levels that I have with this announcement. Let’s take them in order:

Why Now? Marketing Success

I get the allure of Ark trying to make some noise in its flagship fund. Launched in October of last year, ARKW has struggled to find a footing, and has just $12 million in assets at the moment. It’s also really suffered from on-screen liquidity problems, with less than a few thousand shares trading hands every day.

But the thing is, I can’t help but root for it. It’s not crazy that it’s failed to find traction—it’s actively managed. And like most actively managed funds, it needs time to develop a track record before core ETF buyers, like financial advisors, will be willing to take the leap of faith.

It’s about to come up on its one-year anniversary, and the truth is, it’s actually done very well versus broader-based tech funds. Consider the ~5 percent gap it’s opened up on the more broadly diversified iShares US Technology ETF (IYW | A-96) in just under a year:

Heck, the fund has even outperformed the biggest ETF launch of the year, the PureFunds ISE Cyber Security ETF (HACK | C- 31).

So, as much as I think the fund probably deserves more attention than it’s received so far from investors, I can’t help but think the timing of the bitcoin announcement is slightly set to mark the one-year anniversary and crow-able performance.

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