A Decade of Disruption: ARK’s Four Inaugural ETFs, Ten Years Into The Future

By ARK Invest

Upon their ten-year anniversary, we’d like to say a few words about ARK’s four inaugural ETFs—ARK Innovation ETF (ARKK), ARK Next Generation Internet ETF (ARKW), ARK Genomic Revolution ETF (ARKG), and ARK Autonomous Technology & Robotics ETF (ARKQ). With gratitude for the opportunities that we have had to invest in some of the world’s leading companies, we are reminded of our exclusive focus on research-driven investments in and around disruptive innovation. Along the journey, we’ve learned important lessons about consistency, adaptability, and resilience amid market fluctuations.

ARK’s Mission

ARK’s mission remains clear: to harness the potential of disruptive innovation and provide investors with the opportunity to capitalize on its rapid advancements. Our Founder, Cathie Wood, had seen firsthand how traditional frameworks often have fallen short in surfacing and recognizing the true value of innovative companies. Focusing on established businesses rather than those pushing boundaries, many legacy investment models have been slow to adapt, especially as the market and broad-based indexes have concentrated toward a limited number of stocks that have served them well. ARK’s commitment to early-stage innovators positions investors to benefit from their potential long-term growth as those companies reshape entire sectors.

Cathie recognized that innovation was beginning to blur the lines between and among sectors, creating opportunities that traditional research was not organized to capture. That fundamental insight inspired ARK’s original ETFs, which we designed to focus on the convergence among cutting-edge innovations.

Disruptive Innovation

To some investors, “disruptive innovation” might sound like a buzzword. To us, it is a powerful force that is likely to alter the course of human history, reshaping industries and the global economy. At this juncture, we believe that several innovation platforms will provide the backbone for such transformation—Artificial Intelligence, Robotics, Energy Storage, Multiomic Sequencing, and Blockchain Technology. Around that backbone, we structured ARK’s inaugural ETF products: ARKK, ARKW, ARKG, and ARKQ.

Ten years after ARK’s founding in 2014, the techno-economic revolution associated with those platforms has been astounding.

Artificial Intelligence is transforming most sectors, importantly transportation, healthcare, finance, and logistics. The ability of AI to analyze vast amounts of data and improve decision making is revolutionizing how businesses operate and how consumers engage with technology.

Robotics is advancing thanks to automation, machine learning, and artificial intelligence, taking on roles in manufacturing, healthcare, and households. The potential for robotics to increase efficiency and improve quality of life is immense.

Energy Storage is essential to harnessing the renewable energy sources that will power the world sustainably. Thanks to advancements in energy storage, from lithium-ion batteries to next-generation solid-state solutions, fossil fuel consumption seems to be in the process of peaking.

Multiomic Sequencing will transform healthcare. The ability to analyze vast datasets from various biological systems is helping decode the causes of health and disease, while creating personalized treatment options.

Blockchain Technology has expanded beyond its foundational role as a global monetary system to a myriad of applications, from secure voting systems, financial services, and supply-chain transparency. Blockchain technology is creating decentralized, verifiable ecosystems that guarantee digital property rights for the first time in history.

Together, these platforms are creating a future that will alter how we live and work. As we reflect on their evolution, we are struck by the vast possibilities that lie ahead.

Performance

Each of ARK’s original ETFs has experienced periods of remarkable growth during the past decade, outperforming many traditional benchmarks at various points, as shown below. While periodic corrections have caused volatility in all our funds in recent years, our long-term vision remains steadfast. Volatility is an inherent part of innovation-driven strategies, and while it's important to stay focused on long-term goals, making informed investment decisions and evaluating performance effectively can help navigate these fluctuations. In our view, market fluctuations tend to balance out over time, especially for companies at the forefront of transformative change. By maintaining a long-term investment horizon, investors can allow the market to digest those fluctuations and, ultimately, to recognize the value of innovation-driven companies. For patient investors, volatility should become an opportunity to accumulate high-quality assets at attractive valuations.

Please find standardized performance for the ETFs in the Important Information section below.

The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal will fluctuate so that an investor's shares when redeemed may be worth more or less than the original cost. For the Fund’s most recent month end performance, please visit www.ark-funds.com or call 212.426.7040.

Lessons

The volatility inherent in investing in disruptive innovation can be unsettling. After significant market fluctuations, which include periods of rapid growth followed by sharp corrections, our conviction is steadfast that innovation is key to long-term growth, as shown in our longer-term returns above.

After the last ten years, we have learned the importance of resilience and adaptability. The innovation landscape is changing rapidly, making research on emerging trends essential. ARK’s team works continuously to identify the next wave of transformative innovation—a process that requires both expertise and an openness to change. Despite short-term corrections, we continuously evaluate our investments, balancing conviction with responsiveness to market signals.

The volatility in 2021, for example, taught us that even the most promising technologies can experience setbacks. Companies like Tesla (TSLA) and Roku (ROKU) faced significant price corrections, despite their long-term potential. Crucially, the path to innovation is rarely linear, and we believe that staying the course in the face of short-term headwinds will lead to significant rewards in the long term.

Another key takeaway has been the value of transparency and communication with our investors. In an era of information overload, we strive to be clear and concise about our investment strategies, the technological innovations that are powering the companies in which we invest, and the risks associated with long-term investment time horizons. Frequent updates on our research insights help investors monitor and understand the rationale behind our investment decisions. Engagement with our investors has been critical to maintaining our relationships. In short, our commitment to long-term growth through innovation is matched by our adaptability to emerging trends, which we believe is critical to navigating short-term volatility.

Looking Ahead

We are excited about the investment opportunities as we celebrate our ten-year anniversary. The heart of innovation is pumping strongly thanks to the dynamic and unpredictable convergence between and among the disruptive innovation technologies likely to reshape economies and societies. To our investors, ARK’s commitment is that we will continue to invest in disruptive innovation that has the potential to create a meaningful impact on humanity. Surprisingly, broad-based indices continue to lack exposure to innovation at the levels we think prudent. History shows that while disruptive strategies may face short-term setbacks, step changes in their growth trajectories tend to materialize.¹ In our view, the pace and scope of changes—and their associated economic opportunities—are as great or greater than at any point in history.

Thank You

We are grateful to everyone who has joined us on this journey during the past ten years—our loyal investors, our strategic partners in Japan, Europe, and the US, our talented team at ARK, and the visionary entrepreneurs whose hard work we have had the privilege to support. Your belief in our mission and dedication to innovation has made this journey possible.

As we enter the next decade, we urge you to challenge the status quo and embrace the transformative possibilities that disruptive innovation offers through our strategies. Together, we can drive meaningful change and shape the future of investing for generations to come.

Thank you for being an integral part of ARK’s journey. Here’s to many more years of innovation and growth!

Winton, B. 2024. “Platforms Of Innovation: How Converging Technologies Should Propel A Step Change In Economic Growth.” ARK Investment Management LLC.

Important Information

Investors should carefully consider the investment objectives and risks as well as charges and expenses of an ARK Fund before investing. This and other information are contained in the ARK ETFs’ prospectuses and summary prospectuses, which may be obtained by visiting www.ark-funds.com. The prospectus and summary prospectus should be read carefully before investing.

*Annualized. The inception date of ARKK and ARKG is October 31, 2014. The inception date of ARKW and ARKQ is September 30, 2014. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal will fluctuate so that an investor's shares when redeemed may be worth more or less than the original cost. For the Fund’s most recent month end performance, please visit www.ark-funds.com or call 212.426.7040. Returns for less than one year are not annualized. As stated in the ARK ETFs' current prospectuses, the expense ratio for ARKK, ARKG, and ARKQ is 0.75%. The expense ratio for ARKW is 0.87%.

Extraordinary performance is attributable in part due to unusually favorable market conditions and may not be repeated or consistently achieved in the future. Source: ARK Investment Management LLC. As of September 30, 2024.

An investment in an ARK Fund is subject to risks and you can lose money on your investment in an ARK Fund. There can be no assurance that the ARK Funds will achieve their investment objectives. The ARK Funds’ portfolios are more volatile than broad market averages. The ARK Funds also have specific risks, which are described below. More detailed information regarding these risks can be found in the ARK Funds’ prospectuses.

The principal risks of investing in the ARK Funds include:

Disruptive Innovation Risk. Companies that ARK believes are capitalizing on disruptive innovation and developing technologies to displace older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to capitalize on the technology. Companies that develop disruptive technologies may face political or legal attacks from competitors, industry groups or local and national governments. These companies may also be exposed to risks applicable to sectors other than the disruptive innovation theme for which they are chosen, and the securities issued by these companies may underperform the securities of other companies that are primarily focused on a particular theme.

Equity Securities Risk. The value of the equity securities the ARK Funds hold may fall due to general market and economic conditions. Foreign Securities Risk. Investments in the securities of foreign issuers involve risks beyond those associated with investments in U.S. securities. Health Care Sector Risk. The health care sector may be affected by government regulations and government health care programs. Consumer Discretionary Risk. Companies in this sector may be adversely impacted by changes in domestic/international economies, exchange/interest rates, social trends and consumer preferences. Industrials Sector Risk. Companies in the industrials sector may be adversely affected by changes in government regulation, world events, economic conditions, environmental damages, product liability claims and exchange rates. Information Technology Sector Risk. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins.

Financial Technology Risk. Companies that are developing financial technologies that seek to disrupt or displace established financial institutions generally face competition from much larger and more established firms. Fintech Innovation Companies may not be able to capitalize on their disruptive technologies if they face political and/or legal attacks from competitors, industry groups or local and national governments. Blockchain technology is new and many of its uses may be untested. Blockchain and Digital commodities and their associated platforms are largely unregulated, and the regulatory environment is rapidly evolving. As a result, companies engaged in such blockchain activities may be exposed to adverse regulatory action, fraudulent activity or even failure. Communications Sector Risk. Companies is this sector may be adversely affected by potential obsolescence of products/services, pricing competition, research and development costs, substantial capital requirements, and government regulation.

Cryptocurrency Risk. Cryptocurrency (notably, bitcoin), often referred to as ‘‘virtual currency’’ or ‘‘digital currency,’’ operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. Some of the ARK actively managed Funds may have exposure to bitcoin, a cryptocurrency, indirectly through an investment in the ARK 21Shares Bitcoin ETF, a 1933-Act exchange traded product. Cryptocurrency operates without central authority or banks and is not backed by any government. Even indirectly, cryptocurrencies may experience very high volatility and related investment vehicles like ARKB may be affected by such volatility. As a result of holding cryptocurrency, the Fund may also trade at a significant premium to NAV. Cryptocurrency is also not legal tender. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in the U.S. is still developing. Cryptocurrency exchanges may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware. Leverage Risk. The use of leverage can create risks. Leverage can increase market exposure, increase volatility in the Fund, magnify investment risks, and cause losses to be realized more quickly.

Health Care Sector Risk. The health care sector may be adversely affected by government regulations and government health care programs, restrictions on government reimbursements for medical expenses, increases or decreases in the cost of medical products and services and product liability claims, among other factors. Many health care companies are heavily dependent on patent protection and intellectual property rights and the expiration of a patent may adversely affect their profitability.

Biotechnology Company Risk. A biotechnology company’s valuation can often be based largely on the potential or actual performance of a limited number of products and can accordingly be greatly affected if one of its products proves, among other things, unsafe, ineffective or unprofitable. Biotechnology companies are subject to regulation by, and the restrictions of, the U.S. Food and Drug Administration, the U.S. Environmental Protection Agency, state and local governments, and foreign regulatory authorities.

Pharmaceutical Company Risk. Companies in the pharmaceutical industry can be significantly affected by, among other things, government approval of products and services, government regulation and reimbursement rates, product liability claims, patent expirations and protection and intense competition.

Additional risks of investing in ARK ETFs include market, management and non-diversification risks, as well as fluctuations in market value NAV. ETF shares may only be redeemed directly with the ETF at NAV by Authorized Participants, in very large creation units. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from investment returns.

To view the top ten holdings for ARKK click here.

To view the top ten holdings for ARKQ click here.

To view the top ten holdings for ARKW click here.

To view the top ten holdings for ARKG click here.

ARK Investment Management LLC is the investment adviser to the ARK Funds.

Foreside Fund Services, LLC, distributor.

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ARK’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain of the statements contained may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements.