Morningstar recently reclassified the ARK Innovation ETF (ARKK) as part of its “US Technology” category, alongside funds like the Vanguard Information Technology ETF (VGT) and the State Street Technology Select Sector SPDR ETF (XLK). In our view, the reclassification does not reflect or capture the uniqueness of ARKK’s investment strategy. Comparisons against traditional technology ETFs can create an unrepresentative benchmark and lead investors to draw incomplete or misleading conclusions about ARKK’s performance and risk profile. Because innovation spans sectors, styles, and market capitalizations, ARKK’s strategy does not fit neatly within Morningstar’s categories.
What The Technology Category Actually Captures
The Morningstar US Fund Technology category is dominated by passive index ETFs that track the information technology sector of major US equity benchmarks. The two largest funds in the category, VGT and XLK, share a common structure. They hold 317 and 73 stocks, respectively, both are passively managed, and their expense ratios are 0.09% to 0.08%, respectively, as of 3/31/2026.
VGT and XLK also look very similar to the broader market, sharing most of their holdings with the S&P 500 Index, with common holdings of roughly 85% and 100%, respectively, and an active share1 of ~67%.
ARKK is a completely different animal, holding 43 companies and managing its allocations on the basis of an active, thesis-driven methodology. Only ~38% of ARKK’s holdings overlap with the S&P 500, and it maintains an active share of roughly 91%, as shown below.
THE CATEGORY PEER SET — KEY STRUCTURAL DIFFERENCES
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Source: Morningstar as of 3/31/2026. “Avg.” figures reflect the inception of ARKK (10/31/2014). To contextualize ARKK’s differentiated approach, we compare it with two widely used passive technology ETFs: VGT and XLK. Fund prospectuses are available here: [VGT] [XLK] [ARKK]. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Holdings are subject to change.
Other ETFs in the Technology Category Prove Our Point
Morningstar’s category error is self-evident. For example, as of March 2026, VGT allocates approximately 99% to a single Global Industry Classification Standard (GICS) sector, Information Technology. ARKK allocates 28.7% to health care, a sector to which VGT and XLK have virtually no exposure. The data shown in the chart below make it clear for all eyes to see: These three funds do not pursue the same objective, and they do not invest in the same types of businesses. Unlike our new neighbors in Morningstar’s Technology category, ARKK seeks disruptive innovation across thematic sectors and is not bound by some vague notion of “technology.”
ARKK SECTOR BREAKDOWN —March 2026
Source: Morningstar as of 3/31/2026. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Holdings are subject to change.
ARKK And Its Category Peers Share Almost No Holdings
The sector breakdown tells one part of the story, and the related holdings tell the other. ARKK and VGT at best share ~6% overlap, ARKK and XLK even less. Genuine peers typically share 40% to 70% overlap.
Indeed, the difference between ARKK vs XLK and VGT is not reducible to the differences between their respective weights within the otherwise same portfolios. Rather, it is a difference between completely different portfolios, a difference between different companies, and a difference between stages of innovation.
ARKK invests at the point of disruption, holding genomics companies, fintech platforms, autonomous systems, and AI-native businesses. We believe ARKK’s holdings will disrupt the incumbents that VGT and XLK hold.
Source: Bloomberg, Morningstar as of 3/31/2026. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Holdings are subject to change.
ARKK’s Performance Relative To Morningstar’s “US Technology” Category
The only useful outcome of Morningstar’s reclassification of ARKK is that it incidentally provides instructive comparative data that virtually anyone with eyes should be able to understand. ARKK’s placement in the technology category shows a consistent pattern over eleven years. When innovation has led, ARKK has led by a wide margin. When it has not, ARKK fell behind. This reflects the strategy. We maintain discipline and do not style drift.
Source: Bloomberg, Morningstar as of 3/31/2026. 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. Extraordinary performance is attributable in part due to unusually favorable market conditions and may not be repeated or consistently achieved in the future
ARKK outperformed Morningstar’s “US Technology” category in five of eleven years, and the magnitude of its relative performance in those years tells the real story. In years when innovation led, ARKK generally outperformed by a wide margin. On average, we have seen roughly plus 38 percentage points in years of outperformance and minus 16 percentage points in years of underperformance.
As of 03/31/2026: 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 1-800-679-7759. Market returns are based on the trade price at which shares are bought and sold on the NYSE Arca, Inc. using the last share trade. Market performance does not represent the returns you would receive if you traded shares at other times. Total Return reflects reinvestment of distributions on ex-date for NAV returns and payment date for Market Price returns. The market price of the ETF’s shares may differ significantly from their NAV during periods of market volatility.
Three Ways The Technology Category Comparison Gets ARKK Wrong
01 THE SECTOR CONCENTRATION PROBLEM
VGT and XLK provide targeted exposure to the information technology sector. ARKK does not. Instead, ARKK invests across sectors in search of disruption. As a result, VGT and XLK are designed for investors who want technology exposure, while ARKK is designed for investors looking for broader exposure to innovation across industries.
02 THE STAGE-OF-COMPANY PROBLEM
VGT and XLK hold mature, profitable companies. ARKK invests earlier in the innovation curve. The risk and return profiles of the two funds differ by design.
03 THE RATE SENSITIVITY PROBLEM
ARKK’s holdings tend to be more sensitive to interest rates because many disruptive companies are investing for long-term growth instead of maximizing near-term cash flows. In contrast, VGT and XLK hold more mature companies with steadier earnings and lower sensitivity to changes in rates.
What This Means For Investors
Investors should not waste their time discerning whether ARKK is a better technology fund than VGT or XLK, because, indeed, ARKK is more than a technology fund. Instead, investors must ask themselves whether ARKK's specific exposures, cross-sector disruption, high conviction, and pre-mainstream positioning belong in your portfolio, at what allocation, and with what time horizon.
For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Investors should consult with a financial professional to determine the appropriate investments for their portfolio. Diversification does not guarantee a profit or protect against loss
The Category Label Is A Starting Point, Not A Conclusion
We understand the challenge. ARKK is difficult to categorize, and Morningstar seemingly believe that they need to mis-place it somewhere. While the prior “Mid-Growth” category was imperfect for ARKK, the current Technology category is even worse.
ARKK targets disruptive innovation across sectors, not technology sector exposure. Its holdings include companies reshaping healthcare, finance, transportation, and digital infrastructure. They are not the incumbents that dominate traditional technology indices.
ARKK’s eleven-year record reflects that investment impetus. When innovation has led, ARKK has outperformed the Technology category. When innovation has lagged, as during the unprecedented rate tightening cycle in 2021 and 2022, ARKK has underperformed the Technology category. Importantly, however, data show that ARKK’s long-duration profile tends to smooth its volatility, and we believe that time—not timing—conveys the more meaningful outcomes. The US Technology peers hold mature, cash generating companies with less sensitivity to macro volatility, but we believe their valuation will be sensitive to their disruption.
Investors who understand what ARKK holds know how to expect that pattern. Investors who treat ARKK as a substitute for VGT or XLK will not.
This distinction matters. Investors who understand it can size ARKK appropriately and use it alongside other exposures. Investors who rely on category comparisons alone will draw the wrong conclusions.
IMPORTANT DISCLOSURES: This article is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. All performance figures are approximate and sourced from Morningstar, Yahoo Finance, and SEC filings as of Q1 2026. Sector allocation data for ARKK is sourced from ARK's Form N-CSRS filed January 2026. Portfolio overlap figures are approximate based on publicly available holdings data. Morningstar category assignments are determined by Morningstar and subject to change. Investing in ARKK involves risk including possible loss of principal. VGT and XLK are registered trademarks of their respective issuers. © 2026 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.
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 Innovation ETF (ARKK) also has specific risks, which are described below. More detailed information regarding these risks can be found in ARKK’s prospectus and summary prospectus.
The principal risks of investing in the ARKK include: Equity Securities Risk. The value of the equity securities the Fund holds 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 adversely affected by government regulations and government health care programs. Communications Sector Risk. Companies in this sector may be adversely affected by potential obsolescence of products/services, pricing competition, research and development costs, substantial capital requirements and government regulation. Information Technology Sector
Risk. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Detailed information regarding the specific risks of ARKK ETF can be found in the prospectus. Additional risks of investing in ARKK include equity, market, management and non-diversification risks, as well as fluctuations in market value and NAV.
An investment in an ETF is subject to risks and you can lose money on your investment in an ETF. There can be no assurance that the ETF will achieve its investment objective. The ETF’s portfolio is more volatile than broad market averages. Shares of ARKK are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. 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.
This material is for informational purposes only and should not be relied upon as the basis for any investment decision. It does not constitute, either explicitly or implicitly, any provision of services or products by ARK, and investors should determine for themselves whether a particular investment management service is suitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK and are not endorsements by ARK of any company or security or recommendations by ARK to buy, sell or hold any security. Historical results are not indications of future results.
Certain of the statements contained in this material may be statements of future expectations and other forward-looking statements that are based on the current views and assumptions of ARK 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. ARK assumes no obligation to update any forward-looking information contained in this podcast. 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 information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from any third party.
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Active share measures how much a portfolio’s holdings differ from its benchmark index.
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.
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