ARKK - Ark Innovation ETF

[Gregmal]

I agree with the skepticism and am short some of their ETFs. However I would also caution denigrating this simply because of bitter laggard syndrome. Ive seen so many of the "my analysis" people rip these folks but the scoreboard is what counts. We arent talking 1 lucky year here anymore either. Just as ARK is very promotional, theres also a sect of very promotional traditional brick and mortar type finance firms and people who want you to believe "their analysis" is worth what they charge....when it isnt. These same people want you to believe that ARK returning 40% doesnt matter and that this is inferior to their 11% before fees which is really not much after fees. They sell you with similar financial speak, and even as folks see on Twitter and whatnot with stocks like Tesla, want you to believe their analysis is right(that Tesla was a great short at $200; before the split) and the person who called Tesla $4000 is wrong....As if one looks at their retirement fund and goes "time for the sunset, the analysis is great!"....bitter laggard syndrome I call it. "My analysis" is better than your real life 10 bagger....LOL ok...

 

Invitae was an interesting one for me that gave me a bit of an appreciation for the stock picking abilities; again, not that I fully understanding what those abilities or their process is....but NVTA they honed in on at the bottom. Maybe $5 a share. It was a totally left for dead, broken IPO, piece of shit money burner with nothing going for it. And they built this big position in it and its another 8-10 bagger in a few years for them. It would be foolish to just write that off when its been repeatedly accomplished.

 

What I think has changed is that they dont have the small size advantage anymore. ARKG is not going to retain assets if Roche or BMY is the top billing. The bull scenario for me(as a short) there is that indeed they rotate into those type of name, but fast money will flee if they do. There was an interesting dynamic with some of their holdings. These are smaller cap names where ARK was already a top shareholder. And these names started responding to the massive inflows which in a sense was probably ARK bidding up ARK stocks. I really dont have anything against them. If anything else, it shows how easy making a living in the financial/money management business is. You literally just need to be right big, once, and be promotional about it to be set for life. Its likely part of what pisses off so many people about ARK. But they definitely offer something unique and to this point have quite an enviable track record. I dont think it continues and like the market hedge aspect of being short this, so that is how I am setup. But I wish them luck. Also good to see the underdog drive the excel sheet/clipboard nerds crazy.

[RVP]

I don't think it's the bitter laggard syndrome that annoys the "traditional" folks, but more the fact that many superstars of the time love to rub it in your face. The same can be said about the traditional folks too when they had their day in the sun.

 

The returns and $$$ are very real and important for a person's life no doubt, and in that sense the scoreboard is what counts regardless of how the sausage is made. But there's a ton of ego in this industry, and when the scoreboard and ego collide, it creates a lot of resentment/envy/(insert your negative human emotion).

 

The only thing that really matters though is your inner scorecard, not just for yourself, but for the harmony of those around you. The outer scoreboard comes after. At the end of the day it doesn't really matter how much $$$ you have to your name or what your returns are. We all eat, sleep, drink, and depart from this place when our time has come. And it's far better to spend our limited time here at peace with one another.

[chrispy]

This is kind of like fans sitting in seats booing the 2020 MVP on the opposing team. That player crushed it, is doing fine, and does not care at all about the out of shape fans in the seats.

 

At least ARK is giving some type of unique reason to invest and for them to justify fee. High fees on poorly managed accounts should be picked apart more then ARK.

 

Edit: I have no opinion on their performance going forward and will most likely never invest with ARK.

[JRM]

I guess we'll find out at some point if it is luck or skill. 

 

From my point of view, the ARK funds are like the annoying guy you knew from high school who inherited a fortune at age 30 and doesn't appear to know anything about investing.  Yet, he doesn't miss an opportunity to tell you what you're doing wrong and how smart he is for having a higher net worth than you.

[mwtorock]

I guess we'll find out at some point if it is luck or skill. 

 

From my point of view, the ARK funds are like the annoying guy you knew from high school who inherited a fortune at age 30 and doesn't appear to know anything about investing.  Yet, he doesn't miss an opportunity to tell you what you're doing wrong and how smart he is for having a higher net worth than you.

 

A quote - in investing luck dominates skill. Don't know who originally said that.

[Gregmal]

Luck is not entirely predicated on chance. There are reasons some consistently get lucky and others dont. To use a hockey analogy, David Clarkson was the luckiest 30 goal scorer Ive ever seen in my life. But the guy worked hard and went to the front of the net and as they say, good things happen when you go to the net. Too many folks, when it comes to investing, want credit for sitting in the film room and never, or rarely, getting on the field.

[Pelagic]

It seems like the correct bull bet on Tesla is essentially the sole reason for their recent success. Before TSLA began its run, they were lagging the QQQs.

 

I went back and looked to see what portion of their outperformance over QQQ since TSLA's IPO was attributable just to TSLA. Assuming they have had a 10% allocation to Tesla their entire run (about what they have in it now), roughly 100% of the alpha (more than 20%/year) is due to Tesla alone.

 

So, this is a tech index fund that made a big, fairly risky bet on one stock and nailed it. Now that AUM has grown from below $100M to $40B on that bet, how do they keep this up? Doesn't seem likely they can.

 

And now that they are so big, and thus have to start buying mega caps like BMY, it will only drag down their alpha even faster.

 

Are pairs trades still a thing? Long QQQ/short ARK. Seems simple enough if you think their outperformance is going to end.

[peridotcapital]

It seems like the correct bull bet on Tesla is essentially the sole reason for their recent success. Before TSLA began its run, they were lagging the QQQs.

 

I went back and looked to see what portion of their outperformance over QQQ since TSLA's IPO was attributable just to TSLA. Assuming they have had a 10% allocation to Tesla their entire run (about what they have in it now), roughly 100% of the alpha (more than 20%/year) is due to Tesla alone.

 

So, this is a tech index fund that made a big, fairly risky bet on one stock and nailed it. Now that AUM has grown from below $100M to $40B on that bet, how do they keep this up? Doesn't seem likely they can.

 

And now that they are so big, and thus have to start buying mega caps like BMY, it will only drag down their alpha even faster.

 

Are pairs trades still a thing? Long QQQ/short ARK. Seems simple enough if you think their outperformance is going to end.

 

Agreed. And could pair it with SPY if one thinks tech's leadership will fade, but that's a tougher call.

[bilo]

In my view, open end fund management and business success/growth has next to nothing in common with managing a fixed pool of capital or even a fund that does not have routine inflows and outflows. 

 

In my study of open-end funds I came to the conclusion for start-up open-end managers, the key is getting a volatility pump going where inflows become a beneficial force on prospective returns.  No one wants to acknoledge that for obvious reasons, but in my view it is true for even the "legends" even if they participated in this unintentionally (which I personally doubt, its too obvious). 

 

A variation of it is the micro-cap LP manager who keeps pumping money into the same stocks as flows come in and before the cycle implodes diversifies new money into bigger names - or sets up a larger cap fund that old positions can be transferred into. 

 

I have noted this same pattern with many guys who have successfully bootstrapped small funds to larger funds - to the degree they are aware of what they are doing, I don't know.    A key though is clearly having good fund raising ability - consistent  - the folks toiling away not talking to anyone never benefit from their own flows (which, is of course what most would agree is how things are "supposed" to work).

 

I first came to this conclusion from two sources - first, reading one of the legends books, key passages on fund flow impact and trading stood out to me - particularly the complete disregard for market impact (indeed telling the trader to "blast" stocks as needed).  Makes zero sense unless there is something beneficial going on - which is what occurs when stocks are "blasted" in conjunction with performance chasing fund flows.

 

Second, a now dead but once  large hedge fund founder/manager described how it worked in relation to his suspicion that one of the top quant funds was using their low-fee public vehicle to "pump" their high fee hedge funds - something they could get away with easier than others as quants "just different trading systems, strategies, etc" Problem is, if one signal lags due to different time horizon by design, it is easy enough to implement. 

 

With regards to ARKK I have no doubt that the actually dollar-weighted returns will end up being horrible - that is how all "pump up" investment stories end, even if its tactically the ideal way to grow AUM and an open-fund business (once again, no opinion on if/if not ARK or others who use this strategy know what they are doing). 

 

 

[Jurgis]

2021 Big Ideas report from ARK: https://ark-invest.com/big-ideas-2021/

 

They ask you to register.

 

Not much new for people who track the latest and greatest sexy hot new ideas and areas. Summarizes and hugely extrapolates a lot of things discussed on CoBF too. Bitcoin. Intel & not-Intel. Tesla clearly. Genomics. Space. The Final Frontier.  8)

[fareastwarriors]

Cathie Wood Amasses $50 Billion and a New Nickname: ‘Money Tree’

 

 

Ark Investment Management takes in almost $11 billion in 2021

Much-followed firm now sells branded hats, T-shirts, onesies

 

 

https://www.bloomberg.com/news/articles/2021-02-05/cathie-wood-amasses-50-billion-and-a-new-nickname-money-tree?srnd=premium

[Liberty]

Jason Zweig:

 

https://www.wsj.com/articles/cathie-wood-is-wall-streets-hottest-hand-maybe-too-hot-11612544044

[thepupil]

I will absolutely admit to wanting to see Ark completely implode under its own weight and see a massive reflexive drawdown. This would bring me far more joy than seeing a few hedge funds get squeezed. I don’t know what that says about me, but it’s true.

[Castanza]

https://twitter.com/michaeljburry/status/1357805615343575041?s=21

[Ballinvarosig Investors]

https://art19.com/shows/the-investors-podcast/episodes/668756b9-55bc-466c-9389-3a6611d2eeea

 

Has anyone listened to this? Cathie Wood actually characterised herself as a "deep-value investor". Her words - not mine.

 

As an aside, The Investors Podcast is something I had a lot of time for when it started, but what a dumpster fire it has turned out to be. How do you start off with Warren Buffett and end up with $hitcoins and ARKK?

 

By the way, I am very much cognizant that as I type this, Cathie Wood and ARKK have hit an all-time high.

[Buckeye]

https://art19.com/shows/the-investors-podcast/episodes/668756b9-55bc-466c-9389-3a6611d2eeea

 

Has anyone listened to this? Cathie Wood actually characterised herself as a "deep-value investor". Her words - not mine.

 

As an aside, The Investors Podcast is something I had a lot of time for when it started, but what a dumpster fire it has turned out to be. How do you start off with Warren Buffett and end up with $hitcoins and ARKK?

 

By the way, I am very much cognizant that as I type this, Cathie Wood and ARKK have hit an all-time high.

 

Not to derail the discussion on ARKK, but Ballinvarosig, your mention of Cathie Wood describing herself as a “deep-value investor” reminded me of this interview I just listened to with Chamath Palihapitiya where he says almost the exact same thing to describe his investing style. Not sure that I agree, but what do I know?:)

 

https://podcasts.apple.com/us/podcast/invest-like-the-best/id1154105909?i=1000507423983

[cameronfen]

https://art19.com/shows/the-investors-podcast/episodes/668756b9-55bc-466c-9389-3a6611d2eeea

 

Has anyone listened to this? Cathie Wood actually characterised herself as a "deep-value investor". Her words - not mine.

 

As an aside, The Investors Podcast is something I had a lot of time for when it started, but what a dumpster fire it has turned out to be. How do you start off with Warren Buffett and end up with $hitcoins and ARKK?

 

By the way, I am very much cognizant that as I type this, Cathie Wood and ARKK have hit an all-time high.

 

Not to derail the discussion on ARKK, but Ballinvarosig, your mention of Cathie Wood describing herself as a “deep-value investor” reminded me of this interview I just listened to with Chamath Palihapitiya where he says almost the exact same thing to describe his investing style. Not sure that I agree, but what do I know?:)

 

https://podcasts.apple.com/us/podcast/invest-like-the-best/id1154105909?i=1000507423983

 

I feel like “ deep-value investor” conveys a sort of expertise to LPs regardless of your actual strategy.  Momentum investor or even growth investor has connotations of being more like a retail investor imo. 

[Jurgis]

https://art19.com/shows/the-investors-podcast/episodes/668756b9-55bc-466c-9389-3a6611d2eeea

 

Has anyone listened to this? Cathie Wood actually characterised herself as a "deep-value investor". Her words - not mine.

 

....

 

Not to derail the discussion on ARKK, but Ballinvarosig, your mention of Cathie Wood describing herself as a “deep-value investor” reminded me of this interview I just listened to with Chamath Palihapitiya where he says almost the exact same thing to describe his investing style. Not sure that I agree, but what do I know?:)

 

https://podcasts.apple.com/us/podcast/invest-like-the-best/id1154105909?i=1000507423983

 

I too am a derp-value investor.

[Spekulatius]

In my view, open end fund management and business success/growth has next to nothing in common with managing a fixed pool of capital or even a fund that does not have routine inflows and outflows. 

 

In my study of open-end funds I came to the conclusion for start-up open-end managers, the key is getting a volatility pump going where inflows become a beneficial force on prospective returns.  No one wants to acknoledge that for obvious reasons, but in my view it is true for even the "legends" even if they participated in this unintentionally (which I personally doubt, its too obvious). 

 

A variation of it is the micro-cap LP manager who keeps pumping money into the same stocks as flows come in and before the cycle implodes diversifies new money into bigger names - or sets up a larger cap fund that old positions can be transferred into. 

 

I have noted this same pattern with many guys who have successfully bootstrapped small funds to larger funds - to the degree they are aware of what they are doing, I don't know.    A key though is clearly having good fund raising ability - consistent  - the folks toiling away not talking to anyone never benefit from their own flows (which, is of course what most would agree is how things are "supposed" to work).

 

I first came to this conclusion from two sources - first, reading one of the legends books, key passages on fund flow impact and trading stood out to me - particularly the complete disregard for market impact (indeed telling the trader to "blast" stocks as needed).  Makes zero sense unless there is something beneficial going on - which is what occurs when stocks are "blasted" in conjunction with performance chasing fund flows.

 

Second, a now dead but once  large hedge fund founder/manager described how it worked in relation to his suspicion that one of the top quant funds was using their low-fee public vehicle to "pump" their high fee hedge funds - something they could get away with easier than others as quants "just different trading systems, strategies, etc" Problem is, if one signal lags due to different time horizon by design, it is easy enough to implement. 

 

With regards to ARKK I have no doubt that the actually dollar-weighted returns will end up being horrible - that is how all "pump up" investment stories end, even if its tactically the ideal way to grow AUM and an open-fund business (once again, no opinion on if/if not ARK or others who use this strategy know what they are doing). 

 

 

 

That’s a pretty insightful post here that deserves some reflection and I think you clearly are onto something. It is probably particular important for micro and small cap fund manager but does apply to larger larger players as well.

 

For microcaps it happens quite often that despite similar fundamental, some stocks move and other don’t or move much later to the game. The difference doesn’t seem to have much to do with fundamental and they are more likely due to funds flow. It is clear that some manager can create their own fund flow first with their own buying and then through buying from their sphere of influence  - by publishing their research or just folks that follow what they are doing or possibly even collusion or cooperation.

 

For  ARKK for example, we can look at PACB which has been here discussed as a failed merger arb and really as a standalone business doesn’t seem to be viable. Well, it has been a ten bagger since ARKK started to buy it, but is it really a much better business than it was a year ago, It doesn’t look much different to me, but now we got a buyer (ARKK) with a cloud of other buyers that probably just follow.

 

Right now, I wonder how many other stocks are like this, fund manager X starts buying, the stock moves and than other buy as well, because the stock moves or well known manager x is buying...

[BG2008]

I will absolutely admit to wanting to see Ark completely implode under its own weight and see a massive reflexive drawdown. This would bring me far more joy than seeing a few hedge funds get squeezed. I don’t know what that says about me, but it’s true.

 

As your alter ego, I would say that you are a sexist who worships Billy Ackman but can't stand the success of a woman who managed to catch lightning in a bottle with her stock picks. 

 

;) 

[Read the Footnotes]

I will absolutely admit to wanting to see Ark completely implode under its own weight and see a massive reflexive drawdown. This would bring me far more joy than seeing a few hedge funds get squeezed. I don’t know what that says about me, but it’s true.

 

As your alter ego, I would say that you are a sexist who worships Billy Ackman but can't stand the success of a woman who managed to catch lightning in a bottle with her stock picks. 

 

;)

 

Ok, you two. It's this kind of thinking that is going to lead to missing out.

 

Cathie herself has said investment firms not set up like Ark are going to be depriving investors of the biggest opportunities of our lifetime. I can hardly imaging what fate must await you two Negative Nelly's.

 

;)

 

I guess I too am going to be missing out, and I'd like to add that I think many people overlook that the WSB crowd seems to not only like Cathie Woods, but the WSB crowd buys the ARK funds, they buy the funds' constituents, and they speculate and buy the anticipated additions to the funds. How is that for creating additional reflexivity?

 

People who think the WSB and ARK phenomena are separate unrelated events of irrationality may be overlooking connections between the two.

[bizaro86]

I will absolutely admit to wanting to see Ark completely implode under its own weight and see a massive reflexive drawdown. This would bring me far more joy than seeing a few hedge funds get squeezed. I don’t know what that says about me, but it’s true.

 

As your alter ego, I would say that you are a sexist who worships Billy Ackman but can't stand the success of a woman who managed to catch lightning in a bottle with her stock picks. 

 

;)

 

Ok, you two. It's this kind of thinking that is going to lead to missing out.

 

Cathie herself has said investment firms not set up like Ark are going to be depriving investors of the biggest opportunities of our lifetime. I can hardly imaging what fate must await you two Negative Nelly's.

 

;)

 

I guess I too am going to be missing out, and I'd like to add that I think many people overlook that the WSB crowd seems to not only like Cathie Woods, but the WSB crowd buys the ARK funds, they buy the funds' constituents, and they speculate and buy the anticipated additions to the funds. How is that for creating additional reflexivity?

 

People who think the WSB and ARK phenomena are separate unrelated events of irrationality may be overlooking connections between the two.

 

I'm definitely missing out (unless it crashes, then my puts on their funds will do well).

 

There is definitely reflexivity here. But in some ways the reflexivity is past the point of benefiting them

 

To the extent the future holdings of their space fund get bid up before the fund even launches (pun very much intended) that will hurt their performance. It makes it harder for them to push the firms up, because the initial market caps are larger.

[Xerxes]

Folks a technical question:

 

When you buy a ARK ETF off the public market. How does it relate to the AUM.

When i am buying, someone is selling to me. So AUM shouldn't go up.

 

If ARK were to create new ETF units and sell those directly to new investors, than that does moves the AUM of ARKK ?

 

If so, what is the incentive to buy direct as oppose to buy from the market direct.

 

[thepupil]

https://www.etf.com/etf-education-center/etf-basics/what-is-the-creationredemption-mechanism?nopaging=1

[bizaro86]

Folks a technical question:

 

When you buy a ARK ETF off the public market. How does it relate to the AUM.

When i am buying, someone is selling to me. So AUM shouldn't go up.

 

If ARK were to create new ETF units and sell those directly to new investors, than that does moves the AUM of ARKK ?

 

If so, what is the incentive to buy direct as oppose to buy from the market direct.

 

AUM will go up if the market bids the etf up so the price is over NAV. More buyers makes that more likely, but it only adds AUM indirectly.