According to an SEC filing on Wednesday, ARK Invest plans to add the ARK Space Exploration ETF (ARKX) to its existing suite of 7 funds. The company is behind such wildly successful ETFs as the ARK Innovation ETF (ARKK) and the ARK Genomic Revolution ETF (ARKG), both of which returned more than 100% in 2020.
ARK and its rock star chief investment officer Cathie Wood have seen the company's assets under management balloon to roughly $40 billion, making it a top 10 issuer within the ETF industry. The company has achieved its position thanks to five of their funds achieving triple digit returns last year, a feat nearly unheard of in the industry.
ARKX will fit in nicely with the rest of the company's disruptive tech thematic lineup. Existing ARK ETFs target innovation, fintech, genomics and autonomous tech. A space exploration ETF, while not an original idea (the Procure Space ETF (UFO) has been around for nearly two years and has amassed $45 million in assets), sounds like a logical extension of existing tech-focused themes.
Like most other ARK ETFs, ARKX will be actively-managed and target companies that are engaged in the investment theme of space exploration and innovation. ARK defines “space exploration” as leading, enabling, or benefiting from technologically enabled products and/or services that occur beyond the surface of the Earth.
In the filing, ARK says that it believes that space exploration companies can be grouped into four overarching categories, each of which contains relevant sub-elements.
- Orbital Aerospace Companies - companies that launch, make, service, or operate platforms in the orbital space, including satellites and launch vehicles.
- Suborbital Aerospace Companies - companies that launch, make, service, or operate platforms in the suborbital space, including drones, air taxis and electric aviation vehicles.
- Enabling Technologies Companies - companies that create the technologies required for successful value-add aerospace operations, including artificial intelligence, robotics, 3D printing, materials and energy storage.
- Aerospace Beneficiary Companies - companies that stand to benefit from aerospace activities, including agriculture, internet access, global positioning system (GPS), construction and imaging.
The fund won't necessarily tilt towards any of these themes and the final portfolio is expected to contain 40 to 55 names that are "conviction weighted".
My Assessment of ARKX
I have no reason to believe that ARKX won't have the same potential for success that the company's existing ETFs do. ARK's research process is pretty consistent across all of its fund offerings with the only real difference being the sector that is targeted. The themes that ARKX will focus on, such as innovation, robotics, 3D printing and electric vehicles, are all areas that ARK focuses on already. The company and its research team are well-versed in how to pick winners and I'd expect the same chance of success for this fund.
The only thing I wonder about is the timing of the launch. The markets are awfully expensive right now and we're experiencing some of the loosest monetary policy that this economy has ever seen. Could debuting at or near a potential market top be bad timing that would negatively impact returns and push investors away from this fund? Possibly, but that's something that's uncontrollable.
I'm going to be really interested in seeing how ARKX does and what the portfolio is ultimately going to look like. I'd imagine assets under management are going to explode right out of the gate.