The biggest ETF industry success story of the past year (heck, the best story in the entire financial markets) has to be the ARK funds. This is the company that has gone completely against where the industry was headed - plain vanilla ultra-cheap funds - and managed to deliver huge returns focused on disruptive technology.
Most of the company's research has focused on next-gen technology, including robotics, autonomous vehicles, 3D printing, internet services, fintech and innovation. But 2020's most successful ARK ETF didn't come from the tech sector. It came from the healthcare sector.
Specifically, I'm talking about the ARK Genomic Revolution ETF (ARKG). It targets companies that are developing solutions which would enhance and extend human life. Those technologies could include genomics, CRISPR, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells and agricultural biology.
As I noted in an earlier profile of the ARK ETFs, the COVID-19 has shone a lot of light on the biotech sector as scores of companies race to develop and distribute a working coronavirus vaccine. Vaccine development, however, is only part of the equation. Immunotherapy and stem cell research, two primary target themes of the fund, may have even more long-term potential
Of the five ARK ETFs that returned more than 100% in 2020, ARKG led the way with a gain of 180%.
That's perhaps a little surprising given how tech and the industry's response to the COVID pandemic helped shape the economic narrative last year. It shouldn't be though since the firm's approach on targeting innovation and disruption wherever it lies could be equally applied to both technology and biotech.
Consider ARK's process:
"ARK recognizes that disruptive innovation causes rapid cost declines, cuts across sectors, and spawns further innovation. Through an iterative investment process, combining top-down and bottom-up research, ARK aims to identify innovation early, capitalize on the opportunities, and provide long-term value to investors."
ARK's Fast Start In 2021
It's still very early in 2021, but if the global economic recovery is able to remain intact, ARK is looking like it'll hit a few home runs again this year.
Leading the way again is the ARK Genomic Revolution ETF.
In less than three weeks, ARKG is already up another 16% on top of last year's 180% gain.
The COVID vaccine distribution has gotten off to a slow start, but it's easy to see how the race to create a working vaccine has accelerated the trend of biotech-related development. There are some well-founded concerns about current valuations levels - ARKG trades at around 12 times sales vs. less than 3 for the S&P 500 - but this is undoubtedly a rapidly growing space.
Can ARKG continue its hot streak in 2021? Impossible to say, of course, but it's got the combination of investing in one of the market's hotter sectors and being managed by one of the top research teams in the world acting as a tailwind. I wouldn't be at all surprised to see this ETF (and others from ARK) putting up another big year in 2021.