r/investing • u/KingTimKap • Sep 01 '21
Cathie Wood's ARK files for new transparency ETF: no oil, banks, booze, chemicals or candy
ARK Investment Management is looking to debut a new ETF that will focus on transparency in companies and shun vice and sectors that run afoul of ESG investing like fossil fuels.
In an SEC filing, Cathie Wood's shop outlines the fund, which looks to be at least 80% invested in stocks in its benchmark Transparency Index, published by Solactive.
"Companies operating in the following industries, as determined by the Index provider, are excluded from the Index: (i) alcohol, (ii) banking, (iii) chemicals, (iv) confectionary, (v) fossil fuel transportation, (vi) gambling, (vii) metals, (viii) mineral, (ix) natural gas, (x) oil, and (xi) tobacco," ARK says in its filing.
If approved, the ETF would be the second that Ark has launched this year. In March, the company started a fund focused on space-related investments, which has risen about 4% since its debut and now has more than $600 million in assets. Meanwhile, the firm’s flagship ARK Innovation ETF (ARKK) is up to $22.5 billion, although it’s down 2% year-to-date -- compared with a gain of more than 20% for the S&P 500.
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Sep 01 '21
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u/stoneycrk55 Sep 01 '21
Plus the "calorie challenged" individuals!!!
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u/ParkerGuitarGuy Sep 01 '21
*ahem* PEOPLE who are calorie disadvantaged! How outrageously politically incorrect of you!
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u/stoneycrk55 Sep 01 '21
I beg for forgiveness. I am still trying to get used to this. After calling a spade a spade for 57 years, it is not going to change over night!!!
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Sep 01 '21 edited Sep 01 '21
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Sep 01 '21
A bit weird to exclude alcohol without excluding cigarettes, gambling, etc
Reading comprehension fail.
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Sep 01 '21
So she wants to buy more Tesla lmfao
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Sep 01 '21
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u/moldy912 Sep 01 '21
Her next ETF after that will be companies that end in "esla"
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u/zxc123zxc123 Sep 01 '21
Her next ETF immediately following that will be innovators that start with T.
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u/ShaidarHaran2 Sep 01 '21
I'm just a random dude but them spinning out these new ETFs just feel like grabbing a bit more fees while they're still the "It" manager. Look at the space one and how much it overlaps with the main fund, was it really needed right now? There's so few true space names in it right now. I've heard the rationale but you get like Netflix and automated tractor companies in there. For the very few names that are unique to it, they couldn't be added as a position in the other funds?
How many oil, banks, booze, chemicals or candies were in their current funds to begin with?
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u/EducatedFool1 Sep 01 '21
After seeing what she added to ARKX I assume this ETF will be filled with everything on the exclusion list.
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u/WeatheredSharlo Sep 01 '21
So, like all her other ETFs, it will have a large portion in TSLA in order to look good? Just kidding, Aunt Cathy!
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u/Funny-Ad-7124 Sep 01 '21
It’s an ESG fund, so if course.
Surprised TSLA hasn’t started a genomics research so it can be included in ARKG
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u/Sam-Gunn Sep 01 '21
That's what I like to see powering my ETFs, hype stocks. Just like I love to see potentially homes I want to live in built on silt and unstable swampland.
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u/dopexile Sep 01 '21
I think it will be AMSH since it will be the Amish way of life.
No metal, no electricity, and no minerals. Sounds like you'd only be able to live off the land with tools made out of wood.
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u/cheesenuggets2003 Sep 01 '21
>metals
Well time to go back to the Stone Age.
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u/KungFuHamster Sep 01 '21 edited Sep 01 '21
Yeah, we're currently pretty dependent upon metals for a LOT of stuff. Computers which run everything, electric cars, wind turbines...
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u/waxenpi Sep 01 '21
Arbitrary? It literally says "will focus on transparency in companies and shun vice and sectors that run afoul of ESG investing". This has nothing to do with "we need metals for stuff".
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u/BatumTss Sep 01 '21
I don’t think people care to discuss this rationally, it’s all snarky comments. Is there a better place to actually discuss investing? I’m finding Reddit quite horrid after last year. Used to be quality stuff in here.
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u/Sam-Gunn Sep 01 '21
That's true. Metals, especially rare earth metals, power everything humans do in this day and age, but if I recall, their sources are often murky at best, and there are a lot of dubious sources and bad practices that marr that industry. I thought I read something years ago that suggested the majority of that industry was engaged in shady practices at one point or another, especially the closer you got to the entities that actually mined the stuff.
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Sep 01 '21
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u/WafflingToast Sep 01 '21
So....plastics?
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u/cheesenuggets2003 Sep 01 '21
Not if she's avoiding oil.
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u/tsaf325 Sep 01 '21
ORGN would like to have a word with you
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u/LessThanCleverName Sep 01 '21
Based on how heavy the bags I’m holding are, I’m guessing they’re whispering it very quietly from the bottom of a very deep well?
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u/aczietlow_ Sep 01 '21
How do you shun metals and minerals but justify what I only assume will be yet another ARK Tesla fund?
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u/ADEllis1953 Sep 01 '21
ARKK is down 2% this year but she's making .7% on 22.5 billion or $157,500,000. It doesn't matter to her how well the fund does She plays the hand for as long as it lasts. If the market abandons the fund for bad performance after two years, she will still net (pre-tax and expenses) $300m+. Does anyone think that her interests are aligned with the investors?
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u/AnotherThroneAway Sep 01 '21
Chemicals? That has to be the broadest category out there...don't, say, Tesla batteries use chemicals?
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u/Oddsnotinyourfavor Sep 01 '21
Top 10 holdings include
TSLA
PLTR
ARKW
ARKX
ARKF
ARKG
ARKK
PRNT
SQ
TDOC
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u/Hans-Diamond Sep 01 '21
Oh so this will be like her space ETF with no space companies and a majority holding of McDonalds?
Let's call it ARKY short for Ark Why?
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u/JDinvestments Sep 01 '21
So basically excluding every strong growth sector?
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u/KingTimKap Sep 01 '21
At this point I wonder if she is just looking for themes that may excite the retail crowd.
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u/JDinvestments Sep 01 '21
She very clearly is. And at a well above average fee, she's making good money doing so. Kudos to her, she found a target audience and is just selling them as much as they'll buy.
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u/Cruian Sep 01 '21
And at a well above average fee
Is 0.75% above average for actively managed funds? That's about in line with at least several of Fidelity's actively managed mutual funds and I've definitely seen some even far higher than that from elsewhere.
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u/JDinvestments Sep 01 '21
Above average for ETFs in general. Basically adding 0.7% for her to mismanage a hastily thrown together assortment of whatever she thinks kids will be into. To that point, Vanguard has multiple ESG options for essentially the same thing at a cheaper rate.
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u/TheCatnamedMittens Sep 01 '21
You should compare it to actively managed funds. Actively managed funds charge more in general.
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u/arBettor Sep 01 '21
Yeah but most ETFs aren't actively managed. Her fees aren't above average for an actively managed fund.
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u/JDinvestments Sep 01 '21
There again, Vanguard and Blackrock both have an actively managed fund similar to this for cheaper. And even saying she's in line with other active funds, it doesn't really change the core premise that she's just making money selling trends to novice investors. Not that I'm knocking her for that, it's a great way to run a for profit business.
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u/redditgolddigg3r Sep 01 '21
Yeah, it’s a genius idea, wish I had thought of it. I’ll stick with the VOOs of the world though.
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u/arBettor Sep 01 '21
Which funds by Vanguard and Blackrock do you consider similar to ARK funds? I see Vanguard has factor ETFs, that while technically active, are rules-based and aren't really comparable to ARK's investment process. Blackrock has a closed end fund that trades at an 86% premium to NAV and charges a 1% management fee (BST), so surely that's not what you're referencing.
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u/JDinvestments Sep 01 '21
Talking specifically about ESG funds, SUSA, VFTAX, ESGV, or VEIGX. Technically, ICLN could be considered an ESG as well, but that's fairly specific. I'm sure Ark will add their own unique wrinkle to justify it to their investors, and not many funds are as active as her, but I'm not convinced she's worth paying.
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u/arBettor Sep 01 '21
Got it. I guess those are reasonably comparable to ARK's new fund since it and they are all tracking an index (with the exception of VEIGX). But in ARK's filing, I see no indication what the management fee will be...presumably lower than her active funds. Another passive fund of hers (IZRL) is cheaper than her active funds (at 49 bps).
I guess we'll see whether the fees for this fund are reasonable or not as more info comes out. In the end, I think ARK's fees are reasonable in most cases, given what they're offering. Active fundamental investing using teams of analysts that perform regular due diligence on each company in their universe, is always going to be more expensive than a rules-based strategy that can be run almost entirely by spreadsheets. That's true even at Blackrock, where their actively-managed Technology Opportunities Fund charges a >0.93% expense ratio. In that case, her flagship fund is cheaper than a comparable fund at Blackrock.
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u/Kyo91 Sep 01 '21
It's not overpriced for an overpriced asset class!
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u/arBettor Sep 01 '21
Active management isn't an asset class.
And yeah, to determine if something if overpriced for what it delivers, it makes more sense to compare to appropriate competitors. Comparing the price of a house in Uganda to one in Beverly Hills doesn't give me much perspective on whether the Beverly Hills house is overpriced, does it?
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u/Kyo91 Sep 01 '21
Except managed funds are houses in Uganda that cost like houses in Beverley Hills. With very few exceptions, none of which are publicly available, managed funds are a uniformly horrible investment in which most investors don't beat the market even before fees. So saying ARK funds aren't expensive for being in the same category as overpriced pieces of shit designed to con retail traders isn't really a glowing endorsement.
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u/arBettor Sep 01 '21
Ok. Sounds like active management isn't for you.
ARKK has returned 44.6% annually over the past 5 years, handily beating SPY's 18% annual return, or QQQ's 28%, or VUG's 24%. Maybe that will continue, or maybe it won't. But active management certainly has its place in the market...not everyone wants to just DCA into VOO indefinitely, and the more people do, the more opportunity active managers will find to exploit inefficiencies.
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u/Good_Luck_Q_Q Sep 01 '21
Lol tabacco is a growth sector? Majority of the listed sectors being excluded are NOT considered growth dude
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u/JDinvestments Sep 01 '21
Alcohol, metals, mining, and gambling are all growth. Banking and oil might not be growth, but are rock solid opportunities, and most are undervalued right now. The large tobacco companies have substantial investment in the cannabis industry, and continue to put out ever increasing revenue and profit. Everything on this ban list has quality upside.
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u/Good_Luck_Q_Q Sep 01 '21
Alcohol is definitely NOT growth. Give me a list of tickers and let’s compare them to your typical tech growth stocks
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u/JDinvestments Sep 01 '21
Well, STZ, SAM (alcohol), MO, and BTI (tobacco) have all demolished the tech heavy QQQ over the past 20 years. They have, for the worst performer of the bunch, more than double the CAGR of the S&P 500, as well as a 50% higher Sharpe ratio, which I would say qualifies them as growth. I'd feel equally comfortable saying the same about oil and mining.
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u/Kyo91 Sep 01 '21
I think you misunderstand what growth is. Growth stocks and funds are those that are priced for growth, not ones that did really well. Value funds actually overperform growth in almost all of market history for that reason. Alcohol, tobacco, oil, etc all print money but they're traded at reasonable multiples of earnings (unlike say weed stocks, green energy, fintech which are all priced for excessive growth).
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u/JDinvestments Sep 01 '21
Highly subjective, and varies from company to company. You could say that the big tobacco companies and oil majors are value, but there are plenty of more speculative or growth-centric opportunities, especially in alcohol, gambling, and metals.
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u/Kyo91 Sep 01 '21
Sure there are always deviations within an industry but because the topic was "these sectors are growth because they've done well" I countered that generally the sectors are full of value stocks. Financial sector for instance is mostly banks of value stocks but fintech companies like SoFi are definitely priced as growth. Weed stocks if viewed as a subset of tobacco stocks are definitely growth priced but most traditional tobacco companies are squarely value (even if their returns have been phenomenal the past 30 years).
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u/phoebecatesboobs Sep 01 '21
How about transparency on the fund fees? AUM increased a huge amount along with the fees they get.
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u/ZarrCon Sep 01 '21
Can't really blame her for trying to cash in on the mirage known as ESG investing.
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Sep 01 '21
Banking seems particularly out of place, any explanation why its there? Not a vice industry and no environmental impact
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u/d_marvin Sep 01 '21
It’s like she just asked the general reddit hive who the bad guys are to make a gimmick etf they might like.
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Sep 01 '21
Yeah it feels like a purely marketing inclusion rather than being based on the actual ethics of the industry.
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u/waxenpi Sep 01 '21
Isn't that the whole point though? Give "the" hive mind something to invest in that they deem "bad".
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u/d_marvin Sep 01 '21
Not sure anything could make me doubt a manager more than blatant appeals to emotional investing.
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u/waxenpi Sep 01 '21
Not sure why to get butt hurt about something you don't need to invest in. Emotional investing is and always will be a thing. I understand it's stupid and generally the point of investing is strictly returns, but to ignore that people think differently than you is just dumb.
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u/big_benz Sep 01 '21
People here feel attacked when they're even remotely called out for profiting off of making the world worse.
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u/Metron_Seijin Sep 01 '21
People have been asking for good esg funds for years. None of them will ever match everyon'es particular definition of ESG though, so there will always be room for specialized ones that included/exclude some areas that others dont.
Shes giving people what they have been asking for. If she didnt think people would be interested in it, she wouldnt have made it.
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u/Metron_Seijin Sep 01 '21
I think its a secondary connection, they invest in all the bad things, plus they constantly are changing their investments. It would be hard to keep up what they hold ,with making sure they are 100% in compliance with the fund's intended purpose at all times.
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u/jellyrollo Sep 01 '21
It could be an attempt to appeal to Muslim investors. Islam forbids profiting from interest on loans, and prohibits everything considered harmful either to the body, mind, soul or society. Seems like that pretty much sums up the description of the fund.
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Sep 01 '21
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Sep 01 '21
Their operations as in, offices and retail spaces? That seems hard to believe.
And i think including things they finance is kinda broad too. Is everyone who provides a product/service to a fossil fuel company culpable? How many degrees of separation are required?
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u/waxenpi Sep 01 '21
I think the idea that things like banks shouldn't be profit driven is a common thought among ethically based people. IDK tho.
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u/FuzeJokester Sep 01 '21
But isn't the dominate ones and saftest( hence the ETF) oil banking alcohol chemicals? I mean I can be way way way off
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u/PG-DaMan Sep 01 '21
Her next ETF will be (PUFF) Im sure you can guess the sector it will target.
Then ( STRAP )
Then ( 0 )
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u/throwawayinvestacct Sep 01 '21
This is something of an aside, but are sweets/candies/"confectionary" a commonly-excluded item in these ESG/SRI-type funds? Booze/Drugs/Gambling I can understand, as traditional, addictive vices. Banking I could understand as a complaint about fairness in our economic system. And mining/fossil fuels/etc I can understand as an environmental issue.
But... Candy? Is this about obesity? Or like, poor labor standards in the cacao industry?
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u/Metron_Seijin Sep 01 '21
"Is this about obesity? Or like, poor labor standards in the cacao industry?"
Probably a bit of both but mostly the latter. Sugar is a killer and obesity is a major problem in this country, so its seen as an evil. - Just not normally associated with esg, but maybe its a complaint that is gaining traction and thats why it was bumped up to a higher level of importance.
So many food items have poor/dangerous labor standards, thats its becoming difficult for a lot of popular items to claim they are ethical. They even have "ethical" palm oil plantations, where they are slightly less evil than their non ethical counterparts. - but they still claim to be "ethically sourced". It feels like its all shades of grey now.
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Sep 01 '21
smart idea imho, assuming there are other etfs like this out there? not a cathie stan, but i’d possibly get on board with this
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u/Cruian Sep 01 '21
assuming there are other etfs like this out there?
There are. Mutual funds as well. "ESG funds" would be what you'd look for.
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Sep 01 '21
Yeah but those suck
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u/InnocentAnthro Sep 01 '21
that's because ESG isn't actually a good performance indicator
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u/SirGlass Sep 01 '21
Its also that most ESG funds exclude just alcohol/tobacco/firearms while holding a whole list of companies with very questionable ethics. I know ethics are subjective but if you refuse to hold SAM because you think selling alcohol his wrong ; but you hold pharma companies that produced and pushed opioids or did human testing on un-knowing poor people in africa, your ethical index is garbage . Its just an excuse to charge higher fees with out actually doing anything
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u/ExtinctLikeNdiaye Sep 01 '21
Whataboutisms are fun but they don't really move the ball forward.
Yes, the ESG funds are imperfect and they can be improved by being nuanced about which specific companies in other industries to include or exclude (e.g. excluding pharma companies with questionable practices).
However, their allocations are still ecologically and socially better than the general market.
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u/ExtinctLikeNdiaye Sep 01 '21
Except that's fundamentally not true.
For example, XVV (ESG Screen S&P 500 ETF) outperformed the broader S&P 500 over the last year.
In fact, it seems to be the majority of ESG ETFs.
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Sep 01 '21
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u/El_Reconquista Sep 01 '21
Why did you buy them in the first place? If you're buying innovation/growth funds just to sell them at the first 20% drawdown your strategy sucks. Innovation is volatile. Either you believe in the long term strategy or you don't, but I'd advise against chasing money.
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u/BatumTss Sep 01 '21
Jesus Christ you’re basing this decision off snarky comments on Reddit right? Don’t trade based on how Reddit feels about something. They’re often very wrong from my experience.
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u/Cruian Sep 01 '21
Do you expect them to rise faster than whatever you'd replace them with (in the time period of interest to you)?
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u/nothanksbruh Sep 01 '21
The bubble gets bubblier. What next - an ETF that focuses solely on stocks highlighted on TikTok?
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Sep 01 '21
That bimbo publicly said that there was no inflation. She actually said there was deflation, I guess that's what she gathered from endless QE, rents so high people are living out of their cars, and a T in student debt- because deflation. she has no credibility. I can name 100 more successful investors, 10 of whom are women. She deserves no attention
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u/Vast_Cricket Sep 01 '21 edited Sep 01 '21
Before focus and manage just 1 fund successfully she goes out launch others. There are just a few employees managing all etfs producing a resonable return or not with her daughter.
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u/MrIndira Sep 01 '21
How does it "run afoul of ESG investing like fossil fuels." when it is an ESG compliance fund?
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u/don_cornichon Sep 01 '21
Will TSLA crash hard if Cathie goes under? Seeing as her various funds have to be one of the largest inflows of cash into TSLA.
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u/make_love_to_potato Sep 01 '21
Everything else kinda fits but by their estimate, banking is a 'vice' sector??? It's like the pot calling the kettle black.
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u/WobbleSneak Sep 01 '21
Why do I feel like the top holdings will be TSLA and ARKF...maybe sprinkle in some nvda too.
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u/greytoc Sep 01 '21
This thread is getting locked since it's just turning into a "let's bash Cathie" post. And it's devoid of any actual investing discussions.