Recently, I was informed by a friend about ARK and the ETF funds it manages and found its investment style and return performance very impressive. In case you have not heard about it (like me), the company is famous for:
· Investments in disruptive technologies
· Extraordinary performance in 2020
· Holdings including Tesla and Bitcoin
· Daily disclosure of positions and trades
ARK funds seem to be first ETFs that charge a mutual-fund management fee but give hedge-fund performance. With the popularity of factor investing and index investing in past decade, all the facts led me to think: can we replicate the performance with the market and factors and how much alpha do the funds generate?
Therefore, I decided to do a style analysis of the 5 ARK funds to see what I can learn from their success of investment.
Gather Data
First, it’s worthwhile to read through the prospectus of 5 ARK funds to have a sense of what data might be useful for the analysis.
It’s interesting to see that:
· There is a huge difference between weighted average and median market cap.
· 3 funds invest in Tesla (largest share of each fund), 4 funds invest in Asia market and 1 fund…
