A tiny ETF tracking innovative companies is quietly outpacing one of the most famous investments on Wall Street.
The Direxion Moonshot Innovators ETF (MOON) has risen 39% this year, compared to ARK Innovation ETF’s 3.5% gain, according to data compiled by Bloomberg.
Cathie Wood’s flagship fund, known by its ticker ARKK, became one of the top-performing exchange-traded funds in the past year thanks to big bets on tech firms that she believes will disrupt their industries. That’s spawned at least half a dozen new products that similarly invest in innovation but use different tactics.
Wood’s funds, especially ARKK, have faced turbulence in recent weeks as tech got hit by valuation-fears caused by rising yields. MOON and some other copycats have avoided much of that by loading up on biotechnology, with holdings like ImmunityBio, Inc., which focuses on immunotherapy products, up 131% this year.
Read FA’s profile of the MOON ETF here.
MOON “has a heavier weight to biotech companies and less on straight technology and internet companies, which are the reason why ARKK has underperformed,” said Mohit Bajaj, director of ETFs for WallachBeth Capital.
Launched in November, MOON has risen roughly 70% since then, yet has attracted only about $220 million in assets. ARKK’s haul of more than $7 billion so far this year has put its total above $24 billion.
The definitions of “innovation” and “disruption” are in the eye of the beholder, so funds can embrace those themes in different ways. In the case of ARKK, that focus is narrower and its active management structure gives Wood the ability to alter positions based on the latest companies performing well.
Yet ARKK’s large stakes in firms like Tesla Inc., Square Inc. and Roku Inc. dragged it down in the past month, with the automaker, for instance, slumping more than 36% from its January high before rebounding 26%.
MOON’s passive fund tracks the S&P Kensho Moonshot Index of the 50 most-innovative companies in sectors ranging from smart transportation to human evolution.