Wood addressed the concerns on a webinar early this week, noting that the stocks her firm buys scale quickly, which helps to relieve capacity issues. Plus, the increase in initial public offerings and special-purpose acquisition companies will give them more options to choose from.
“When people say, ‘oh, they’re forced into larger-cap stocks,’ well, I can give you a few examples,” she said during the webinar, citing Invitae, which went from “roughly $250 million, if I’m not mistaken, to $8 billion.”
There are no signs that suggest trouble is imminent. Ark is luring all that cash because it has made highly successful bets on companies that have soared during the pandemic. Its five actively managed products have all returned more than 100% in the past year, among the best-performing in the U.S. The flagship $28 billion Ark Innovation ETF (ARKK) is up 164% in the past 12 months, compared to just 43% for Invesco QQQ Trust Series 1 (QQQ).
In fact, Wood’s moves are so closely watched that any stocks she chooses can receive a boost. Her new stake in DraftKings Inc. fueled a recent jump. And the announcement that she would launch the ARK Space Exploration ETF (ticker ARKX) ignited a sector-wide rally.
“The fact that they just filed for a space-themed ETF was enough to push the share price of Virgin Galactic higher, which is just incredible,” said Ben Johnson, Morningstar’s global director of ETF research.
Thematic funds as a whole are flourishing as investors seek to ride the next big trend, though there are worries that some pockets are getting frothy. For example, money is pouring into funds focused on responsible environmental, social and corporate governance practices even as their stocks trade at lofty price-to-earnings multiples.
“I’m sure Ark is happy to have the assets, but at the same time, if you look at the history of chasing hot active-managers in the mutual fund or hedge fund space there’s a lot of mean reversion, and lot of time that happens after big inflows,” said Ross Mayfield, investment strategy analyst at Baird.
This article was provided by Bloomberg News.