Cathie Wood’s ARK Innovation ETF could beat a Fidelity rival in this year’s race for top-performing exchange-traded fund. A key difference: Wood bet big on
Coinbase Global
while Fidelity shied away.
ARK Innovation,
Wood’s flagship ETF with $8.7 billion in assets, is up 60% this year, ranking fifth among actively managed ETFs, according to Morningstar Direct. Two of Wood’s other ETFs,
ARK Next Generation Internet
and
ARK Fintech Innovation,
rank first and second. All are beating
Fidelity Blue Chip Growth ETF,
up 55%, landing in ninth place.
Chalk up Wood’s win to
Coinbase
and crypto more broadly. Wood has long invested in Coinbase, which trades like a leveraged bet on
Bitcoin.
That hurt in 2022 as Bitcoin tanked, but it has paid off this year: Coinbase is up 295%, pushing well ahead of Bitcoin’s 155% gain. Regulators may soon approve an ETF that holds Bitcoin directly—including a pending application from ARK Investment Management—and investors have bid up the token in anticipation.
At about 10% of ARK Innovation, Coinbase is the ETF’s largest holding. Wood has been trimming her stake in the brokerage and now owns around 6 million shares in ARK Innovation, down from 8.3 million over the summer. But her firm still holds more than 8 million shares of Coinbase overall through ETFs, making it one of the brokerage’s largest stakeholders.
“It’s no secret that we are bullish on the outlook for digital assets, Bitcoin in particular,” Tom Staudt, ARK Invest’s president and CEO, told Barron’s in a recent interview. “Coinbase stands to be a beneficiary.”
Wood’s other top picks have also fared well, including
Roku,
up 158%,
UiPath,
up 99%, and
Tesla,
ahead 101%. Wood has cut Tesla considerably, however, from more than 3.5 million shares in June to 2.6 million as of December 13.
Wood, of course, is rebounding from a disastrous 2022; ARK Innovation lost 67% last year, ranking dead last among mid-cap growth ETFs. This year it’s in the top 1%, according to Morningstar, on track for a worst-to-first comeback.
ARK Innovation’s long-term returns are still lagging far behind the market. The ETF is off 58% over the last three years and is up just 31% in five years, falling well behind the Nasdaq Composite Index’s 122% five-year total return.
Fidelity Blue Chip Growth is also riding the tech wave: its top 10 holdings include
Nvidia,
Meta Platforms,
and
Uber Technologies,
up 231%, 179%, and 150%, respectively.
“I believe the portfolio was well-positioned for the AI-driven rally,” Blue Chip Growth primary manager Sonu Kalra said in an email to Barron’s. Positioning in tech, particularly a large slug of Nvidia, helped the fund outperform in the third quarter, he points out.
What appears missing from the ETF is Coinbase or anything crypto related, according to its latest holding report, dated October 31.
Whether crypto even belongs in the Fidelity ETF is debatable. The ETF largely tracks the portfolio of its mutual fund sibling with the same name. Judging by its strategy, crypto doesn’t make the cut for “blue chip growth.”
The lack of crypto has stung this year, but sticking with quality has delivered strong results for Blue Chip Growth. Highly profitable megacap tech stocks make up its core, including names like
Apple,
Microsoft,
and
Alphabet.
The fund also includes a smattering of other sectors and companies that have done well, notably
Eli Lilly,
up 57% this year thanks to its weight-loss drugs.
Both ARK and Fidelity’s Blue Chip ETF “are having a great year,” said Todd Rosenbluth, head of research at fund analytics firm VettaFi. “These aren’t closet index strategies—you’re getting the best ideas from active managers.”
Long-term returns are what count for many investors, though, and by that measure Blue Chip Growth looks superior. The mutual fund is up a cumulative 147% over the last five years. That beats Wood’s Bitcoin-juiced ETF and the broader market, without crypto in the mix.
Write to Lauren Foster at [email protected]
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