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ARKK vs ARKG: Head-To-Head ETF Battle

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ARKG vs ARKK

If you are thinking of investing, you may have considered diversifying your portfolio. One option to be able to do so is ETFs or exchange-traded funds. These are managed securities that keep track of a sector, commodity, or another asset and gain value from those.

As stated in the name, ETFs can be traded on exchanges just like stocks. Therefore, the price of an ETF will change across the trading day as they are bought and sold by traders.

Now, why exactly would you want to invest in an ETF? As we already mentioned, they are a great option to diversify your portfolio. But why is that? The simple reason is that they naturally track a great variety of different assets. If a single stock falls, you may not be so heavily affected, and the other areas in the fund will cover that fall.

What are the ARK ETFs

So, now let’s look at the ARK ETFs in particular. What exactly brings these together? The ARK ETFs have a theme of focusing on disruptive technologies, and this theme of innovation is found across all ARK ETFs. How exactly do they qualify something as being innovative? For this, the technologies must meet three different criteria:

  1. They must see dramatic cost declines and unleash waves of incremental demand: At a certain point of any technology, the same cost does go down, and the addressable markets widen. This means that it does see significant demand already, and the cost is becoming accessible.      
  2. The tech must cut across sectors and geographies: This means that they see global industry crossing acceptance. This also means that they provide product-market fits and have gained interest from many different disciplines.
  3. The same must serve as a platform for further innovation: This means that the technology must find additional adopters. The use cases for the technology cannot be singular and have multiple use-cases.     

So what ARK provides exact ETFs? There are 6 active ETFs:

  • ARK Innovation ETF (ARKK)
  • ARK Next Generation Internet ETF (ARKW)
  • ARK Next Generation Internet ETF (ARKG)
  • ARK Autonomous Tech. & Robotics ETF (ARKQ)
  • ARK Fintech Innovation ETF (ARKF)
  • ARK Space Exploration & Innovation ETF (ARKX)

What Benefits Do ARK ETFs Provide?

Some benefits come with the ARK ETFs. For one, it is an actively managed fund, which means that the ETFs’ holdings are very dynamic. If a company does see promise, ARK may see it fit to incorporate the same into the fund.

There is another aspect that comes with the ARK ETFs. While they don’t provide many dividends, and these can be pretty unstable, these are not the vital part of the ETF.

When you are looking to invest in an ARK ETF, you look at how the same will appreciate over time rather than the dividends. Seeing how your investment in the ETF gains in value is what you are most interested in.

Who manages the ARK ETFs?

The firm that manages both ETFs is ARK Invest. They are an investment firm that manages several different ETFs. The firm was founded in 2014 by Cathrine D. Wood with a focus on disruptive innovation.

The company launched with 4 active ETFs and later started maintaining 2 different index funds. These are the 3D Printing ETF, launched in 2016, and the Israel Innovative Technology ETF, launched in 2017.

The firm has since grown to become one of the top ten issuers of ETFs in the world, overseeing about $41.5 billion in ETF products. This has made it one of the biggest players in the world of ETF.

What is ARKK?

So, let’s get it started. What exactly is the ARK Innovation ETF or ARKK? This is the flagship actively managed fund from ARK, and this fund looks to invest in disruptive innovation technology across all sectors in the global market.

In terms of what is meant with ‘disruptive innovation’. This refers to any technologically enabled new product or service that potentially changes the way the world works. Companies in the ARKK include those that rely on or benefit from advances in the areas of:

  • DNA Technologies and the “Genomic Revolution”: These are companies focused on extending and enhancing the quality of life for people across the world. This is done by incorporating technological and scientific developments, improvements, and advancements in genomics into their business. Now, these companies don’t necessarily have to all provide the same services, and these can be found across healthcare, information technology, and materials.
  • Automation, Robotics: These are companies that look to capitalize on the productivity of machines through automation. This can be in such areas as transportation as well as other robotics firms.
  • Energy Transformation: In terms of energy transformation, these companies capitalize on innovations in how we deal with energy, including the acquisition and storage thereof.
  • Artificial Intelligence: When referring to a technology fund, you can’t do without artificial intelligence. These companies look to design, create, integrate and deliver robotics and artificial intelligence technology and services.
  • “Next Generation Internet”: Those looking to benefit and build on the technology infrastructure that deals with sharing information and technology and the internet in general.
  • Fintech Innovation: Lastly, the fund looks to invest in financial technology innovation with companies that can benefit from advancements in the financial sector and how economic transactions happen.

So what exactly are companies in the fund investing in? The fund invests in 45 different innovative technologies. Let’s look at the top ten holdings and the weights of the same:

You can see that there is a heavy emphasis on those firms that are at the forefront of innovation right now. Do note that the ARKK has a significant investment in Tesla, and this means that there is a large dependence on what happens with the Electric Vehicle company.

What is ARKG?

Now that we’ve seen the ARK innovation fund, let’s look at the ARK Genomic Revolution ETF or ARKG. This fund looks to build and invest in those companies that look to build on the quality of human life.

These are those technology and biotechnology industries that look to incorporate advancements in genomics into their business. The companies held in ARKG are leaders, enablers, or beneficiaries of technologies, including:

  • CRISPR: The genetic engineering technique by which the genomes of living organisms can be modified and changed.
  • Targeted Therapeutics: Technologies that build on and work on the identification and treatment of specific cancer cells. It involves drugs targeting specific genes and proteins involved in the growth and survival of cancer cells.
  • Bioinformatics: ARKG looks to invest in those companies that combine the computation and analysis tools with biological data.
  • Molecular Diagnostics: Technologies building on techniques used to analyze biological markers and how cells express these genes. This is done to diagnose and monitor disease and risk and see which therapies work best for cases.
  • Stem Cells: This technology combines cell biology, genetics, and clinical medicine to effectively treat malignant and non-malignant diseases.
  • Agricultural Biology: The application of scientific principles, biotech, and genetics to problems in modern agricultural production and environments.

So what companies have ARK identified in this theme of genomic revolution? At this time, the fund has invested in 53 different companies. The 10 most important ones are:

  • TESLA INC 10.38%
  • COINBASE GLOBAL INC – CLASS A 6.11%
  • UNITY SOFTWARE INC 5.88%
  • TELADOC HEALTH INC 5.80%
  • ROKU INC 5.40%
  • ZOOM VIDEO COMMUNICATIONS – A 4.94%
  • SHOPIFY INC – CLASS A4.32%
  • SPOTIFY TECHNOLOGY SA3.99%
  • SQUARE INC – A 3.59%
  • EXACT SCIENCES CORP 3.55%

We can see the influence in health and biotech that this fund focuses on. The ARKG ETF builds on the future of health and Genomic sequencing.

Comparing the ARKK and ARKG

Now, both ARKK and ARKG have quite some overlap in what refers to the technologies that they invest in. Given that the ARKK fund does also invest in DNA technologies and the “Genomic Revolution”, there is some overlap in theme. As we can see in the following weight tables, there is quite a bit of overlap in what sectors these themes cover:

ARKK Sector Breakdown

  • Information Technology: 31.1%
  • Health Care: 29.3%
  • Communication Services: 17.4%
  • Consumer Discretionary: 13.8%
  • Financials:6.3%
  • Industrials: 1.9%
  • Not Classified: 0.2%

ARKG Sector Breakdown

  • Health Care: 94.7%
  • Information Technology: 3.9%
  • Not Classified: 0.7%
  • Materials: 0.6%

We can see that both put a significant emphasis on both information technology and healthcare. Given the advancements and the new growth, and further incorporation of cutting-edge technology into healthcare, it’s easy to see that there would be such an overlap.

If we look at the technology breakdown, a similar overlap is visible:

ARKK Technology Breakdown

  • Cloud Computing: 13.0%
  • Digital Media: 11.9%
  • E-Commerce: 10.9%
  • Gene Therapy: 6.0%
  • Big Data & Machine Learning: 5.6%
  • Internet of Things: 5.4%
  • Blockchain & P2P: 4.9%
  • Mobile: 4.8%
  • Instrumentation: 4.6%
  • Bioinformatics: 4.5%
  • Molecular Diagnostics: 4.4%
  • Robotics: 4.0%
  • Next Generation Oncology: 3.5%
  • Energy Storage: 3.3%
  • Social Platforms: 2.4%
  • Autonomous Vehicles: 2.4%
  • Development of Infrastructure: 2.0%
  • Beyond DNA: 1.8%
  • Targeted Therapeutics: 1.7%
  • Space Exploration: 1.5%
  • 3D Printing: 1.2%

ARKG Technology Breakdown

  • Molecular Diagnostics: 18.1%
  • Bioinformatics: 17.5%
  • Targeted Therapeutics: 15.0%
  • Beyond DNA: 14.7%
  • Instrumentation: 13.7%
  • Next Generation Oncology: 11.1%
  • Gene Therapy: 8.2%
  • Stem Cells: 0.6%
  • Agricultural Biology: 0.4%

We can see that both do put a great emphasis on Molecular diagnostics, Bioinformatics, targeted therapeutics, and Beyond DNA. This does mean that both funds will track these technologies quite closely.

Performance

Looking at the performance of both, we can see that ARKK has been performing better over time. We can see that both have seen massive increases in the past years as the technologies behind them have grown.

We can see that both saw a great start to the year, reaching an all-time high in February of $159.70 for ARKK and $115.15 for ARKG. Unfortunately, both have seen a steady decline since.

Although there are these differences, both funds have been tracking very similar paths over time. This clearly shows the overlap between both funds and emphasizes why you want to hold only one of the two.

Final Thoughts: ARKK or ARKG?

ARKK has much broader diversification into companies that provide services of all sorts. What does this mean? Even if any individual companies have a weak year, your portfolio should still go up as the other companies will cover it.

Should you have confidence in the future of genomic technologies and what biotechnology will provide, your opinion may change. In this case, it may be a better idea to invest in the ARKG fund.

All that being said, if you do opt for one, the other should be out of the question. That being said, both funds have an active track record of being well managed by an investment team, and ARK has a strong track record of providing ETFs that have seen quite some success in the past.

Either way, as these technologies and the biotech sectors become more prevalent globally, these funds will see a growing pattern.

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