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INNOVATION IS KEY TO GROWTHwww.ark-invest.com
For Informational Purposes Only. Not for Distribution.
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INVESTMENT OPPORTUNITYARK aims to identify large-scale investment opportunities by focusing on public companies that are the leaders, enablers, and beneficiaries of disruptive innovation.
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INVESTMENT OPPORTUNITY
TODAY, WE IDENTIFY MORE INNOVATION PLATFORMS THAN EVER BEFORE
• ARK seeks to capitalize on powerful opportunities for growth associated with secular shifts and long-term trends.
• While benchmarks reflect past successes, ARK’s investment approach focuses on innovation to capture future growth.
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INVESTMENT OPPORTUNITY
DISRUPTIVE INNOVATION CREATES OPPORTUNITIES AND VALUE TRAPS
[1] Anthony, Scott D., S. Patrick Viguerie, and Andrew Waldeck. "Corporate Longevity: Turbulence Ahead for Large Organizations." Innosight, 2016, https://www.innosight.com/wp-content/uploads/2016/08/Corporate-Longevity-2016-Final.pdf
40AVERAGE COMPANY LIFESPAN ON S&P 500 INDEX IN YEARS (rolling 7-year average)
20
30
10
0
1965
1975
1985
1995
2005
2015
2025
1970
1980
1990
2000
2010
2020
2030
• The average lifespan of S&P 500 companies reflects the accelerating pace of change.
• The average lifespan of an S&P 500 company has dropped from 33 years in 1965, to 20 years in 1990, and is forecast to shrink to 14 years by 2026. At the current and forecast turnover rate, roughly 50% of the current S&P 500 will be replaced within the next ten years.1
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INVESTMENT OPPORTUNITY
ARK IDENTIFIES FIVE INNOVATION PLATFORMS EVOLVING TODAY
These Innovation Platforms Enable Long-Term Investment Opportunities
Robotics Energy StorageDNA
SequencingArtificial
IntelligenceBlockchainTechnology
Industrial Innovation
Elements
Autonomous Vehicles
3D Printing
Robotics
Battery Technology
Space Exploration
Mobility-as-a-Service
Innovative Materials…
Genomics Innovation
Gene Therapy/ Stem Cells
Elements
DNA
Cancer Treatments
Diagnostics
Bioinformatics
Therapeutics
Agricultural Biology
…
Internet Innovation
Cloud Computing
Elements
Big Data
Artificial Intelligence
Mobile/ IoT
Digital Media
Bitcoin/ Cryptocurrencies
Fintech…
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INVESTMENT OPPORTUNITY
LONG-TERM INVESTMENT OPPORTUNITIES IN DISRUPTIVE INNOVATION
Human genomic sequencing is projected to grow at a 200% + annual growth rate over the next five years. Plants, animals, tumors, viruses, and bacteria also will be sequenced.1
CRISPR’s addressable market in the monogenic disease space totals more than $75 billion annually with nearly $2 trillion in latent demand from unaddressed populations.7
Autonomous Mobility-as-a-Service should reach $10 trillion in gross sales by the early 2030s.2
Globally, deep learning should approach a $17 trillion market cap in 20 years.3
Global sales of electric vehicles (EVs) should reach 17 million units by 2022.4
Mobile value transfers are expected to reach $55 trillion globally by 2022.5
The 3D printing market should grow from $6 billion in 2016 to $65 billion by 2022, with some estimates reaching $490 billion by 2025.6
[1] [2] [3] [4] [5] Source: ARK Investment Management LLC, 2018[6] Source: ARK Investment Management LLC, McKinsey[7] Source: ARK Investment Management LLC, 2017; Genetic Explanation: Sense and Nonsense. Gruber, Jeremy & Krimsky, Sheldon. 2013
Forecasts are inherently limited and cannot be relied upon. Please note, companies that ARK believes are capitalizing on disruptive innovation and developing technologies to displace oldertechnologies or create new markets may not in fact do so and/or may face political or legal attacks from competitors, industry groups, or local and national governments. ARK aims to educate investors and to size the potential opportunity of disruptive innovation, noting that risks and uncertainties may impact our projections and research models. Investors should use the content presented for informational purposes only, and be aware of market risk, disruptive innovation risk, regulatory risk, and risks related to the innovation area:
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WHY DISRUPTIVE INNOVATION?
ARK focuses solely on disruptive innovation to take advantage of four market inefficiencies
1. “The Market’s Short-Term Time Horizon”
2. “The Passive Public Markets”
3. “The Silo-ization of Wall Street”
4. “The Closed-off Research and Investment Mentality”
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WHY DISRUPTIVE INNOVATION?
1. “The Market’s Short-Term Time Horizon”
The market easily can be distracted by short-term price movements, losing focus on the long-term effect of disruptive technologies. We believe there is a time arbitrage ARK can take advantage of. We seek opportunities that offer growth over 3-5 years that the market ignores or underestimates.
Saddle Adoption Curve of Innovation
Source: ARK Investment Management LLC
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WHY DISRUPTIVE INNOVATION?
2. “The Passive Public Markets”
Aiming to Capture Growth in the Public Markets
ARK identifies inefficiencies in innovative stocks in the public markets, investing in companies best positioned for growth.
Diminishing Opportunities in the Pre- IPO Space
ARK believes traditional asset managers have crowded into the private space, limiting opportunities.
Missing the “Next Big Thing”in Benchmarks
ARK observes that investors have moved towards passive benchmarks, rewarding past successes, as indices tend to be market-cap weighted.
PRIVATE BENCHMARKPUBLIC
IPO–Filter
Innovation investors have crowded into the private markets, while at the same time the public markets have increasingly gone passive. Thus ARK believes innovative public companies with forward looking growth are the most inefficiently priced part of the market.
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WHY DISRUPTIVE INNOVATION?
3. “The Silo-ization of Wall Street”
Innovation cannot be boxed into sectors, geographies, or market caps. Index strategies tend to miss forward looking growth opportunities, while analysts covering disruptive companies have trouble understanding technology cost curves. ARK’s analysts are organized by cross-sector disruptive innovation themes to capitalize on the convergence of research.
Source: ARK Investment Management LLC; All data as of September 30, 2018
SECTORS
Health Care 37.6%Information Technology 23.9%Communication Services 17.0%Consumer Discretionary 17.0%Financials 3.5%Industrials 0.7%Funds 0.4%
MARKET CAPITALIZATION
Mega (100 B+) 13.0%
Large (10-100 B) 35.1%
Medium (2-10 B) 11.0%
Small (300M-2B) 38.1%
Micro (50-300M) 2.6%
INNOVATION PLATFORMS vs STYLE BOXESExample: ARK Disruptive Innovation Strategy — actively managed concentrated portfolio
VS.
PORTFOLIO COMPOSITIONGene Therapy 11.5%3D Printing 9.2%Autonomous Vehicles 8.7%Instrumentation 7.8%Big Data & Machine Learning 7.4%Molecular Diagnostics 6.9%E-Commerce 6.7%Robotics 5.1%Internet of Things 4.7%Digital Media 4.4%Bioinformatics 4.2%Social Platforms 4.1%Beyond DNA 3.3%Cloud Computing 3.2%Energy Storage 3.0%Targeted Therapeutics 2.8%Blockchain & P2P 2.5%Mobile 2.2%
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WHY DISRUPTIVE INNOVATION?
4. “The Closed-off Research and Investment Mentality”
Disruptive innovation demands an open-source approach to gain a deeper understanding of the convergence and full market potential. ARK uses an Open Research Ecosystem that combines top-down and bottom-up research. It is designed to identify disruptive innovation early, allowing for an organized exchange of insights between the portfolio manager, director of research, analysts, and external sources.
Data Sources
Analyst Teams
Portfolio Management
Theme Developers
A
PM TD
ARKLAB
TRADITIONALSOURCES
ONLINE +SOCIAL MEDIA
CROWDSOURCING
OPEN RESEARCH ECOSYSTEM
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WHY DISRUPTIVE INNOVATION?
HOW TO USE DISRUPTIVE INNOVATION STRATEGIES
1. Portfolio diversification — thematic investing in disruptive innovation can offer a low correlation of relative returns to traditional growth strategies and negative correlation to value strategies.
2. Source of alpha — a top-down approach looks at secular trends and ecosystems to find attractive growth opportunities across sectors.
3. Hedge for index-based strategies — a constant focus on secular changes and disruptive innovation can offer a portfolio hedge in a rapidly changing world and complement traditional strategies.
GROWTH STRATEGY SATELLITE STRATEGY HEDGE
Growth Portfolio
Core Portfolio
EquityPortfolio
The information herein is general in nature and should not be considered financial advice. An investor should consult a financial professional regarding the investor’s specific situation.
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ARK Invest155 W. 19th Street, 5th Floor
New York, NY 10011(212) 426-7040
www.ark-invest.com
Catherine D. WoodFounder CEO/CIO [email protected]
Tom StaudtChief Operating [email protected]
Kellen Carter, Chief Compliance Officer/Corporate Counsel [email protected]
CONTACT
©2018, ARK Investment Management LLC. No part of this material may be reproduced in any form, or referred to in any other publication, without the expresswritten permission of ARK Investment Management LLC (“ARK”).
The information provided is for informational purposes only and is subject to change without notice. This presentation does not constitute, either explicitly orimplicitly, any provision of services or products by ARK, and investors should determine for themselves whether a particular investment management service issuitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK, and are notendorsements by ARK of any company or security or recommendations by ARK to buy, sell or hold any security. Historical results are not indications of future results.
Certain of the statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on ARK'scurrent views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materiallyfrom those expressed or implied in such statements. The matters discussed in this presentation may also involve risks and uncertainties described from time to time inARK's filings with the U.S. Securities and Exchange Commission. ARK assumes no obligation to update any forward-looking information contained in this presentation.ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain informationwas obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from anythird party. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed.
Index Descriptions: The S&P 500® Index is a widely recognized capitalization-weighted index that measures the performance of the large-capitalization sectorof the U.S. stock market.
ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARKfor client accounts during the past year that could be considered by the SEC as recommendations go to http://ark-invest.com/wp-content/trades/ARK_Trades.pdf.It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosureshttp://ark-invest.com/terms-of-use.
