BMO ARK Innovation Fund ETF Series - ARKK Sales Aid
Innovation is Key to Growth
Jul. 31, 2023- The global economy is undergoing one of the largest technological transformations in history1 displacing industry incumbents and creating new leaders, enablers, and beneficiaries of disruptive innovation.
- ARK focuses solely on offering investment solutions to capture disruptive innovation that span market capitalization and sectors with low overlap to broad-market indices.
- Invests in five major innovation platforms that are evolving and converging at the same time: Artificial Intelligence, Energy Storage, Robotics, DNA Sequencing, and Blockchain Technology.
Why Innovation?
 | Invest In The Future Today Innovation could displace industry incumbents, increase efficiencies, and gain majority market share. This technologically enabled change offers long-term opportunities for companies and investors alike. |
 | Take Advantage Of Market Inefficiencies Market inefficiencies, such as short-term time horizons, siloed investment styles, closed off research mentality, or backwards looking indices may cause investors to miss out on future growth driven by disruptive innovation. |
 | Make The World More Innovative Good innovation investing should focus on technologies and companies that are likely to have a positive impact on our society, and the world’s ability to create further innovations. |
Reasons to Consider Utilizing ARKK - BMO ARK Innovation Fund ETF Series
| Cost Effective and Ease-of-Access | Provides a lower cost option with true active management in an ETF structure without the need for foreign currency exchange or US Estate tax considerations as it trades on the Toronto Stock Exchange. |
| Exposure To Innovation | Constant focus on secular trends and disruptive innovation that can complement traditional strategies and core portfolios due to low overlap of holdings. |
| Growth Potential | Aims to capture long-term growth with low correlation of relative returns to traditional growth strategies and negative correlation to value strategies, lower current valuations can serve as a good entry point as valuations have come off year to date 2022. |
| Tool For Diversification | Adds diversification to portfolios with negative correlation to traditional value strategies and low correlation to several core asset classes and traditional growth strategies. |
| Grounded In Research | Combines top-down and bottom-up research in its portfolio management to identify innovative companies and convergence across markets.2 |
Overlap of BMO ARK Innovation Fund ETF Series with major indices3:
3% S&P 500 Index stocks represented in the Fund | 7% NASDAQ Index stocks represented in the Fund | 2% MSCI World Index stocks represented in the Fund |
The ARK Difference
ARK Investment Management LLC (ARK) was founded in January 2014 by Catherine (Cathie) Wood and has $25.1 billion4 in assets under management. It focuses solely on offering investment solutions to capture disruptive innovation in the public markets. As the Founder, CEO and CIO of ARK, Cathie appears regularly on CNBC, Bloomberg, and Fox Business, among other broadcast news, and has been featured and quoted in The Wall Street Journal, Forbes, Fortune, Barron’s, New York Times, and numerous other media outlets. As a thought leader for investing in disruptive innovation, Cathie has been widely recognized for her vision and impact in the financial industry.
“Innovation should displace industry incumbents, increase efficiencies, and gain majority market share. More Importantly, disruptive innovation impact and concerns all of our lives.”
Catherine Wood, Founder, CEO and CIO of ARK Investment Management LLC
| Innovation is Expanding Now ARK has identified five major innovation platforms that are evolving and converging at the same time: Artificial Intelligence, Energy Storage, Robotics, DNA Sequencing, and Blockchain Technology. According to their research, enterprise value5 attributable to companies that participate in the underlying technologies attributable to these innovation platforms increased from roughly $7 trillion in 2019 to almost $14 trillion in 2020 and is forecasted to grow to $210 trillion by 2030.6 The global economy is undergoing the largest technological transformation in history. |  |
Investment Process: Combining Top-Down & Bottom-Up Research
| Case Study: Artificial Intelligence (AI)7 Artificial Intelligence could scale from almost $2.5 trillion in 2021 to $87 trillion in enterprise value by 2030, in part due to convergence across technologies. The convergence of robotics, battery technologies, and artificial intelligence is likely to collapse the cost structure of transportation, impacting the economics of auto, rail, and airline activities. The convergence of next generation DNA sequencing, artificial intelligence, and gene therapies should boost returns on investment significantly, potentially creating a golden age of health care likely to rival that of the eighties and nineties. By 2030, AI software companies could produce $14 trillion in annual revenue collectively. The resulting $4 trillion in free cash flow could create over $80 trillion in enterprise value, up from $2.3 trillion in 2021. By 2030, AI hardware companies could produce $1.7 trillion in annual revenue collectively. The resulting $350 billion in free cash flow could create $7 trillion in enterprise value. |  |
ETF Series at a Glance
| Invests in | Actively managed equity strategy that invests in companies that represent the best risk-reward opportunities from ARK’s investment theme of disruptive innovation, defined as the introduction of a technologically enabled new product or service that potentially changes the way the world works. |
| Investment process | Top-down and bottom-up; benchmark agnostic portfolio construction |
| Typical holdings | 35-55 positions |
| Weighted avg. market cap | $116 billion |
| Benchmark Index | MSCI ACWI (C$) |
TOP 10 HOLDINGS
- Tesla Inc
- Coinbase Global Inc
- Roku Inc
- Zoom Video Communications Inc
- Block Inc
- UiPath Inc
- Exact Sciences Corp
- Unity Software Inc
- Shopify Inc
- New Duke Holdco Inc
Target allocation of the Fund’s Top 10 Holdings, Sector and Region Breakdown and Weighted avg. market cap as of June 30, 2023. For illustrative purposes only and may change due to the Fund’s ongoing portfolio transactions without notice.
ETF Ticker: ARKK | MER*: 0.85%
*Also available in Mutual Fund Series. Management Expense Ratio (MER) is estimated as ETF is less than one year old.
How to use BMO ARK Innovation Fund ETF Series in Building A Portfolio
- Consider adding to your existing growth portfolio to add diversification to a unique theme
- A small allocation can lead to greater returns vs a traditional growth portfolio
- Use as a long term position to a series of sectors that are ongoing rapid innovation
Examples to consider: The first example is using BMO Growth ETF (ZGRO) without ARK Innovation ETF. The second example shows the inclusion of ARK Innovation ETF (NYSE: ARKK).
BMO Growth ETF - ZGRO
Portfolio Return/Metrics
1 Year | 10.49% |
| 3 Year | 7.68% |
| 5 Year | 7.68% |
| Return Since Common Inception | 8.42% |
| 3 Year Standard Deviation | 10.86 |
| 5 Year Standard Deviation | 11.64 |
| 3 Year Sharpe Ratio | 0.43 |
| 5 Year Sharpe Ratio | 0.33 |
BMO Growth ETF with 10% Allocation to ARKK*
Hypothetical Data based on the past performance of NYSE: ARKK - For Illustration Purposes Only.
Portfolio Return/Metrics
| 1 Year | 11.57% |
| 3 Year | 5.70% |
| 5 Year | 7.40% |
| Return Since Common Inception | 9.13% |
| 3 Year Standard Deviation | 12.60 |
| 5 Year Standard Deviation | 13.19 |
| 3 Year Sharpe Ratio | 0.29 |
| 5 Year Sharpe Ratio | 0.32 |
*The returns presented are not for a client portfolio but are for illustration purposes only. The scenario presented above uses the existing US ETF - ARK Innovation ETF (ARKK) as a substitute for BMO ARK Innovation Fund - ETF Series (ARKK) because the BMO Fund is new and has no performance history. The U.S. version has the same mandate and portfolio manager as the newly launched BMO ETF Series. NYSE:ARKK has different fees than the BMO Fund. BMO Growth ETF is prohibited from investing in an NYSE: ARKK because it is an actively managed U.S. ETF, Common Inception date is October 31, 2014. All return data is in CAD $ as of July 30, 2023.
1 Source: ARK Investment Management LLC
2 Traditional value investing is an investment strategy where stocks are selected that trade for less than their intrinsic values. Traditional growth investing is an investment strategy that focuses on stocks, whose earnings are expected to grow at an above-average rate compared to its industry or the overall market. Correlation is the degree to which two strategies move in relation to each other.
3 Source: ARK Investment Management LLC, as of September 30, 2022.
4 AUM as of June 30, 2022
5 Enterprise value is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization
6 Source: ARK Investment Management LLC, 2021
7 Source: ARK Investment Management LLC, as of June 30, 2022. Forecasts are inherently limited and cannot be relied upon. Artificial Intelligence (AI) – Artificial neural networks, or neural networks, are computing systems modeled loosely after biological neural networks like the human brain.
Advisor Use Only
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