BMO ARK Next Generation Internet Fund ETF Series - ARKW Sales Aid
Transforming the Way the World Works
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 ARK’s theme of next generation internet, including artificial intelligence, deep learning, cloud computing, big data, social platforms, e-commerce, blockchain technologies, and the Internet of Things (IoT), which are transforming every sector of the economy.
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 ARKW - BMO ARK Next Generation 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 | Invests in companies that are focused on and expected to benefit from shifting the basis of technology infrastructure to the cloud, enabling mobile and internet-based products and services, with potential for long-term growth. |
| 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 YTD. |
| 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.2 |
| Grounded In Research | Combines top-down and bottom-up research in its portfolio management to identify innovative companies and convergence across markets. |
ARK aims for negative correlation of relative returns to traditional value strategies… | 
| …and low correlation of relative returns to traditional growth strategies. |
The ARK Difference
ARK Investment Management LLC (ARK) was founded in January 2014 by Catherine (Cathie) Wood and has $25.1 billion3 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
| The Rise of the Digital Consumer The Internet is transforming every sector of the global economy and changing the way we manage information, analyze data, purchase goods, and communicate across the globe. The new digital consumer is spending an increasing amount of time socializing, playing, and purchasing online. As digital takes share in our daily lives, the market — as measured by online entertainment spend, advertising spend, and platform e-commerce fees — is likely to grow at an 18% compound annual rate during the next five years, from $1.8 trillion today to $4.1 trillion in 2026.4 |  |
Investment Process: Combining Top-Down & Bottom-Up Research
Case Study: Web35
Now that consumers are spending more time and resources online, the importance of digital assets is likely to increase considerably as consumer spending shifts to virtual worlds. ARK estimates that on average in 2030, internet users will spend 52% of their free time online and 48% offline. Web3 represents the next generation of the internet; one that is decentralized, incorporates blockchain technology and tokenbased economics, and is user-owned.
Based on ARK’s research, offline consumption will peak middecade at $49 trillion annually and then decline in response to Web3. Without Web3, annual online expenditures are likely to grow at an annual rate of 16%, from $1.4 trillion in 2021 to $5.2 trillion in 2030. With Web3, annual offline consumption is expected to depress by $7.3 trillion, boosting direct online expenditures at an annual rate of 28%, from $1.4 trillion today to $12.5 trillion per year.
 |  |
ETF Series at a Glance
| Invests in | Actively managed equity strategy that invests in companies that represent ARK’s investment theme of next generation internet. They are focused on shifting technology infrastructure to the cloud, enabling mobile, internet-based products and services, new payment methods, artificial intelligence, and social media. |
| Investment process | Top-down and bottom-up; benchmark agnostic portfolio construction |
| Typical holdings | 35-55 positions |
| Weighted avg. market cap | $37 billion |
| Benchmark Index | MSCI ACWI Technology Index (C$) |
TOP 10 HOLDINGS
- Coinbase Global Inc
- Tesla Inc
- Roku Inc
- Block Inc
- Unity Software Inc
- Zoom Video Communications Inc
- 3IQ Bitcoin ETF
- Shopify Inc
- Uipath Inc
- Roblox Corp
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: ARKW | 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 Next Generation Internet 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 Next Generation Internet ETF. The second example shows the inclusion of ARK Next Generation Internet ETF (NYSE: ARKW).
BMO Growth ETF - ZGRO
Portfolio Return/Metrics
| 1 Year | 10.83% |
| 3 Year | 7.68% |
| 5 Year | 7.27% |
| 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 ARKW*
Hypothetical Data based on the past performance of NYSE: ARKW - For Illustration Purposes Only
Portfolio Return/Metrics
| 1 Year | 12.73% |
| 3 Year | 5.97% |
| 5 Year | 7.72% |
| Return Since Common Inception | 9.79% |
| 3 Year Standard Deviation | 12.51% |
| 5 Year Standard Deviation | 13.02% |
| 3 Year Sharpe Ratio | 0.31 |
| 5 Year Sharpe Ratio | 0.34 |
*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 Next Generation Internet ETF (ARKW) as a substitute for BMO ARK Next Generation Internet Fund - ETF Series (ARKW) 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: ARKW has different fees than the BMO Fund. BMO Growth ETF is prohibited from investing in an NYSE: ARKW because it is an actively managed U.S. ETF. All return data is in CAD $ as of July 31, 2022. Common inception: October 31, 2014. Source: Moringstar Direct August 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 AUM as of September 30, 2022.
4 Source: ARK Investment Management LLC, 2021.
5 Source: ARK Investment Management LLC, 2021.
Advisor Use Only
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