ARK Space Exploration & Innovation ETF's recent Process Pillar rating increase outweighs the negative impact of its fee hike, resulting in an upgrade to its Morningstar Medalist Rating to Neutral from Negative. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns a Below Average People Pillar rating. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and momentum exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy's parent organization earns the firm a Below Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Kratos Defense & Security Solutions

AeroVironment

Trimble

Iridium Communications

Teradyne

L3Harris

Archer Aviation

Amazon

UiPath

The 3D Printing ETF

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. ARK Space Exploration & Innovation ETF earns an Average Process Pillar rating. 

The largest contributor to the rating is the firm's five-year retention rate of 100% over the period. Management team experience, which averages 23 years at this fund, also strengthens the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy, over time, has consistently held more undervalued companies, compared with peers in the Mid-Cap Growth Morningstar Category. But in terms of size exposure, it is similar to the average. Analyzing additional factors, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has had lower exposure to momentum stocks over peers in recent years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. Such exposure tends to pay off when markets are hot and to be costly when they are not. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and technology relative to the category average by 35.0 and 8.0 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and financial services, underweight the average by 17.8 and 10.2 percentage points of assets, respectively. The portfolio is positioned across 37 holdings and is quite concentrated. Specifically, 60.2% of the strategy's assets are housed within the top 10 holdings, compared to the category average of 26.1%. And finally, in terms of portfolio turnover, on a year-over-year basis, 8% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

ARK Space Exploration & Innovation ETF's sole listed portfolio manager has not yet proven themself effective at running the strategy, leading to a Below Average People Pillar rating. With only one listed portfolio manager, the strategy leaves itself vulnerable to key-person risk. This is concerning as a strategy's team size and management stability contribute significantly toward the People Pillar rating.  Catherine D. Wood brings over 23 years of portfolio management experience to the table. However, the risk-adjusted performance of the strategies they manage has been weak, averaging a 1.2-star Morningstar Rating. Isolating the analysis to the fund at hand, Catherine Wood has delivered inferior performance, lagging both the category benchmark and average peer over the past two-year period. Finally, the manager's personal investments are another factor of analysis in the rating. Catherine Wood has invested between $100,000 and $500,000 in the strategy. This effort aligns interests with shareholders by investing alongside them.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Below Average

People

ARK Investment Management is a thematic-investing specialist that has done little to mitigate the significant risks borne by its clients. It earns a downgrade of its Parent rating to Below Average from Average.

ARK's main draw is its founder, chief executive officer, and sole portfolio manager Cathie Wood, who since launching the firm in 2014 has presided over its tremendous growth in recent years while establishing a broad media presence and enthusiastic following. Despite horrendous results across its lineup of six actively managed exchange-traded funds over the past 12 months, the firm has shown remarkable asset retention but little inclination to prevent future implosions. It had roughly $55 billion in assets under management as of March 2022.

The firm's risk-management resources are below industry standards. Its assets are mostly (if not entirely) tied to nondiversified portfolios that make huge industry bets, embrace stocks with high volatility, and are highly correlated to one another. The firm has no risk-management professionals to either define risk tolerance, monitor exposures, or foresee possible downsides.

It has in place a poor succession plan for 66-year-old Wood, the firm's majority owner and lone portfolio manager. Her would-be successor's 15 years of industry experience include none as a portfolio manager. Dovetailing with that key-person risk is the firm's inability to develop and retain talent on the analyst team.

The firm has been shareholder-friendly in some ways. Its ETFs are cost competitive relative to actively managed rivals, and Wood personally invests in them, which helps align interests.
But overall, the firm's stewardship falls short. A capability to manage its myriad risks and a culture that fosters career growth within the research team would do more.

Parent

ARK Space Exploration & Innovation ETF

ARKX actively selects global companies engaged in space exploration and innovation. The fund seeks long-term capital growth.

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ETF Trends' head of research, Todd Rosenbluth, stopped by the TD Ameritrade Network this week to discuss the ETFs to watch amid global changes. First off, Rosenbluth notes disproportionately high exposure in interest in aerospace and defense-oriented ETFs.

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Russia's ongoing war with Ukraine is casting a pall over the former's economy and place on the world stage. Some experts also believe it could be a drag on Russia's space program, which is often a source of national pride in that country.

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The attack in Ukraine has raised the prospect of higher military spending, pushing the aerospace and defense stocks higher.

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As the space investment thesis evolves, more investors are realizing that the final frontier is about much more than space tourism. Sure, space travel is interesting and grabs headlines, but from an investment perspective, there's much more to the space story.

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Successful 2021 space flights by SpaceX and Blue Origin, among others, helped usher space investing into the mainstream. So did the launch of the ARK Space Exploration and Innovation ETF (ARKX).

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After a smashing 2020, the pace of ETF launches has been robust in 2021. In 2021, we saw about a record 445 new products (per a Bloomberg article).

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The two pure-play space-sector ETFs remain relatively low volume entities. At this stage in the very early market for publicly-traded space stocks, we believe individual stock-picking remains a preferable approach.

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Systematic persistent inflation risk signaled by the Fed points to a persistent unfavorable environment for innovative growth companies. We draw references from scientific studies and showed that unprofitable companies with high valuations are prone to the most severe drawdown.

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Like other Ark funds, its space exploration ETF has gotten slammed lately. While it may be due for a bounce, the long-term prospects look uninspiring.

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After a period of underperformance, some ARK investors are jumping ship.

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Lucid Group

Rivian Automotive

"If we saw Lucid and Rivian getting into the autonomous world, especially Rivian ... that might be more interesting," Cathie Wood told CNBC.

Cathie Wood said Ark Invest would buy stock in Lucid and Rivian if the companies enter the autonomous vehicle space

Space is the final frontier, and while it's implicit that there's plenty of, well, space there, there's a rush to put more satellites into orbit to power broadband internet. That rush, which some experts call a land grab, has implications for exchange traded funds like the ARK Space Exploration and Innovation ETF (ARKX).

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ARK Innovation ETF

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Market volatility affects all companies, but can be particularly fraught for innovative firms. It is not unexpected that companies that are creating ideas that will define the future could hit challenges in the present.

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As markets cycle through equities and generate volatility, this can impact some innovative companies. However, pullbacks are often opportunities for investors to capitalize on the innovations that can change the world.

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Billionaires, such as Jeff Bezos, Richard Branson, and Elon Musk, are racing to get space. Actually, that trio has already been successful in doing just that, and that's a big reason why they dominate the space conversation these days.

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Macro headwinds sure made it challenging for investors to make good money out of the benchmark S&P 500 index in the third quarter. But did ones with money in Cathie Wood's Ark ETFs had it any better?

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Good timing is undeniably beneficial to new exchange traded funds regardless of underlying investment objective. That sentiment is proving accurate for the ARK Space Exploration and Innovation ETF (ARKX) and not simply because the fund has $608.5 million in assets under management following its late March debut — and also not because space tourism is [.

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Aerospace and defense stocks reside in the industrial sector — a group not necessarily known for being high-octane or thrilling. However, there are some fresher approaches to aerospace and defense stocks than basic industrial sector exchange traded funds.

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Recently, several companies, including Virgin Galactic (NYSE:SPCE) and Elon Musk's SpaceX, executed successful space flights. Those headlines stoked interest in exchange traded funds, such as the ARK Space Exploration and Innovation ETF (ARKX).

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ARK's growing success, following a wildly bullish call on Tesla several years back, has seen its product line expand. The leader of thematic ETFs - ARK has packaged a bunch of atypical equities together under different umbrellas.

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The ARK Invest Space Exploration ETF is investing in innovative companies, but it is also heavily supported by US Defense spending. That's because four of the top-10 holdings get the majority of their revenue via US Defense Department contracts.

News for ARK Space Exploration & Innovation ETF ETF (ARKX)