Despite People Pillar weakness and an Average Process Pillar, ARK Israel Innovative Technology ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization earns the firm a Below Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. ARK Israel Innovative Technology ETF earns an Average Process Pillar rating. The main contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 100% also contributes to 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 outperformed 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.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the ARK Israeli Innovation Index ("index").  The fund normally invests at least 80% of its total assets in securities that are included in the fund's benchmark index, and depositary receipts representing securities included in the index or underlying stocks in respect of depositary receipts included in the index. The index includes equity securities and depositary receipts of exchange listed companies that are incorporated and/or domiciled in Israel ("Israeli Companies"). The fund is non-diversified. 

 The portfolio is overweight in healthcare and communication services relative to the category average by 16.2 and 4.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and financial services, with technology underweighting the average portfolio by 19.1 percentage points of assets and financial services similar to the average. The portfolio is positioned across 50 holdings and is less top-heavy than peers. Specifically, 26.9% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 52.3% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 51% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

ARK’s team earns a Below Average People Pillar rating. The team benefits from the firm's five-year retention rate of 100%. However, the rating is weakened by the experience of the management team, which averages one year at this fund. The parent firm's five-year success ratio of 0% also detracts from the team. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

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 Israel Innovative Technology ETF

IZRL tracks an equally weighted index of Israeli companies causing advancements in the areas of genomics, health care, biotechnology, industrials, manufacturing, and IT.

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The ARK Israel Innovative Technology ETF is a potentially undervalued long-term investment opportunity despite geopolitical risks. Israel's tech sector and its listed stocks on US exchanges make IZRL an attractive investment option. The chart analysis suggests significant upside potential for IZRL, making it a strong buy on a 3-year basis.

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Exchange-traded funds that invest in Israel-related stocks were under pressure on Monday as the country stepped up airstrikes on the Palestinian enclave of Gaza in response to Saturday's unprecedented attack by the militant group Hamas.

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Israeli stocks and the related exchange traded funds, including the ARK Israel Innovative Technology ETF (IZRL), are under duress this year as Prime Minister Benjamin Netanyahu attempts to initiate changes to the country's judicial system that are widely unpopular among citizens. IZRL, which follows the ARK Israeli Innovation Index, is lower by 2.22% year-to-date.

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The ARK Innovation ETF (ARKK) accreted nearly half a billion dollars from investors in September. ARK Invest's flagship fund saw $441 million in net inflows in September, bringing the year-to-date net inflows to $1.4 billion.

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Early-stage technology investment returns are likely to be highly positively skewed, underscoring the importance of a small number of contributors in ARK's portfolios. Limiting individual position weights results in an implicit mean reversion strategy, which is more suited to cyclical value type investments.

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Among developed markets that are not the U.S. or Japan, Israel has one of the deepest technology sectors. As such, it's not surprising that the country is a prime destination for venture capitalists.

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Outside of the U.S. and select Asian countries, Israel is one of the most technology-centric nations in the world. Among exchange traded funds, the ARK Israel Innovative Technology ETF (Cboe: IZRL) is particularly levered to that theme.

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Growth stocks are facing challenges to start 2022 amid persistent inflation and expectations that the Federal Reserve could be forced to deploy more interest rate hikes than previously expected to damp soaring consumer prices. In other words, tech investors are dealing with some curve balls early in the new year, but recent growth stock weakness [.

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The ARK Israel Innovative Technology ETF (Cboe: IZRL) is one of the niftier exchange traded funds providing exposure to Israeli equities, and it could be in for a rebound as index provider MSCI reconsiders Israel's classification. It's been more than a decade since Israel was promoted to developed market status from the emerging markets classification — [.

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Outside of the U.S. and Asia, Israel is one of the most tech-centric investable markets in the world — a theme investors can access with select exchange traded funds, including the ARK Israel Innovative Technology ETF (Cboe: IZRL). IZRL, one of two passively managed ETFs offered by ARK Investment Management, isn't a dedicated technology ETF, but [.

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The Israeli equity market is crossing some notable milestones, and that could spark interest in related exchange traded funds, including the ARK Israel Innovative Technology ETF (Cboe: IZRL). “The total value of the companies traded on the Tel Aviv Stock Exchange (TASE) passed above the one trillion shekel threshold last month, according to the TASE [.

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The U.S. and China are the world's two largest economies, and each are posting impressive rates of economic growth this year, but investors looking for other fast-growing economies shouldn't sleep on Israel. They can get in on the act with the ARK Israel Innovative Technology ETF (Cboe: IZRL).

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Israel is readying for a new government as Benjamin Netanyahu's 12-year run as prime minister comes to an end. When news of the transition broke, Israeli stocks traded modestly higher, with the ARK Israel Innovative Technology ETF (Cboe: IZRL) posting a 1.4% gain on Monday.

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As Israel leads the charge to per capita vaccinations, investors can consider the ARK Israel Innovative Technology ETF (Cboe: IZRL). A month ago, 60% of Israelis were vaccinated, nearly double the corresponding vaccination rate of Americans at that time.

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News for ARK Israel Innovative Technology ETF ETF (IZRL)