Everything You Need to Know About Ark’s Space ETF

The holdings in the Ark Space Exploration and Innovation ETF might not be what your clients expect.

For a relatively low cost, thematic ETFs allow your clients to make bets on industries they expect to thrive. What if they want to invest in space exploration, a futuristic industry if ever there was one?

Ark Investment Management’s Space Exploration & Innovation ETF gives investors exposure to companies linked to the space economy, but its holdings are broader than some may expect. Let’s break down this ETF in detail and explore whether it’s a good investment opportunity for your clients.

What Is the Space Economy?

Simply put, the space economy is the industry that “creates value and benefits to human beings in the course of exploring, researching, understanding, managing and utilizing space.” Satellite technology allows streaming services, the internet, and other major technologies to work as they do today.

Investing in the space economy before it becomes even more profitable could be a wise idea.

What is the Ark Space Exploration ETF?

The Ark Space Exploration and Innovation ETF (ARKX), launched March 30, is an actively managed ETF seeking capital growth through investing in both domestic and foreign equity securities. At least 80% of assets are typically invested in companies engaged in space exploration and innovation, according to Ark Invest.

ARKX Performance

As of mid-October 2021, the fund’s shares are down about 4.5% since its inception. The ETF has a far lower trading volume than Ark’s Innovation ETF, with less than 400,000 shares changing hands per day, versus an average of nearly 5.6 million shares a day for the flagship fund.

How Does the Ark Space ETF Work?

The Ark Space ETF works the same way as other ETFs; investors can purchase ETF shares similarly to purchasing shares in regular companies or organizations. It has an expense ratio of 0.75%.

ARKX is designed to attract forward-thinking investors and regular people who simply want to get in on the space race action by supporting companies that send rockets into space or develop satellite technologies.

What Companies Does the Ark Space ETF Invest In?

The ETF’s top 10 holdings are:

As you can see, several of these companies are directly or tangentially related to space exploration and innovation. But the ETF also invests in a few more curious holdings, including:

Asked about the Netflix and Deere investments on CNBC in May, Ark Invest founder Cathie Wood said “the real money-making opportunity is not space tourism [but] mobile connectivity,” which uses satellites from companies like SpaceX to connect the unconnected masses to the internet, enabling them to access Netflix.

Deere, for its part, will benefit from drones and weather satellites that make farming more efficient, Wood said.

Because the Ark Space ETFs investments are designed around a theme, there’s plenty of room for interpretation. Indeed, Wood may have very good reasons for these choices. But if your clients decide to invest in Ark’s space ETF, be sure to review its current holdings with them and discuss whether it meets their definition of a “space investment fund.”

How Does the Ark Space ETF Stack Up Against Other Ark ETFs?

Alongside the Space Exploration Fund, Ark has a number of other ETF investment options, including:

The Ark Space ETF has more than $541 million in net assets. But the company’s other ETFs total well over several billion dollars in assets. For example, ARKK has total net assets of over $19 billion.

Some of these funds could be better than others for different investors. For example, many believe lots of jobs will be replaced by robotics or autonomous technologies in the near future, so the ARKQ fund may be a more practical investment choice for some investors.

There are also other space-themed ETFs to consider, such as the Procure Space ETF (UFO), SPDR Kensho Final Frontiers ETF (ROKT) or iShares U.S. Aerospace and Defense ETF (ITA).

Is the Ark Space ETF a Good Investment Opportunity in 2022?

Ultimately, ARKX is still in its early stages. It’s too early to say whether it’s an overall winner or loser in the market.

At this stage, the Ark Space ETF could be a good investment opportunity in 2022 for your clients if:

The Ark Space ETF is explicitly run for long-term capital performance. Therefore, it’s best to think of the Ark Space ETF as a vehicle to let money sit for many years or even decades. In theory, that money will grow dramatically thanks to the fund’s management and the projected interest in space innovation and growth over the next 20 to 30 years.

(Image: Adobe Stock)

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