Why Invest in
Disruptive Innovation?
For Informational Purposes Only | As of September 30, 2020
[Link] ARKK
2 | Disclosure
Risks of Investing in Innovation
Please note, companies that ARK believes are capitalizing on disruptive innovation and developing technologies to
displace older technologies or create new markets may not in fact do so. ARK aims to educate investors and seeks to
size the potential investment opportunity, noting that risks and uncertainties may impact our projections and
research models. Investors should use the content presented for informational purposes only, and be aware of
market risk, disruptive innovation risk, regulatory risk, and risks related to certain innovation areas. Please read risk
disclosure carefully.
RISK FACTORS OF INVESTING IN INNOVATION
Rapid Pace of Change Regulatory Hurdles
Exposure Across Sectors and Market Cap Political or Legal Pressure
Disruptive
Innovation
Barriers to Entry Patent Protection and Intellectual Property Rights
Uncertainty and Unknowns Competitive Landscape
à Aim
Source: for a cross-sector
ARK Investment understanding
Management LLC, of technology
2019 à Aim to understand the regulatory, market, sector,
and combine top down and bottom up research. and company risks. (See Risk and Disclosure at the end)
3 | Why Invest In Innovation?
Identifying Investable Innovation Platforms
ARK’s investment process recognizes that true disruptive innovation causes rapid cost declines and demand growth,
cuts across sectors and geographies, and spawns further innovation, stimulating growth over extended time horizons.
1. Cost Curve Declines 2. Cross Sector Ramifications 3. More Innovation
Cost Decline Under Wright’s Law Penetration of Electricity by New Innovation and Technologies
(Including Tipping Point) Manufacturing Subsector 1 Thanks to Battery Breakthroughs
100%
0%
- 2% 80%
Percent Change in Costs
- 4% Cost curve bends as 60%
unit demand crosses
- 6% critical thresholds. 40%
- 8%
20%
- 10%
Cost declines compound as
production growth 0%
- 12%
accelerates. 1880 1900 1920 1940 1960
- 14%
- 16% Within 30 years, electricity
penetrated most sectors
[1] Jovanovic, Boyan & Rousseau, Peter L., 2005. "General Purpose Technologies," Chapter 18. | Subsectors include: Printing, Fabricated Metal,
Transport Equipment, Stone Clay Glass, Primary Metals, Petrol/Coal, Paper, Electric Machinery, Rubber, Leather, Chemicals, Textiles, and Food.
4 | Why Invest In Innovation?
ARK Believes Innovation is Key to Growth
We identify five major innovation platforms that are evolving today, transforming the way the world works
while enabling long-term investment opportunities.
Blockchain
Frictionless Value Transfer
Mobile Connected Devices
Internet of Things
Cloud Computing
Neural Networks
Reusable Rockets
Adaptive Robotics
3D Printing
Autonomous Mobility
Battery Systems
Gene Editing
Immunotherapy
Sequencing Technology
There is no guarantee the investment opportunities ARK seeks to identify will translate to sustained long-term growth.
5 | Why Invest In Innovation?
ARK FOCUSES ON INNOVATION TO TAKE ADVANTAGE OF FOUR MARKET INEFFICIENCIES
1. “The Market’s Short-Term Time Horizon”
The market easily can be distracted by short-term price movements, losing focus on the long-term effect of
disruptive technologies. We believe there is a time arbitrage ARK can take advantage of. We seek opportunities
that offer growth over 3-5 years that the market ignores or underestimates.
Saddle Adoption Curve of Innovation
Source: ARK Investment Management LLC
6 | Why Invest In Innovation?
ARK FOCUSES ON INNOVATION TO TAKE ADVANTAGE OF FOUR MARKET INEFFICIENCIES
2. “The Passive Public Markets”
Innovation investors have crowded into the private markets, while at the same time the public markets have
increasingly gone passive. Thus ARK believes innovative public companies with forward looking growth are the
most inefficiently priced part of the market.
Diminishing Opportunities Aiming to Capture Growth Missing the “Next Big Thing”
in the Pre- IPO Space in the Public Markets in Benchmarks
ARK believes traditional asset ARK identifies inefficiencies in ARK observes that investors
managers have crowded into innovative stocks in the public have moved towards passive
the private space, limiting markets, investing in companies benchmarks, rewarding past
opportunities. it believes are best positioned successes, as indices tend to be
for growth. market-cap weighted.
PRIVATE PUBLIC BENCHMARK
IPO–Filter
Source: ARK Investment Management LLC
7 | Why Invest In Innovation?
ARK FOCUSES ON INNOVATION TO TAKE ADVANTAGE OF FOUR MARKET INEFFICIENCIES
3. “The Silo-ization of Wall Street”
Index strategies tend to miss forward looking growth opportunities, while analysts covering disruptive companies
have trouble understanding technology cost curves. ARK’s analysts are organized by cross-sector disruptive
innovation themes to capitalize on the convergence of research.
Innovation vs. Traditional Silos
Robotics
Autonomous Vehicles
Market Capitalizations
Machine Learning
3D Printing
Energy Storage
E-Commerce VS. Style Boxes
Blockchain Technology
Bioinformatics
Industries and Sectors
Molecular Diagnostics
Source: ARK Investment Management LLC
8 | Why Invest In Innovation?
ARK FOCUSES ON INNOVATION TO TAKE ADVANTAGE OF FOUR MARKET INEFFICIENCIES
4. “The Closed-off Research and Investment Mentality”
Disruptive innovation demands an open-source approach to gain a deeper understanding of the convergence and
full market potential. ARK uses an Open Research Ecosystem that combines top-down and bottom-up research. It
is designed to identify disruptive innovation early, allowing for an organized exchange of insights between the
portfolio manager, director of research, analysts, and external sources.
OPEN RESEARCH ECOSYSTEM
Data Sources
Analyst Teams
Portfolio Management
Theme Developers
9 | ARK Seeks To Capture Disruptive Innovation
ARK’s ETFs Aim to Offer
1. Access to Growth
Investors who seek to access companies at the forefront of technology-enabled
innovation, in some of the most promising areas of the economy, with potential
for long-term growth.
2. Portfolio Diversification
Suited for investors who like to diversify their existing portfolio with strategies
that offer low correlation to a number of core asset classes held in most
investors’ portfolios.
3. Moderate-to-High Risk-Reward Profile
A constant focus on secular changes and disruptive innovation can compliment
traditional strategies and core portfolios. Investors should have a moderate-to-
high risk profile and intend to stay invested for the medium-to-long term.
The information herein is general in nature and should not be considered financial advice.
An investor should consult a financial professional regarding the investor’s specific situation.
10 | ARK Seeks To Capture Innovation
5 Reasons Investors Should Consider ARKK
1. Exposure To Innovation: Aims for thematic multi-cap exposure to innovation across sectors.
ARK believes the securities held in ARKK present the best risk-reward opportunities from
ARK’s innovation-based themes.
2. Growth Potential: Aims to capture long-term growth with low correlation of relative returns
to traditional growth strategies and negative correlation to value strategies.
3. Tool For Diversification: Offers a tool for diversification due to little overlap with traditional
indices. It can be a complement to traditional value/growth strategies.
4. Grounded In Research: Combines top-down and bottom-up research in its portfolio
management to identify innovative companies and convergence across markets.
5. Cost Effective: Seeks to provide a lower cost alternative to mutual funds with true active
management in an exchange traded fund (ETF) that invests in rapidly moving themes.
11 | ARK Innovation ETFs
PORTFOLIO COMPOSITION
ARK Innovation ETF — ARKK Cloud Computing 10.1%
E-Commerce 9.8%
The ARK Innovation ETF aims for multi-cap exposure to innovation Molecular Diagnostics 9.4%
across sectors. ARK believes the securities held in ARKK present the Gene Therapy 7.5%
best risk-reward opportunities from ARK’s innovation themes.
Big Data & Machine Learning 7.4%
Digital Media 7.3%
• Ticker: ARKK
3D Printing 7.3%
• Fund AUM: $8.9 Billion
• Holdings: 35-55 U.S. Equities/U.S.-listed ADRs Internet of Things 5.7%
• Expense Ratio: 0.75% Beyond DNA 4.8%
Bioinformatics 4.6%
TOP 10 HOLDINGS Weight Mobile 4.4%
Instrumentation 4.2%
TESLA INC 11.0%
Energy Storage 3.6%
INVITAE CORP 8.8%
Targeted Therapeutics 2.9%
SQUARE INC - A 6.4%
Autonomous Vehicles 2.2%
ROKU INC 5.3%
Next Generation Oncology 1.9%
CRISPR THERAPEUTICS AG 4.9%
Robotics 1.9%
PROTO LABS INC 3.5% Social Platforms 1.5%
ZILLOW GROUP INC - C 3.4% Development of Infrastructure 1.1%
2U INC 3.1% Space Exploration <1%
LENDINGTREE INC 2.9% Blockchain & P2P <1%
TELADOC HEALTH INC 2.9% Stem Cells <1%
52.0%
SECTORS
MARKET CAPITALIZATION
Health Care 35.5%
Mega ($100B+) 14.0% Information Technology 28.7%
Large ($10-$100B) 35.4% Communication Services 16.5%
Medium ($2-$10B) 35.3% Consumer Discretionary 11.1%
Small ($300M-$2B) 14.3% Financials 3.8%
Micro ($50-$300M) 0.4% Industrials 3.8%
Not Classified 0.6%
Holdings are subject to change and should not be considered as investment advice, or a recommendation to buy, sell or hold any particular security. The securities identified do not represent
all of the securities purchased, sold or recommended for client accounts. It should not be assumed that an investment in the securities identified was or will be profitable.
Source: ARK Investment Management LLC; All data as of September 30, 2020.
12 | ARK Innovation ETFs
Thematic Strategies Focused on Disruptive Innovation
ARKK PRNT
ARK Innovation ETF The 3D Printing ETF
ARKW IZRL
ARK Next Generation Internet ETF * Israel Innovative Technology ETF
ARKQ
ARK Autonomous Tech. & Robotics ETF *
ARKG
ARK Genomic Revolution ETF
ARKF
ARK Fintech Innovation ETF
*Effective as of November 4, 2019, the name of the ARK Web x.0 ETF changed to the “ARK Next Generation Internet ETF” and
the name of the ARK Industrial Innovation ETF changed to the “ARK Autonomous Technology & Robotics ETF.”
13 | ARK Investment Management LLC
CONTACTS
Rebecca L. Burke
Vice President | National ETF Sales
Resolute Investment Managers, Inc.
M. 978.609.0553
[Link]@[Link]
Matt Murphy, CFA, CAIA
Vice President | National ETF Sales
Resolute Investment Managers, Inc.
M. 214-918-3342
[Link]@[Link]
Factsheet, prospectus, and latest performance reports are available
for download on our website: [Link]/investor-material
ARK Investment Management LLC
3 East 28th Street, 7th Floor
New York, NY 10016
©2020, ARK Investment Management LLC. No part of this material may be reproduced in any form, or referred to in any other publication, without the express
written permission of ARK Investment Management LLC (“ARK”).
The information provided is for informational purposes only and is subject to change without notice. This presentation does not constitute, either explicitly or
implicitly, any provision of services or products by ARK, and investors should determine for themselves whether a particular investment management service is
suitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK, and are not
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Certain of the statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on
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materially from those expressed or implied in such statements. The matters discussed in this presentation may also involve risks and uncertainties described
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contained in this presentation. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that
are discussed. Certain information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or
completeness of any information obtained from any third party.
14 | Disclosure
Investors should carefully consider the investment objectives and risks as well as charges and expenses of an ARK
ETF before investing. This and other information are contained in the ARK ETFs’ prospectuses, which may be
obtained by visiting [Link]. The prospectus should be read carefully before investing.
Fund Risks: The principal risks of investing in the ARKK include: Equity Securities Risk. The value of the equity securities the Fund holds may fall due to general
market and economic conditions. Foreign Securities Risk. Investments in the securities of foreign issuers involve risks beyond those associated with investments in
U.S. securities. Health Care Sector Risk. The health care sector may be adversely affected by government regulations and government health care programs.
Communications Sector Risk. Companies is this sector may be adversely affected by potential obsolescence of products/services, pricing competition, research and
development costs, substantial capital requirements and government regulation. Information Technology Sector Risk. Information technology companies face
intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Additional risks of investing in ARKK include equity,
market, management and non-diversification risks, as well as fluctuations in market value and NAV.
The Fund’s exposure to cryptocurrency may change over time and, accordingly, such exposure may not always be represented in the Fund’s portfolio. Many
significant aspects of the U.S. federal income tax treatment of investments in bitcoin are uncertain and an investment in bitcoin may produce income that is not
treated as qualifying income for purposes of the income test applicable to regulated investment companies, such as the Fund. GBTC is expected to be treated as a
grantor trust for U.S. federal income tax purposes, and therefore an investment by the Fund in GBTC will generally be treated as a direct investment in bitcoin for
such purposes. See ‘‘Taxes’’ in the Fund’s SAI for more information.
An investment in an ETF is subject to risks and you can lose money on your investment in an ETF. There can be no assurance that the ETF will achieve its investment
objective. The ETF’s portfolio is more volatile than broad market averages. Shares of ARKK are bought and sold at market price (not NAV) and are not individually
redeemed from the ETF. ETF shares may only be redeemed directly with the ETF at NAV by Authorized Participants, in very large creation units. There can be no
guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF
shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from
investment returns.
Portfolio holdings will change and should not be considered as investment advice or a recommendation to buy, sell or hold any particular security. Please visit
[Link] for the most current list of holdings for the ARK ETFs.
The information herein is general in nature and should not be considered financial, legal or tax advice. An investor should consult a financial professional, an
attorney or tax professional regarding the investor’s specific situation. Certain information was obtained from sources that ARK believes to be reliable; however, ARK
does not guarantee the accuracy or completeness of any information obtained from any third party.
ARK Investment Management LLC is the investment adviser to the ARK ETFs.
Foreside Fund Services, LLC, distributor.
