Connect with us

Analysis

Disclosures show Ark has removed limits on company ownership

Published

on


Interested in ETFs?

Visit our ETF Hub for investor news and education, market updates and analysis and easy-to-use tools to help you select the right ETFs.

Ark Investment Management has removed restrictions from its exchange traded funds that limited how much the funds could hold in a single company, recent disclosures show.

Previously, the manager allowed its ETFs to hold up to 30 per cent of their assets in a single company, prospectuses show. The funds were also prohibited from owning more than 20 per cent of a single company’s outstanding shares.

But Ark removed those limits, effective immediately, the firm disclosed at the end of March.

Ark also removed language prohibiting its actively managed ETFs from investing more than 35 per cent of their assets in depository receipts, including American depository receipts used by foreign companies, and other types of securities, filings show. It also removed a limitation capping active funds’ investments at 10 per cent of assets in unsponsored ADRs that are traded over the counter.

This article was previously published by Ignites, a title owned by the FT Group.

None of Ark’s funds’ investments are close to the previous limit on fund assets held in a single company, disclosures on the Ark website showed on April 5. The products’ biggest bet was in Tesla, which made up 10.78 per cent of the $21.5bn Ark Innovation ETF, 10.7 per cent of the $6.7bn Ark Next Generation Internet ETF and 10.41 per cent of the $3.2bn Ark Autonomous Technology and Robotics ETF.

Overall, 7.36 per cent of Ark’s ETF assets were in Tesla as of December 31, according to FactSet, a data provider. The manager’s ETFs had $34.8bn in assets under management as of that date, the database shows.

The removal of limits on ADRs may have the biggest impact, especially for Ark’s flagship Innovation ETF, said Robby Greengold, a Morningstar strategist.

However, the Innovation ETF’s strong performance and inflows have “made it more difficult than before for the ETF to make meaningful investments in the kind of innovative small and microcap companies that have historically been prominent in the portfolio”, Greengold said.

Investors added $15.8bn to the Innovation ETF over the year ended March 29, according to FactSet data. The fund returned 152.51 per cent in 2020, Ark’s website showed.

Ark executives have also said they saw more opportunities to invest in foreign companies, Greengold added. The company last year hired an analyst who focuses exclusively on innovation in Asian investments.

But Greengold said he would be surprised to see Ark’s ETFs invest substantially more than 10 per cent of their assets in any one company.

Cathie Wood, Ark’s chief executive and lead portfolio manager, had previously said that her company’s funds had a “self-imposed” restriction on investing more than 10 per cent of assets in a single company.

Top positions in Ark’s funds have historically maxed out at 12-13 per cent, Greengold said.

At the end of 2020, Ark’s ETFs owned more than 20 per cent of the outstanding shares of Compugen and Statasys, according to FactSet data. But those positions were spread out across its different funds, Greengold noted.

Ark earlier in March published a white paper outlining a new price target for Tesla, predicting that the company’s share price could hit $3,000 by 2025.

Other funds have attracted criticism for even larger bets on Tesla. Morningstar in January downgraded its rating for the $7bn Baron Partners Fund from bronze to neutral because the fund had allowed its position in Tesla to balloon to 47 per cent of assets as of December 31. That share had fallen to 39.5 per cent by the end of February, according to Baron Funds’ website.

US mutual fund concentration and diversification rules require funds to disclose if they will hold more than 25 per cent of their portfolio in a given sector or more than 5 per cent of their portfolio in a single security. But an appeals court ruled in 2019 in a case against the Sequoia Fund that a fund could exceed those thresholds if they were caused by market movements.

Like other transparent ETFs, Ark’s funds publicly disclose their holdings each day. Investors can also sign up to receive notifications of any trades that the firm makes in its actively managed ETFs.

Ark also last month added language to the prospectus disclosing the risks of investing in special purpose acquisition companies, or Spacs — so-called blank-cheque companies designed to take private companies public through mergers or acquisitions.

Some of Ark’s ETFs invest in Spacs. As of April 5, the $3.2bn Ark Autonomous Technology & Robotics ETF held 0.42 per cent of its assets in Atlas Crest Investment Corp, a Spac that went public last year and announced in February it would acquire electric airline company Archer. Another 0.24 per cent of the fund’s assets were in Jaws Spitfire Acquisition Corp, a Spac backed by Serena Williams that last month agreed to take 3D printer Velo3D public.

Investors added $36.5bn to Ark’s ETFs collectively over the year ended February 28, according to data from Morningstar Direct. The firm was the ninth-largest ETF issuer at the end of last month, with $51.3bn in assets, Morningstar data shows.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.

Click here to visit the ETF Hub



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Analysis

Iranian TV action thriller delivers warning to Zarif

Published

on

By


It is hardly surprising that Mohammad Javad Zarif, Iran’s foreign minister and nuclear negotiator, is not a fan of Gando, a popular television drama that depicts an incompetent minister who scuppers nuclear talks with world powers by hiring dual nationals who turn out to be spies for MI6.

The series — made by an institute believed to be affiliated to the elite and hardline Revolutionary Guards — “is a lie from the beginning to the end” that “damages foreign policy more than me” by fuelling public mistrust, Zarif said.

By focusing on the nuclear talks, the Guards’ motive goes beyond creating compelling drama, reformist analysts say. Iran is in discussion with western powers about reviving the nuclear deal, a key reformist achievement, and hardliners want to deter the popular foreign minister from declaring his interest in the presidency in what is a crucial election year.

“I’ll be grateful to Gando-makers to let us continue our current job,” Zarif said this month, and commented that he would not run for the presidency.

The possibility of nuclear talks with the US and other powers has complicated an already fraught Iranian political scene ahead of the June election. Many reformists are pinning their hopes on Iran’s top diplomat to reinvigorate the nuclear deal and boost support at the ballot box. Hardliners might prefer to negotiate the deal themselves after the election. The polls are also seen as particularly crucial in case supreme leader Ayatollah Ali Khamenei, 81, dies during the next president’s term.

Pendar Akbari, left, and Ashkan Delavari, right, in a scene from ‘Gando’
Pendar Akbari, left, and Ashkan Delavari, right, in a scene from an episode of ‘Gando’. The series title refers to an Iranian crocodile able to distinguish its friends from its enemies © Bahar Asgari/Shahid Avini Cultural and Artistic Institute via AP

The purpose of Gando, which refers to an Iranian crocodile able to distinguish its friends from its enemies, “is to tell Zarif that should he dare to announce his candidacy, he will be destroyed immediately,” said one reformist analyst. “When the intelligence service of the Guards truly believes in the Gando plot lines, it means even if Zarif decides to defy such warnings, he will not be allowed to run.”

Centrist president Hassan Rouhani is due to step down this year after two terms and it is not yet clear who the presidential candidates will be. Politicians register as late as May and then have to be vetted by the Guardian Council, the hardline constitutional watchdog, which can disqualify nominees. Potential hardline candidates include Mohammad Bagher Ghalibaf, the parliament speaker and a former guards commander; Ebrahim Raisi, the judiciary chief; and Ali Larijani, a former speaker of parliament. On the reformist side, speculation has centred on Es’haq Jahangiri, first vice-president, Hassan Khomeini, a grandson of the founder of the Islamic republic, and Zarif.

A US-educated career diplomat widely respected in the west for his pragmatism, Zarif was instrumental in the historic deal in 2015, under which Iran curbed its nuclear activity in exchange for the lifting of sanctions. But Donald Trump abandoned the accord in 2018, imposed sanctions, including on Zarif, and said he would pursue a new accord to contain Iran’s regional and military policies. The US move emboldened hardliners, confirming to them the untrustworthiness of the US.

Zarif’s background in the US both as a university student and as Iran’s head of mission at the UN — during which he met US politicians including then senator Joe Biden — has long made him a source of suspicion for hardliners.

This wariness of both Zarif and the west is evident to viewers of Gando, as is the heroism of the Revolutionary Guards. Mohammad, the action hero protagonist, warns that western negotiators may sabotage refineries as part of nuclear talks. Mohammad works out of elaborate facilities akin to those in a James Bond film. The fictional foreign minister is advised by a media adviser, the main culprit, “to enter into direct talks with the US and accept the conditions of the leader of the global village”.

Vahid Rahbani in a scene from an episode of ‘Gando’
Vahid Rahbani in a scene from an episode of ‘Gando’. State TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run © Hassan Hendi/Shahid Avini Cultural and Artistic Institute via AP

The dramatic scenes reflect, in part, the worldview of some of Zarif’s critics. “Reformists, Mr Zarif and his lobby group in Washington [Iranian dual nationals] should be wiped out from Iran’s politics,” said an aide to a senior hardline politician who is a potential presidential candidate. “We have to get rid of this cancerous tumour once for good.”

Gholamali Jafarzadeh, a former conservative member of parliament, said Zarif “is not a good statesman and should not run for president” while “reformists should know that their choices have no chance to be allowed to run”. 

This month, state TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run. Local media said broadcasts would resume when the presidential race was over. Iran’s centrist president Hassan Rouhani, whose signature achievement is the nuclear deal — alluded to the show on Wednesday and said “people’s money” should not be spent on “fabrication of the truth” and “distortion of facts”.

After three years of sanctions, many voters are disillusioned by the infighting and the prospect of real change, whatever the outcome of the election. “Whether Zarif or a figure more senior than him runs or not, I’m not going to vote,” said Hamid, a 40-year-old engineer. “Let the Guards win the election as they are the ones who are running the country anyway. Why shall I make a fool of myself?” 



Source link

Continue Reading

Analysis

Rising inflation complicates Brazil’s Covid-19 crisis

Published

on

By


After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

Coronavirus business update

How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter.

Sign up here



Source link

Continue Reading

Analysis

Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?

Published

on

By



Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO



Source link

Continue Reading

Trending