Can ARK Survive the Flood?

Editor's Views: The popularity of ARK funds has parallels with the Woodford debacle, and why more female fund managers should speak up

Holly Black 12 March, 2021 | 11:00AM
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The ARK story is a fascinating one to watch and raises more investment questions that we have the time, space or inclination for in this column. But a particularly interesting point made by my colleague Ben Johnson this week is the one of liquidity. More specifically: how can you manage liquidity in an ETF?

The word liquidity alone is enough to trigger nightmares for many UK investors. The last time this word was bandied about we were talking about the collapse of the Woodford Equity Income fund. But that fund had one vital tool in its armoury that the ARK ETFs do not – the ability to close.

As we have seen with so often with property funds, when the going gets tough, asset managers can suspend trading. If they are suspending because of outflows this allows them the time to sell assets to raise money to meet redemptions. If the closure is because of an influx of new money, it allows breathing space to deploy inflows in a sensible way.

But ETFs can’t close. Because they are listed on stock exchange (hence the moniker exchange-traded funds) they are subject to the same rules as any other publicly listed shares. And that may be an issue when you’re suddenly flooded with tens of billions of dollars of investor cash in a matter of weeks.

This might not be a problem for an ETF that simply tracks a big liquid market, but it could easily be an issue for one that prides itself on picking disruptive, up-and-coming stocks.

Investors who have had their eye caught by the frankly staggering performance of ARKK must be aware of two things: past performance is no guarantee of future returns, and if you’re the last one in you could be the one left cleaning up the mess if the tide turns.  

Why Women Investors Matter

International Women’s Day is a growing event and one we really need to support in the investment world. Because this is still undoubtedly an industry dominated by men. You don’t even need to look at our analysis, which shows that women run just 7.7% of UK-domiciled funds, to know that (although obviously you should look at that analysis because it’s pretty terrifying).

I won’t bleat on about how more needs to be done to empower women in investment, plenty of my talented colleagues have already produced fabulous research on that this week. But if I were going to make one plea to women across the industry it would be this: talk about being a woman!

Over years of interviewing fund managers, advisers and investment professionals, I have been told time and again: I don’t want to talk about the fact that I’m a woman, it doesn’t matter.

But it does matter. I know it doesn’t affect your ability to do your job (although actually, given the fact you’re more likely to have to take time out to care for children or elderly relatives, it does), but it matters because you have defied the odds to get that job and you should be flying the flag for other women to do the same.

International Women’s Day hits some resistance from people who view it as an “anti-men’s day”, but this is like saying that Mother’s Day is “anti-Dad’s day” or that my birthday is “anti-everyone who wasn’t born in July day”. International Women’s Day is a chance to celebrate the achievements of women, and to dream of those yet to come.

Pandemic-Proof House Prices 

Is there a topic more loved by Brits than house prices? Possibly the weather, but I’d say Rightmove probably gets more page views than the Met Office. Our Mortgage Matters series aims to tackle some of the big property buying questions and this week we looked at ways that parents can help their kids or grandchildren on to the ladder – something that looks increasingly out of reach for young people.

Latest figures from the ONS showed the average UK house price is now almost £250,000 and increased by 7.6% over the past 12 months. That is barmy when you consider we’re just emerging from a global pandemic, which has seen the UK economy near collapse and public borrowing at a record high. That house prices continue to rise defies logic.

The Government announced in last week’s Budget plans to guarantee 95% mortgages to try to help aspiring buyers – something that is equal parts encouraging and concerning. But we need more assistance from mortgage providers too. While there are a few products which allow parents to be guarantors or jointly responsible for their children’s mortgages, surely in this age of innovation the banks can do better.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk