A small innovation ETF inspired by Cathie Wood is returning 10 times Ark Invest's flagship fund this year

  • The Direxion Moonshot Innovators ETF (MOON) has returned 39% year-to-date, beating Cathie Wood’s flagship fund, the Ark Innovation ETF (ARKK), by roughly 10-fold.
  • ARKK has gained 3.5% over the same period.
  • The Direxion fund is much smaller than Ark, and is more heavily concentrated in biotechnology stocks.
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A small ETF that aims to give investors exposure to the most innovative companies in the US has outperformed the flagship fund of Cathie Wood’s Ark Invest by 10-fold this year.

The Direxion Moonshot Innovators ETF (MOON) tracks 50 US companies that pursue innovative technologies, similar to the stated goal of the Ark Innovation ETF (ARKK). But MOON has gained roughly 39% in 2021, far outpacing ARKK’s 3.5% rise. Bloomberg first reported on the fund’s outperformance.

After a stellar 2020, this year has been shaky for Wood’s ETF as investors take profits from highly valued technology stocks and bet on cyclical names against the backdrop of rising yields and an economic reopening. 

Yet Direxion’s technology stocks have fared well so far. Moon’s top stock holding by percentage is Vuzix, a $1 billion market-cap company that supplies wearable display technology and virtual reality devices. That stock has returned nearly 140% year-to-date. Meanwhile ARKK’s top holding, Tesla, has remained relatively flat in 2021. 

According to the Direxion website, the ETF’s top sub themes consist of genetic engineering (19.44%), cyber security (16.79%), and clean technology (9.74%). 

As of Dec 31, 2020, the ARKK’s largest themes were e-commerce (12%), digital media (9.7%), and cloud computing (9.4%).

The Direxion ETF tracks the S&P Kensho Moonshots Index, an index of 50 US companies that pursue innovative technologies that have the potential to disrupt existing industries and have the highest “early-stage composite innovation scores.”

That innovation score is determined by “a natural language processing review,” of each company’s latest regulatory filing for the use of “words and phrases that are related to innovation,” according to the Direxion website.

The fund has gained 70% since its inception in November 2020, but has under $200 million in assets under management, compared to Ark’s $24 billion.

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