Cathie Wood’s New ETF Excludes Banking, Fossil Fuels, and Vice

(Bloomberg) — Cathie Wood is gearing up to launch a new publicly traded fund focused on transparency.

Ark Investment Management’s Transparency ETF will track an index that excludes sectors such as alcohol, banking, gambling and oil and gas, Wood’s company said in a filing Tuesday. The top positions in the 100 business meter are largely technology and consumer companies such as Inc., Microsoft Corp., Apple Inc., Nike Inc. and Chipotle Mexican Grill Inc. An old favorite of Ark, Elon Musk’s Tesla Inc. , also makes the cut.

“This is sort of Ark’s version of ESG,” said Eric Balchunas of Bloomberg Intelligence, referring to products that reflect higher environmental, social and governance standards. “It’s intriguing because it doesn’t have a moralizing vibe. It’s like they say if you’re looking for transparency, you’re probably going to buy good companies.”

Ark did not immediately respond to a request for comment.

If approved, the ETF would be the second Ark has launched this year. In March, the company launched a fund focused on space-related investments, which has risen about 4% since its debut and now has more than $600 million in assets. Meanwhile, the company’s flagship ARK Innovation ETF (ARKK) is up to $22.5 billion, though it’s down 2% so far — compared to gains of more than 20% for the S&P 500.

For her part, Wood has been an advocate for transparency in her funds and has openly disclosed her stock choices. That has helped her attract a loyal following of individual investors as her funds delivered spectacular returns in 2020 and catapulted her to financial stardom.

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She is known for her persistence that revealing her choices doesn’t hurt her strategies, but instead instills more confidence from those who buy her money. ETFs have been her favorite vehicle since she launched Ark in 2014, years before she appeared on TV and stock prices changed based on her comments.

Opting for a passive strategy for the new fund may surprise some who know Wood as leading a revolution in actively managed ETFs, with more money flowing into it now than ever before. But one of Wood’s passive products, the 3D Printing ETF, has quietly picked up steam and is even featured prominently in its space fund.

The transparency fund joins Ark’s eight other ETFs, six that are actively managed and two that track indexes passively. Ark currently has approximately $45 billion in its ETFs, making it the 11th largest ETF issuer in the US

“An index-based ESG ETF doesn’t necessarily scream ‘disruptive innovation,’ which ARK has branded itself,” said Nate Geraci, president of the ETF Store. “It will be very interesting to see how they approach the marketing of this ETF as the strategy appears to be at odds with companies like Tesla and DraftKings, major core interests in other ARK ETFs.”

(Updates detailing Ark funds. An earlier version of the story corrected the performance of the S&P 500 in the third paragraph.)

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