ETFs Aren’t Just for Indexes Now That Active Sees the Light
The success of Cathie Wood’s exchange-traded funds revives investor interest in stockpickers—and asset managers’ hopes for higher fees.
Cathie Wood, chief executive officer and chief investment officer of Ark Investment Management.
Photographer: Alex Flynn/Bloomberg
This is the year that investors will have to stop using the words “index funds” and “exchange-traded funds” interchangeably. That was never quite accurate, but for most of their history ETFs’ main appeal was that they delivered very low-cost exposure to broad market indexes such as the S&P 500 and the Russell 2000. And then along came Cathie Wood.
The head of Ark Investment Management has shaken up the $5.6 trillion ETF industry with her slate of actively managed funds. As with all ETFs, the funds’ shares can be bought and sold instantly just like stocks. Wood made bets on the bullish themes of 2020—Tesla Inc., tech stocks, biotech, and Bitcoin—and got the returns to match. In the past year alone, Wood’s Ark Innovation ETF took in almost $10 billion from investors, as it rose 149%. “It does demonstrate clearly there is a market for actively managed ETF products,” says Ben Slavin, head of ETFs for BNY Mellon Asset Servicing.