Ark Investment Management’s ESG Fund Outperforms with Crypto Bet
Ark Investment Management’s Nikko AM Ark Positive Change Innovation Fund achieved an impressive return of 68% last year, surpassing the gains of the S&P 500 index. The fund’s standout feature is its substantial bet on cryptocurrencies, with its largest holding being Coinbase Global Inc., which makes up nearly 10% of the portfolio. This success is notable considering the challenges faced by many ESG funds focused on traditional clean-tech assets. While wind and solar assets experienced setbacks due to disruptions caused by higher interest rates, ESG funds that ventured into other areas of technology, such as cryptocurrencies, enjoyed greater success.
Market Value of Coinbase Contributes to Fund’s Performance
The market value of Coinbase skyrocketed almost fivefold last year, coinciding with a 21% decline in the S&P Global Clean Energy Index. This surge in the largest US cryptocurrency exchange significantly contributed to the impressive performance of the Nikko-Ark fund.
SEC Approval Sparks Enthusiasm for Cryptocurrencies
In 2024, the US Securities and Exchange Commission approved several Bitcoin exchange-traded funds, sparking enthusiasm among crypto enthusiasts. However, subsequent market fluctuations have led some analysts to attribute the decline in Bitcoin’s value to the “buy the rumor, sell the fact” phenomenon. Thomas Hartmann-Boyce, a portfolio manager at Ark, believes that Coinbase shares still have room to continue their upward trajectory following the SEC approval.
Tech-Focused ESG Funds Outperform Peers
Last year, ESG funds that fully embraced tech and moved away from conventional green assets outperformed their counterparts. One notable performer was the JPMorgan US Technology Fund, which delivered returns of almost 65% to investors. Similar to the Nikko Ark portfolio, this fund falls under the European Union’s Sustainable Finance Disclosure Regulation’s Article 8 category. Ark aims for a compound annual rate of return of at least 15% over the next five years for its high-conviction public equities, including Coinbase.
Volatility and Long-Term Strategy
Investors in the Nikko Ark fund have experienced volatility, with substantial gains in 2023 following a decline in 2022. In the early part of this year, the fund has experienced a modest loss. Similarly, Coinbase’s value has decreased year-to-date. Despite these challenges, Peter Graf, the chief investment officer for Nikko in the Americas, remains committed to the fund’s strategy and allocations. The fund aims to provide long-term exposure to sustainability-related innovation and believes that new technologies will withstand business cycles.
Hot Take: Ark Invest’s Crypto-Powered ESG Fund Emerges as Top Performer of 2023
Ark Investment Management’s Nikko AM Ark Positive Change Innovation Fund stood out in 2023 as it achieved an outstanding return of 68%, surpassing the gains of the S&P 500 index. This success can be attributed to its substantial bet on cryptocurrencies, with Coinbase being its largest holding. While traditional clean-tech assets faced challenges, ESG funds that embraced technology, including cryptocurrencies, enjoyed greater success. The market value of Coinbase significantly contributed to the fund’s impressive performance. Despite market fluctuations and volatility in the early part of this year, Ark remains committed to its long-term strategy and aims for continued success in high-conviction investments.
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