HEAD-TO-HEAD: ARK Innovation ETF versus Fidelity Blue Chip Growth ETF

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Performance

From its October 2014 inception through February 2021, the ARK ETF’s 36.4% annualized total return was the best result of any actively managed fund in the mid-growth category, Greengold said.

It also beat the Russell Midcap Growth Index’s 15.5% gain and the 19.5% gain of the Nasdaq Composite, to which it is most highly correlated. However, it also posted higher volatility than virtually any other fund, its risk-adjusted results were nonetheless top-ranked, noted Greengold.

The fund has generated a three-year cumulative return of 38.82% in US dollars, according to FE Fundinfo. Its three-year annualised volatility is 40.47%.

“Fund investors have needed to buy in at a favorable time and be patient to come out ahead, because the fund’s relative results tend to be boom or bust,” said Greengold. It reaped the bulk of its outperformance from two calendar years 2017 and 2020, but was among the category’s poorest performers in 2015 and has had sharper losses during market corrections than the indices’ or peers’.

“Its relatively concentrated and benchmark-agnostic portfolio means investors should have a stomach for volatility,” said Greengold.

The Fidelity Blue Chip Growth ETF’s older, open-end sibling has posted strong, albeit volatile, returns under manager Sonu Kalra. From his July 2009 start through January 2021, the strategy’s 21.2% annualized gain beat the Russell 1000 Growth Index by 3 percentage points and outpaced 95% of peers in the large-growth category, which returned on average 15.8% annualized, according to Morningstar.

The fund’s relative and absolute results were by far its best of any calendar year on Kalra’s watch in 2020, when its 62.2% gain soared above the index’s 38.5% gain and ranked in the best-performing decile of the category, said Greengold.

The fund entered the year with a 2% stake (5 times the index’s share) in Tesla, which was the index’s top performer and most significant stock-level contributor to the fund’s returns with a nearly 750% cumulative gain. There were also meaningful industry-level contributors: For example, the fund favored semiconductors and was underweight in software and services stocks; the former handily outperformed.

Discrete calendar year performance

Source: FE Fundinfo and Morningstar. Annual returns in US dollars *31 Dec 2021 – 23 February 2022; **since inception

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