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

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Manager review

ARK ETF’s investment team is mostly inexperienced and hasn’t settled after years of churn, according to Morningstar.

Since founding ARK in 2014, Cathie Wood has been the firm’s sole portfolio manager across all its ETF strategies. She honed her process at Alliance Bernstein (AB) from 2001 to 2013, where the thematic strategies she ran had high volatility, poor downside performance, and underwhelming long-term results, Greengold said.

“During her 12 years at the helm of large-growth AB MA Strategic Research, its before-fee returns outpaced the Russell 1000 Growth Index but lagged on a risk-adjusted basis. She also ran two other growth-oriented funds whose net-of-fee results underperformed their bogies on her watch, risk-adjusted or otherwise,” he added.

Wood’s current 10-person research team bears little resemblance to its early-2018 iteration. Many analysts have been hired, but few have stuck around. Just three members–including director of research Brett Winton–have tenures at the firm of three years or longer.

Most of the analysts hired since 2014 came without significant experience as stock analysts, technical experts, or forecasters, according to Greengold. The few with full-time work experience before starting at ARK came from relevant fields, such as epidemiology, but the team does not stand out next to rivals that employ and retain in-house specialists with advanced degrees.

The Fidelity strategy’s “skilled and well-supported manager” merits an above average people rating, according to Morningstar’s research.

“Sonu Kalra has put together an impressive record since joining Fidelity in 1998,” said Greengold.

He started as an equity analyst covering media, technology, and internet stocks. He had brief stints managing Fidelity Select Networking & Infrastructure (2002), Fidelity Select Computers (2002-05), and Fidelity Select Technology (2002-05) before moving on to Fidelity OTC (2005-09), a tech- and biotech-heavy portfolio that invested in many Nasdaq-listed stocks.

During his 4.5-year tenure at Fidelity OTC, the fund stayed well ahead of the Nasdaq Composite Index and average large-growth peer. It also beat the Russell 1000 Growth Index by nearly 4 percentage points annualized, Greengold said.

“Kalra has access to Fidelity’s huge global analyst team, which helps him source ideas and monitor the portfolio, which typically holds hundreds of names. The manpower is necessary considering the portfolio’s girth,” Greengold added.

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