Valerio
Baselli:
Hello
and
welcome
to
Morningstar.
The
big
news
within
the
ETF
space
is
that
the
American
asset
management
firm
ARK
Invest,
which
focuses
on
disruptive
innovation,
has
acquired
Rize
ETF,
a
London-based
provider
of
thematic
and
sustainable
trackers.
To
talk
about
the
future
of
ARK
Invest
in
Europe,
among
other
things,
today
I’m
joined
by
the
well-known
founder
and
CEO
of
ARK
Invest,
Cathie
Wood.
So,
Cathie,
first
of
all,
welcome
and
thanks
for
being
here.
Let’s
start
with
the
basics.
Why
this
takeover
in
Europe
and
why
now?
Cathie
Wood:
Well,
it’s
been
very
interesting
at
ARK
practically
since
the
beginning
when
we
monitor
who
the
subscribers
are
to
our
research,
which
we
give
away
free.
We
have
found
that
25%
of
them
are
from
Europe,
but
we
didn’t
have
anything,
any
strategies,
to
offer
in
Europe.
And
so,
we
have
been
looking
for
quite
some
time
and
we
found
this
gem
hidden
inside
of
AssetCo,
and
the
DNA
was
just
right.
They’re
thematic,
they’re
futures-oriented,
mega
trend
oriented,
and
it
seemed
like
a
great
fit.
Baselli:
So,
as
you
know,
thematic
investment
has
enjoyed
a
booming
rise
in
recent
years
in
Europe,
even
though
the
pace
of
flows,
for
example,
has
slowed
down
compared
to
the
explosion
post
COVID-19.
What
are
your
thoughts
in
investing
thematically,
especially
here
in
Europe,
where
the
average
investor
is
probably
different
from
the
American
one?
Wood:
Well,
judging
from
the
responses
to
our
research,
I
think
the
appetite
is
there.
And
I
also
do
appreciate,
certainly
we’re
learning
a
lot
from
our
new
ARK
Invest
Europe
team,
that
Europe
is
different.
Different
countries
have
different
kinds
of
appetites
for
different
strategies.
I
know,
for
example,
Valerio,
in
your
Italy,
there’s
a
huge
appetite
for
thematic,
perhaps
in
other
areas
not.
So,
we
are
going
to
leave
it
to
them
to
direct
us
to
the
right
places.
Baselli:
That’s
interesting.
What
advice
would
you
have
for
investors
shopping
for
a
thematic
fund?
And
there
are
any
themes
in
your
view
that
don’t
really
have
investment
merit
at
least
today?
Wood:
Well,
our
focus
at
ARK
Invest
has
been
on
actively
managed
ETFs
and
other
wrappers,
focused
exclusively
on
disruptive
innovation.
And
ARK
Invest
Europe
is
similarly
minded.
We
don’t
think
there
are
enough
strategies
out
there
that
are
focused
on
the
future
in
the
ways
that
we
are
grounded
in
original
research.
We
see
a
lot
of
strategies
that
are
somehow
flavors
of
broader
based
benchmarks.
And
we
think
that
the
world
of
technology
especially
is
moving
so
quickly
that
it
will
be
very
difficult
for
the
benchmarks
to
keep
up.
And
I’ll
just
give
one
example.
It
took
the
S&P
500
in
our
country
until
Tesla
reached
$500
billion
for
the
S&P
to
allow
it
into
its
index.
$500
billion.
There
are
not
many
companies
bigger
than
that.
And
yet,
in
the
case
of
Tesla,
we
think
it
has
miles
to
go.
Baselli:
And
let’s
talk
of
your
flagship
strategy,
the
ARK
Innovation
[ARKK]
fund.
After
having
performed
extremely
well
between
2017
and
2020,
the
fund
suffered
for
a
couple
of
years.
Now,
in
2023,
the
year-to-date
performance
is
very
positive.
But
some
might
say
that
the
strategy
missed
out
the
big
part
of
the
artificial
intelligence
rally.
The
easiest
example
is
of
course
Nvidia
[NVDA],
a
name
that
you
owned
since
inception,
I
believe,
which
is
no
more
in
the
portfolio
and
is
up
roughly
190%
for
the
year-to-date.
So,
why
did
you
decide
to
close
out
your
stake
in
Nvidia?
And
do
you
regret
this
decision?
Wood:
Well,
if
you
read
our
research
going
back
to
2014,
we’ve
been
very
focused
on
the
revolution
called
artificial
intelligence.
And
we
gained
exposure
to
NVIDIA
when
it
was
$5.
Now,
it’s
closer
to
$450.
And
we
were
pounding
the
table.
So,
we
did
very,
very
well
with
it.
In
fact,
in
the
flagship
strategy
since
inception,
it
is
the
fourth
largest
contributor
to
performance
after
Tesla,
GBTC,
Invitae,
which
is
a
genomics
name,
and
then
NVIDIA.
What
we’ve
been
doing
with
our
research
is
trying
to
figure
out
who
else
is
going
to
win
in
a
very
big
way.
This
is
called
real
original
research
as
opposed
to
checking
a
box,
artificial
intelligence,
NVIDIA.
And
we
have
found
that
the
characteristics
of
companies
that
will
win
in
this
new
age
–
and
this
is
going
to
impact
every
industry,
every
company
–
are
companies
with
domain
expertise,
and
when
it
comes
to
innovation,
that’s
really
important,
especially
in
areas
like
multi-omics
sequencing
and
life
sciences.
So,
they
have
domain
expertise,
they
have
AI
expertise,
so
we
look
at
their
talent,
and
perhaps
most
importantly,
they
have
proprietary
pools
of
data
so
that
they
can
evolve
specialized
AI
models
and
integrate
them
into
the
open
source
models
out
there
to
develop
very
powerful
solutions.
Almost
every
name
in
our
flagship
strategy
is
an
exposure
to
artificial
intelligence.
NVIDIA
is
much
more
expensive
than
most
of
the
names
in
our
portfolio,
except
for
perhaps
the
multi-omics
names.
Baselli:
Yeah,
exactly.
I
wanted
to
ask
you,
what
do
you
think
of
the
current
NVIDIA
valuation?
Do
you
think
market’s
expectations
of
its
growth
or
margins
are
overly
optimistic?
Wood:
We
think
that
it’s
going
to
be
a
good
stock
over
time,
but
we
don’t
think
it
is
going
to
outperform
the
other
stocks
in
our
portfolio
over
time
as
more
and
more
people,
analysts,
investors,
do
research,
real
research,
on
what
this
AI
revolution
means.
And
so,
we
think
our
current
positions
are
misunderstood
exposures
to
artificial
intelligence.
We
do
not
regret
selling
NVIDIA
in
the
flagship,
which
has
to
incorporate
all
of
our
innovation
platforms,
so
robotics,
energy
storage,
artificial
intelligence,
blockchain
technology,
and
multi-omics
sequencing.
The
other
portfolios,
which
are
more
specialized,
do
own
NVIDIA.
We’ve
just
taken
the
position
down
quite
significantly.
Baselli:
All
right.
Speaking
of
artificial
intelligence,
of
course,
you’ve
been
investing
in
it
for
years.
Do
you
have
a
preferred
way
of
gaining
exposure
to
the
theme?
For
instance,
what
do
you
prefer
among
solution
providers,
hardware
providers,
or
maybe
companies
who
will
leverage
AI
into
their
own
businesses,
such
as
biotech
firms?
Wood:
Sure.
As
I
mentioned,
practically
every
stock
in
our
portfolios
we
view
through
an
AI
lens
in
the
way
I
described,
especially
focused
on
proprietary
data.
But
for
every
dollar
of
hardware
invested
in
the
AI
space
–
and
NVIDIA
is
primarily
hardware,
evolving
more
software
solutions,
but
primarily
hardware.
For
every
dollar
of
hardware,
we
expect
8
to
20
times
the
amount
of
software.
And
so,
we
have
a
lot
of
software-oriented
names
in
our
portfolios.
To
give
you
an
example,
UiPath
is
a
robotics
process
automation
company.
It
is
helping
companies
automate
the
most
mundane
administrative
tasks
in
their
companies.
And
it
has
proprietary
data
associated
with
many
companies
around
the
world
and
the
solutions
they
are
evolving
to
automate
these
mundane
processes,
including
AI.
So,
it
has
all
of
that
proprietary
data.
Other
names
that
are
not
familiar,
and
that’s
what
we
offer
is
diversification
in
the
disruptive
innovation
space.
Other
names
include
Twilio,
Exact
Sciences,
even
Zoom.
I
think
many
people
are
surprised
to
see
Zoom
in
our
portfolios.
But
I
think
many
people
will
be
surprised
to
see
how
many
AI
applications
Zoom
is
evolving
here.
So,
on
October
4th,
stay
tuned
to
Zoomtopia
and
you’ll
learn
more
about
it.
Baselli:
Very
interesting.
Your
investment
process
follows
a
clear
philosophy.
It
concentrates
the
portfolio
on
high-conviction,
high-growth
names.
So,
an
economic
environment
with
rising
interest
rates
is
far
from
being
ideal
for
this
kind
of
strategy.
How
do
you
manage
this?
And
what’s
your
outlook
on
rates
and
economic
growth?
Wood:
Yes.
During,
it
was
2021
and
’22
that
this
was
a
real
problem.
First,
the
fear
of
rising
interest
rates
hurt
our
strategy,
and
then
the
actuality,
or
the
reality
of
rising
rates
last
year
really
hurt
our
strategy.
This
year
we’ve
started
outperforming,
and
I
think
it
is
because
investors
are
looking
over
the
top
of
these
interest
rate
increases
and
anticipating
the
end
of
them,
and
then
ultimately
the
decline.
If
we’re
right,
disruptive
innovation
is
going
to
cause
a
lot
of
deflation.
That’s
a
good
thing.
Deflation
caused
by
disruptive
innovation
will
cause
an
explosion
in
the
growth
rates
of
units
in
the
disruptive
innovation
space.
So,
we
think
we’ve
been
through
the
worst
of
it,
but
I
will
also
point
to
another
period
where
interest
rates
were
rising
in
2017,
for
example.
Our
response
back
then
is,
wait
a
minute,
the
Fed
is
now
sure
that
we’re
over
the
’08-’09
crisis,
and
it
is
going
to
allow
the
markets
to
work.
Our
portfolios,
the
flagship,
was
up
87%
that
year,
even
though
interest
rates
were
going
up.
Now,
if
interest
rates
have
plateaued
or
are
going
down,
that
will
be
an
extra
good
environment
for
our
strategies,
especially
given
what
happened
in
’21
and
’22.
This
will
be
the
flip
side
of
that.
Baselli:
Of
course,
if
you
think
of
disruptive
innovation,
you
think
of
digital
assets
and
cryptocurrencies.
You
have
been
one
of
the
early
adopters
of
Bitcoin.
Now
markets
await
the
Security
and
Exchange
Commission
decision
on
the
first
Bitcoin
spot
ETF.
But
from
this
point
of
view,
we
might
say
that
Europe
is
probably
a
bit
ahead
of
the
game.
There
are
dozens
of
crypto
ETPs
listed
in
Europe.
As
you
know
very
well,
you
have
a
partnership
with
21Shares,
the
biggest
crypto
ETPs
provider
in
Europe.
So,
what
is
your
outlook
for
Bitcoin
at
this
stage?
Wood:
We
are
very
optimistic
on
Bitcoin.
One
of
the
markers
or
milestones
this
year
that
I
think
surprised
everyone
was
in
the
United
States,
we
had
a
regional
bank
crisis
in
March.
As
regional
bank
stocks
were
plummeting,
some
went
bankrupt.
Bitcoin
increased
from
19,000
to
30,000.
What
was
that?
That
was
a
flight
to
safety.
One
of
the
reasons
regional
banks
and
most
banks
get
into
trouble
is
counterparty
risk
and
depositors
fleeing
them.
If
you
think
about
crypto
assets
and
Bitcoin
especially,
it
is
completely
decentralized.
There’s
no
counterparty
risk.
And
it
is
completely
transparent.
You
can
see
the
movements
by
IP
address
and
see
where
there
might
be
trouble
brewing.
It’s
a
giant
neighborhood
watch
with
a
lot
of
people
involved.
This
involves
their
livelihood.
So,
we
think
it’s
very
robust.
When
institutions
get
the
green
light,
and
I
think
they’re
waiting
for
the
SEC,
I
think
that
we’re
going
to
see
significant
participation
in
this
new
asset
class
by
institutions.
Baselli:
Finally,
going
back
to
the
start
of
the
acquisition
of
Rize
ETF,
what
will
be
your
role
for
the
European
market
and
overall
within
the
firm?
Will
you
still
manage
the
active
ETFs?
Wood:
Yes,
the
active
equity
ETFs
ARK
Invest
in
the
U.S.
will
continue
to
manage.
And
ARK
Invest
Europe
will
manage
the
ARK
indexed
thematic
strategies,
and
they
also
will
distribute
for
us.
So,
we
think
it’s
a
win-win.
Baselli:
Thank
you
so
much,
Cathie,
for
your
time
and
your
insights.
I
appreciate
that.
For
Morningstar,
Valerio
Baselli.
Thanks
for
watching.
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