Single Sector Fund

Nikko AM ARK Disruptive Innovation Fund

About the fund

This fund provides access to a global share portfolio that offers thematic exposure to disruptive innovation across a number of sectors and geographies.

Disruptive innovation is caused by the introduction of new technologically enabled products or services that permanently change an industry or economic sector by providing greater simplicity, accuracy, customisation and accessibility while driving down costs.

Risk Indicator (volatility)

1
2
3
4
5
6
7 Extremely high

Target Asset Allocation

Equities 100.00%

Commentary

As of 31 May 2022

Market Highlights

  • Broad-based global equity indexes were generally flat in May despite macro headwinds that hurt consumer, business, and investor confidence. Innovation stocks remained volatile, swinging dramatically from declines during the first half of the month to a rally in the second.
  • If the market remains volatile and the economy continues to slow down, shares of companies in the disruptive innovation space offering scarce growth opportunities and improving fundamentals should benefit.







 

The top contributors include CRISPR Therapeutics (CRSP), Zoom Video Communications (ZM), Spotify Technology (SPOT), Twist Bioscience (TWST), and Ginkgo Bioworks (DNA). Shares of CRISPR Therapeutics (CRSP) experienced a volatile month after the company missed on earnings and revenue consensus targets, but subsequently rose after speculation that it could be a near-term acquisition target and potentially after news that it appointed a new Chief Medical Officer who will oversee the firm’s global clinical development and regulatory operations. Shares of Zoom Video Communications rallied following the company’s first-quarter earnings report, which included an earnings beat and revenue growth that is up against a difficult year-over-year comparison. ARK believes Zoom is one of the companies disrupting Cisco Systems. Spotify appreciated on relatively little company-specific news. ARK believes Spotify can leverage its dominant music streaming position to expand its product suite effectively. Twist is the preeminent provider of synthetic biology tools, particularly oligonucleotides, to both the translational research and clinical end markets. Twist recently signed a new research collaboration agreement with Astellas Pharma. Shares positively contributed to performance. Ginkgo Bioworks released its first-quarter results where it beat revenue estimates but fell short on EPS estimates. Importantly, the company increased full-year guidance for total revenue stemming from conviction in its biosecurity revenue prospects.

 

The top detractors include Unity Software (U), Coinbase (COIN), Tesla (TSLA), Block (SQ), and Invitae (NVTA). Shares of Unity Software gapped down after reporting first quarter results, writing down guidance for full-year revenue growth. In line with management’s comments, ARK expects Unity to prioritize the cleaning of its training data and retrain targeting products under Unity Monetization to ensure the aforementioned is a one-time hit rather than a longer-term deterioration. In contrast, management noted that Unity’s Create segment reported continued strong growth of 65% year-over-year with strengthening demand for real-time 3D rendering. Shares of Coinbase traded down following the company’s first quarter earnings and the crash of TerraUSD stablecoin. We believe Coinbase is the premier regulatory-compliant crypto platform and expect the company to diversify its revenue streams into derivatives, yield products, NFTs and others over the medium- to long-term. Tesla shares traded down during the month. As a result of China’s Zero COVID policy, the Shanghai factory was closed and there were opening delays. However, restrictions have begun to ease. Shares of Block and Invitae underwent a period of strong downward pressure during the month. The combination of negative GDP in the first quarter and fears that inflation may not have peaked in March has investors on edge. Volatility could persist until demand destruction and excess inventories make it clear that inflation is not entrenched in the economy.

 (source: ARK Investment Management LLC)

Performance

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Performance

at 31 May 2022
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 -7.12% -27.75% -52.72%
Appropriate Market Index (AMI)2 -2.45% -7.80% 3.37%
  1. Returns are before tax and after the deduction of fees and expenses and including tax credits (if any).
  2. AMI: NASDAQ-100 Notional Net Total Return Index in NZD

5 year cumulative performance $10,000 invested

Top 10 Holdings

Security Name Percentage
Zoom Video Communications Inc 8.45%
Tesla Motors Inc 8.32%
Roku Inc 7.81%
Square Inc. Class A 5.23%
Coinbase Global Inc 4.67%
Crispr Therapeutics Ag 4.64%
Exact Sciences Corporation 4.35%
Teladoc Health Inc 4.09%
Twilio Inc. Class A 3.88%
Uipath Inc 3.55%

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