Cathie Wood’s new fund gives small investors access to VC market for just $500

Cathie Wood’s Ark Invest New Disruptive Technology Fund has a distinct Value proposition. 

Not all organizations worth investing in are publicly traded, and they still need capital, which could help smaller investors. Cathie Wood’s fund, launched on September 27 seeks to open venture investing to those with $500 and above. The fund’s launch will be on a platform created by Titan, a young disruptive firm that has helped many investors by redefining the old methods. 

The Ark Venture fund will be an interval fund, making it a closed-end fund that is not on a stock exchange. The restrictions used in interval funds are mostly applicable when most holdings do not trade on the open market. They make it simpler for the fund to concentrate on returns without looking at managing inflows and outflows. 

What the fund will do

The fund will invest in early to late-stage tech organizations and venture capital funds. Public tech organizations will also be considered. To access the fund investments, one will have to go to the Titan platform, a disruptive platform on tablets and phone applications that enables investors to improve the strategies developed and managed by other investors. Just like additional Ark Investment funds, the theme is disruptive innovation. ARK describes disruptive innovation as introducing a technologically enabled new service or product that has the potential to change the world. The platform Titan is an example. 

The Titan’s Home page

The first thing one notices on Titan’s home page is a statement that reads, “Investment management, made modern.” It asks users to use the platform to create a portfolio of managed crypto, stocks, private credit, real estate, and venture capital. The platform’s innovation is used to provide an investment space that allows people to develop a portfolio consisting of titans, a set of improved investment techniques in different industries. The platform seeks to improve access to investments retail investors could not previously access. Venture Capital is a non-public fund offered to organizations by investors who have confidence in their management and business model to expect earnings. Since the firms don’t list in stock markets, investments are sourced from family members, rich investors, and investment banks. 

Though it is considered risky to direct funds to venture capital, the likelihood of getting above-average returns induces them to invest. New organizations or ventures with a brief operating history can use the market. 

What this means to ARK ETF’s value

ARK’s decision to venture into less-liquid assets is a deviation from Cathie Wood’s previous strategies, resulting in success as ARK ETF’s value increased the previous year. The ARK Innovation ETF (ARKK) has reduced by 60% in 2022, a sharper decline compared to the 21% reduction in the S&P-500-tracking ETF. The venture fund charges a fixed management cost of 2.75%, which does not include any load fees or carried interest. The expense ratio of the fund is 4.22%.

The company’s flagship Innovation Fund has been quiet all year as Cathie Wood’s operations have been greatly affected by the increasing interest rates. ARKK reduced by 60% this year and shed off 70% from its 52-week high in November. The company has struggled with offerings in 2022. It announced the end of its Transparency ETF (CTRU) in July, and the remaining ETFs, including the ARK Innovation ETF (ARKK), have performed dismally in broader markets. 

Due to the large market crash experienced in 2022, Ark Invest has been involved in significant structural changes to its portfolio. In July, it sold 1.4 million shares of Coinbase. The stock sale was spread across Ark Innovation, Fintech Innovation, and Next Generation Internet. The company was one of the most established backers of Coinbase when it first hit Wall Street in 2021. The sale was motivated by an SEC assessment earlier in 2022. The stock has reduced by more than 75% since the year started though Ark Invest remains bullish due to its investment in Tesla Motors.