Renowned US fund manager Cathie Wood recently came to Frankfurt to promote her three newly offered active ETFs in Europe. „The interest from investors in our strategy here is incredibly high“, Wood said at a press conference. Young people in particular seem appreciative of the firm's approach, and family offices are interested. Wood gave a charismatic and knowledgeable performance at the press event. The 68-year-old fund manager is convinced of her investment approach, focusing on companies involved in disruptive innovation.

„Many people think we have a thematic approach“, noted Wood, dispelling a preconception about her investment company Ark Investment. „Instead, we are driven by research on stocks. And I currently have the best research I've ever had.“ Additionally, Ark is not a small-cap fund manager. More than 50% of the investments are in large stocks.

In Germany, autonomous driving, a sector in which Tesla is strong, is not yet legal. Wood is particularly impressed by Tesla. The electric vehicle manufacturer's stock, alongside names like Coinbase, represents one of the largest positions in her flagship fund. „The market share of electric vehicles will increase from 10% to 75% in the coming years“, Wood forecasts. This includes both human-driven electric vehicles, which will become cheaper, and autonomous driving cars. Companies will increasingly buy fleets of Tesla vehicles, especially those capable of autonomous driving. In hew view, Tesla is the only company among the Magnificent 7 that is truly disruptive.

„Over a five-year horizon, our price target for Tesla is 2,000 dollars per share“, Wood revealed. However, this assumes the market opening up for autonomous driving and robotaxis. Without robotaxis, the price target is 600 dollars per share. The development of electric vehicles, including autonomous driving, is a true revolution in the transportation sector. Ford and GM are not profitable with electric cars. And many electric car manufacturers in China are currently going bankrupt.

Ark Investment evaluates individual companies using several criteria within a scoring model. An important aspect is management, and having a visionary like Elon Musk at the helm. It's also crucial to consider implementation, such as how much money is being invested in research and development, and in which areas. Furthermore, the barriers to entry in a market should be considered. Lastly, disruptive companies should also lead in their products and services. For example, breakdowns are very rare at Tesla, and much less common than with conventional cars.

According to Wood, companies focused on disruptive innovation grow at rates of 20% to 30% per year, sometimes even more. In contrast, traditional growth companies typically grow in single digits. High growth rates are particularly evident in the artificial intelligence sector. In its flagship fund, Ark Invest has switched from hardware stocks to software stocks like Palantir.

Overall, the valuation in the Ark Innovation ETF is currently at a price-to-earnings ratio (P/E) of 27, while the S&P 500 has a P/E of 18. Nonetheless, the companies in the fund are expected to grow significantly. Thus, they are expected to approach the valuation of the S&P in the coming years.

„This is a volatile strategy that we pursue“, Wood admitted. „But we won't deviate from it. We only focus on disruptive innovation.“ Even during the bear market in 2021/2022, the fund did not diversify broadly. „Instead, we focus on our convictions“, Wood explained. And 2023 was another good year for the fund, with a performance of plus 68%.

In the past, Europeans have shown great interest in the research provided by Ark Invest, which the company offers for free. It had been looking for a partner in Europe for several years. With Rize Invest, the investment company found a suitable partner with a similar DNA to Ark Invest. It has since acquired Rize Invest, now operating as Ark Invest Europe.

„The timing is perfect“, said Wood. „With active ETFs you are starting in Europe a journey that we began ten years ago.“ Active ETFs especially promote high transparency. The growth potential for actively managed exchange-traded funds in Europe is huge, in Wood's view.

She believes that the Federal Reserve is making a mistake with its current „Higher for longer“ policy. In her view the Fed is looking at backward-looking indicators, and should not raise interest rates, but rather lower them. With regard to the upcoming Presidential election, she will make her choice based on economic factors. And at the moment the US economy has a lot of problems.