ARK Investment Management (ARK) has launched the ARK Israel Innovative Technology ETF (IZRL), primarily listed on the Cboe ETF Marketplace.
The ARK Israel Innovative Technology ETF (IZRL) is designed to provide exposure to, and capture the price movements of, exchange listed Israeli companies whose main business operations are causing disruptive innovation in what ARK believes to be the highest growth potential segments of the economy: the Internet, technology, genomics, health care, biotechnology, industrials, and manufacturing. With an annual expense ratio of 0.49 per cent, IZRL will charge at least 18.6 per cent below the current US-listed Israel-focused ETFs (which range between 0.59 per cent and 0.75 per cent annually). IZRL spans the full market capitalisation spectrum, and will rebalance on a quarterly basis tracking the ARK Israeli Innovation Index (IZRLINVN).
Since its inception on1 October, 2015, the ARK Israeli Innovation Index has returned 17.9 per cent at a compound annual rate as of 30 September, 2017, outperforming the MSCI Israel Index (MXIL: -10.1 per cent annualised), the MSCI Israel Capped Investable Market Index (MISCNU: 4.3 per cent annualised), and the BlueStar Israel Global Index (BLSNTR: 3.3 per cent annualised).
ARK believes that Israel is an innovation powerhouse. Ranked highly for innovation capacity and entrepreneurship, including the 2nd overall for innovation by the 2017 Global Competitiveness Index, Israel is a global leader in the development and marketing of new products and services, technological improvements, and advancements in scientific research.
Following Israel’s promotion to developed market status in early 2010, however, many portfolios significantly underweighed the country relative to growth and innovation projections. In fact, as of 30 September, 2017, Israel represented only 0.14 per cent of the MSCI World (Developed) Index.
“Unintentionally, and often unknowingly, benchmark-sensitive investors lowered their exposure to Israel dramatically after its promotion to developed market status in 2010,” says Catherine D Wood, ARK’s Founder, CEO, and CIO. “According to ARK’s research, at the end of 2009, 13 Israeli stocks represented approximately 3.4 per cent of the market cap of the MSCI Emerging Market Index. If Israel were to have maintained its weight in the MSCI Emerging Market Index, then 3.4 per cent would account for USD427 billion in market cap today. Instead, following the promotion of Israel to developed market status, four Israeli companies now represent roughly 0.14 per cent, or USD62 billion, of the MSCI World (Developed) Index market cap. Consequently, Israel has lost access to USD365 billion of exposure in global equity market indices. For perspective, Israel’s GDP should approximate USD340 billion in 2017.”
“ARK believes that innovation is the key to growth and countless rankings show the innovative capacity of Israeli companies,” says Tom Staudt, ARK’s Chief Operating Officer and Director of Product Development. “Most investors would have significantly more exposure to these companies if Israel were geographically located within traditional index regions. ARK believes that IZRL will help take advantage of significant growth opportunities and market inefficiencies, and provide exposure to a truly unique growth story.”
