thematic investing in disruptive innovation · disruptive innovation is the introduction of a new...

THEMATIC INVESTING in DISRUPTIVE INNOVATION

www.ark-invest.com

INTRODUCTION CATHER INE D. WOOD, CEO/CIO

2

2014 Founded ARK Invest 12 years at AllianceBernstein Chief Investment Officer of Global Thematic Strategies ($5 billion AUM) Co-founded Tupelo Capital Management $800 million under management, the largest women-run hedge fund in the world in 2000 18 years with Jennison Associates Chief Economist, Equity Research Analyst, Portfolio Manager and Director 3 years with Capital Group University of Southern California B.S., summa cum laude, in Finance and Economics

ARK Invest | ark-invest.com

3

WHAT IS DISRUPTIVE INNOVATION?

THEMATIC INVESTING POWERED BY DISRUPTIVE INNOVATION

Disruptive innovation is the introduction of a new product or service that permanently changes an industry landscape by creating simplicity, convenience and accessibility while driving down costs.

1781 Steam Engine 1860

Internal Combustion Engine

1876 Telephone

1880 Electric

Lighting

1923 Television

1971 Microprocessor

2003 First Human Genome Sequenced

1990 Internet

1977 Mobile Phone

1903 Airplane

Selection of Historical

DISRUPTIVE INNOVATION


4 TECHNOLOGY IS CHANGING EVERYTHING AT AN ACCELERATED RATE

UNDERSTAND THE TECHNOLOGICAL TRENDS TO STAY AHEAD OF THE CURVE.


5

CAPITALIZATION ON THE CONVERGENCE OF SECTORS

*NFLX: 0.44% *ILMN: 0.25% *TSLA: 0.20% *ATHN: 0.04%

Percentage Weight in Russell 3000 Growth Index*

IDENTIFYING ECOSYSTEM ENABLERS

*As represented by the iShares Russell 3000 Growth ETF: http://www.ishares.com/us/products/239713/ishares-russell-3000-growth-etf (as of 08.12.2015) The companies referenced are for illustrative purposes only and are not endorsements by ARK of any particular company or security and are not recommendations by ARK to buy, sell or hold any security.


DIFFERENTIATION COMPANIES THAT FALL BETWEEN THE CRACKS

*AMZN: 1.71%

*NVDA: 0% *XLNX: 0.02% *MDSO: 0.02% *AMBA: 0.03% *HDP: 0.002% *SPLK: 0.07%

*SSYS: 0%

6

Genomic Sequencing

Robotics and Automation

The Cloud and Big Data

Energy Storage

F O U R G E N E R A L P U R P O S E T E C H N O LO G Y P L AT F O R M S D R I V I N G I N N OVAT I O N TO DAY

Bitcoin


7

Genomic Sequencing



Energy Storage


Bitcoin


8

$1

$10

$100

$1,000

$10,000

$100,000

$1,000,000

$10,000,000

$100,000,000

7/24/98 4/19/01 1/14/04 10/10/06 7/6/09 4/1/12 12/27/14 9/22/17 6/18/20 3/15/23

Projected Cost to Sequence a Whole Human Genome (monthly, log scale)

Historic Cost Per Genome Moore's Law Moore's Law Forecast Historic Rate Forecast

GENOMIC SEQUENCING

Source: ARK Investment Management LLC Projections are not guarantees. ARK Invest | ark-invest.com

9

GENOMIC SEQUENCING

40,000 235,000

53,000,000

4,000,000,000

121,000,000

34,000,000,000

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

100,000,000

1,000,000,000

10,000,000,000

100,000,000,000

Human Genomes Sequenced Thus Far Human Genome Sequencing Capacity 2014

Human Genomes Sequenced by 2019 Human Genomes Sequenced by 2024

Estimated Number of Human Genomes Sequenced Over the Next 5 and 10 Years

Moore's Law Forecast Historical Rate Forecast

200% CAGR

Source: ARK Investment Management LLC Estimates are projections and not guarantees.

Moore’s Law Forecast Historic Rate Forecast


GENOMIC SEQUENCING I L LUMINA CASE STUDY – AN EXAMPLE OF A D ISRUPT IVE COMPANY

10

Source: Bloomberg The information shown is historical and not a prediction of future results. The company is referenced for illustrative purposes only. Such reference is not an endorsement by ARK of the company or any security and is not a recommendation by ARK to buy, sell or hold any particular security. ARK Invest | ark-invest.com

11

Genomic Sequencing



Energy Storage


Bitcoin


12

$11

$185

$242

$0

$50

$100

$150

$200

$250

$300

2015 2025 2035

Billi

ons

Accelerating Capital Spending on Robotics will Disrupt Labor

32% GROWTH RATE

•  47% of American Jobs will be replaced by automation •  Automation will generate $12 trillion in additional GDP

By 2035:

ROBOTICS AND AUTOMATION

Source: ARK Investment Management LLC, Oxford University Study Projections are not guarantees. ARK Invest | ark-invest.com

ROBOTICS AND AUTOMATION ARK’S ORIGINAL RESEARCH ON THE FUTURE OF AUTOMATION

13

Source: ARK Investment Management LLC


14

ROBOTICS AND AUTOMATION 3D PRINTING

Source: ARK Investment Management LLC Estimates are projections and not guarantees. ARK Invest | ark-invest.com

ROBOTICS AND AUTOMATION: 3D PRINTING STRATASYS CASE STUDY – AN EXAMPLE OF A DISRUPT IVE COMPANY

15


Source: Bloomberg The information shown is historical and not a prediction of future results. The company is referenced for illustrative purposes only. Such reference is not an endorsement by ARK of the company or any security and is not a recommendation by ARK to buy, sell or hold any particular security.

16

Genomic Sequencing



Energy Storage


Bitcoin


17

DATA ANALYTICS WILL BE REQUIRED TO STAY RELEVANT

•  Mining massive unstructured datasets via machine learning will be crucial for insights •  In 2000 98% of connected devices were computers, by 2020 it will be only 9%

THE CLOUD AND BIG DATA

6%

2015

11%

2020

7.5x

Putting Useful Data to Use

% Unanalyzed % Analyzed


18

Source: LA Times, Center for Automotive Research (CAR), USDT Federal Highway Admin 2009 National Household Travel Survey, Zipcar 2014 Annual Report Projections are not guarantees.

THE CLOUD AND BIG DATA SHARING ECONOMY

If the sharing economy reaches 5% penetration, US auto sales will fall from 14-15 million to 7-8 million by 2020, even in a strong economy.


0

2

4

6

8

10

12

14

16

18

2014 2015 2016 2017 2018 2019

Uni

ts (

mill

ions

)

Projected Annual New Car Sales in the US

No Additional Car Sharing Car Sharing 5% Adoption Car Sharing 2.5% Adoption

19

THE CLOUD AND BIG DATA SHARED AUTONOMOUS VEHICLES

US drivers travel three trillion miles per year

Personal vehicle travel costs roughly 70 ₵ /mile

US car owners spend $2.1 trillion on driving per year

~ 60% of miles driven are addressable by SAVs

Google could price travel at 25 ₵ /mile

+ $450 billion opportunity for shared autonomous vehicles

+

Consider: •  If SAVs replace 60% of US vehicles, 740 million parking spaces worth $13 trillion free up •  Human error contributes to 90% of auto accidents •  Vehicles are stranded assets, utilized only 4% of the time on average


20

Genomic Sequencing



Energy Storage


Bitcoin


21

ENERGY STORAGE

Electric vehicles are 4x more energy efficient than combustion engine vehicles. Battery pack system costs will drop 40% by 2020.

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2013 2014 2015 2016 2017 2018 2019 2020

Estimated Cost of Tesla Battery vs. Cost of Total Battery Pack System

Just the Battery Total Battery Pack System

Source: ARK Investment Management LLC Estimates are projections and not guarantees. ARK Invest | ark-invest.com

ENERGY STORAGE OIL CASE STUDY

22


Source: Bloomberg The information shown is historical and not a prediction of future results.

23

Genomic Sequencing



Energy Storage


Bitcoin


BITCOIN

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Bitcoin (Sender) Credit Card (Merchant) PayPal (Merchant) Remittances (Consumer)

Perc

ent o

f Tr

ansa

ctio

n

Payment Method Transaction Fees

24

Source: ARK Investment Management LLC The information shown is for illustrative purposes only and is not a recommendation by ARK to buy, sell or hold any security. ARK Invest | ark-invest.com

Source: ARK Investment Management LLC The information shown is for illustrative purposes only and is not a recommendation by ARK to buy, sell or hold any security. The information shown depicts the expansion of the bitcoin monetary base through 2025.

25

BITCOIN


0%

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Deterministic Expansion of Bitcoin Supply

Source: The United States Money Supply M0: http://www.tradingeconomics.com/united-states/money-supply-m0/forecast (as of 8.21.2015) The information shown is historical and not a prediction of future results. Projections are not guarantees.

26

BITCOIN


•  By 2030, the United States Money Supply M0 is projected to trend around 5,537,118 USD Million

5000000

4000000

United States Money Supply M0USD Million

1000000

0

3000000

2000000

2013 2002 1991 1980

27

BITCOIN


$280 $1,700

$17,000

$170,000

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

Today 1% of GFGM 10% of GFGM 100% of GFGM

Value of One bitcoin in Global Financial Gold Market (GFGM)

Source: ARK Investment Management LLC The information shown is for illustrative purposes only and is not a recommendation by ARK to buy, sell or hold any security.

28

CAPITALIZATION ON THE CONVERGENCE OF SECTORS

*NFLX: 0.44% *ILMN: 0.25% *TSLA: 0.20% *ATHN: 0.04%

Percentage Weight in Russell 3000 Growth Index*

IDENTIFYING ECOSYSTEM ENABLERS

*As represented by the iShares Russell 3000 Growth ETF: http://www.ishares.com/us/products/239713/ishares-russell-3000-growth-etf (as of 08.12.2015) The companies referenced are for illustrative purposes only and are not endorsements by ARK of any particular company or security and are not recommendations by ARK to buy, sell or hold any security.


DIFFERENTIATION COMPANIES THAT FALL BETWEEN THE CRACKS

*AMZN: 1.71%

*NVDA: 0% *XLNX: 0.02% *MDSO: 0.02% *AMBA: 0.03% *HDP: 0.002% *SPLK: 0.07%

*SSYS: 0%

29


Recognize that the world is changing rapidly. Incorporate a deep understanding of the underlying drivers of long term value creation and risk. Look forward to provide a dynamic and flexible way to validate conviction-based decisions.

DISRUPTIVE INNOVATION IS A THEMATIC INVESTMENT OPPORTUNITY

WHAT IS THEMATIC INVESTING? A thematic approach seeks investable ideas to capture opportunities from long-term trends or secular shifts that cut across economic sectors and geographic boundaries.

30

①  PORTFOLIO DIVERSIFICATION TOOL Thematic investing can offer a low correlation of relative returns to traditional growth strategies and negative correlation to value strategies.

HOW INVESTORS BENEFIT FROM THEMATIC

③  HEDGE FOR INDEX-BASED STRATEGIES Constant focus on secular changes and disruptive innovation can offer a portfolio hedge in a rapidly changing world and complement traditional strategies.

②  UNIQUE SOURCE OF ALPHA Top down approach looks at secular trends and ecosystems to find attractive growth opportunities across sectors.


31

DISRUPTIVE INNOVATION IS KEY TO GROWTH

OFFERING INVESTORS

POWERFUL PORTFOLIO DIVERSIFICATION AND PROSPECTS FOR LONG-TERM GROWTH

IN A SLOW GROWTH WORLD

INVESTING IN THE COMPANIES THAT ARE CHANGING THE WAY THE WORLD WORKS

AND MAKING IT A BETTER PLACE


©2015, ARK Investment Management LLC. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of ARK Inestment Management LLC. The content of this presentation is for informational purposes only and is subject to change without notice. This presentation does not constitute, either explicitly or implicitly, any provision of services or products by ARK and investors should determine for themselves whether a particular investment management service is suitable for their investment needs. All statements made regarding companies or securities are strictly beliefs and points of view held by ARK and are not endorsements by ARK of any company or security or recommendations by ARK to buy, sell or hold any security. Certain of the statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The matters discussed in this presentation may also involve risks and uncertainties described from time to time in ARK's filings with the U.S. Securities and Exchange Commission. ARK assumes no obligation to update any forward-looking information contained in this presentation. Certain information was obtained from sources that ARK believes to be reliable; however, ARK does not guarantee the accuracy or completeness of any information obtained from any third party. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Index Descriptions: The Russell 3000® Growth Index measures the performance of those Russell 3000® Index companies (the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market) with lower composite value scores.

32

thematic investing in disruptive innovation · disruptive innovation is the introduction of a new...

Documents