Why Hasn’t Cathie Wood’s ARK Fund Invested in Quantum Computing or Quantum Technologies?

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Quantum Technology can be classified as part of the next big innovative disruptions with huge potential to make waves across various industries. Investors – retail and institutional alike – tend to gravitate towards early investing in industries like the quantum technology industry.  This is what begs the question, of why an investment fund, best known for investing in innovative stocks does not have any quantum stock on its portfolio. This article explores if there are some criteria the quantum industry hasn’t met or if Cathie Wood’s ARK fund should be looking into some quantum stock ASAP.

Who is Cathie Wood?

Cathie Wood is an Economics graduate from USC, considered by many in the finance industry as a super-star investment profession. Wood is the Founder and CEO of the ARK fund. Her flagship $23 Billion Ark innovation fund has averaged no less than 45% in returns over the past five years.

Wood is seen as a high-risk, high-reward investor. She was one of those that were early on things like Bitcoin and Tesla. She firmly believes in the earnings potential of disruptive innovation. Cathie Wood is a minority in the hedge fund industry though, as not many women occupy her position, and this has contributed to her popularity.

Many love Cathie for her smart analysis on the technology sector and the companies that she covers. She has recently come under-fire as many of her holdings have diminished in value.

What is the ARK Fund?

The ARK Fund is an investment vehicle owned by Ark Invest which was founded in 2014 by Cathie Wood, who serves as the company’s chief investment officer and CEO. The entire focus of the ARK Fund is to focus on creating investment vehicles that invest in stocks of companies driving disruptive innovation.

“Innovation is on sale and it will be really important to investors to get to move towards the right side of change, given the amount of disruption that we do expect,”

Cathie Wood, CEO, ARK Invest.

According to ARK, investing in innovation is investing in the future, capitalizing on currently existing inefficiencies, and a way to make the world a better place. Ark Features several ETFs that investors can choose from, including Ark Innovation ETF (ARKK), Ark Autonomous Tech & Robotics ETF (ARKQ), ARK Next Generation Internet ETF (ARKG), ARK Genomic Revolution ETF (ARKF), ARK Fintech Innovation ETF (ARKX), and ARK Space Exploration & Innovation ETF (ARKX).

ARK and Quantum-Si

In 2021, ARK bought 460,000 shares in Quantum-Si as part of its ARK Genomic Revolution ETF (ARKF). Quantum-Si is the only quantum-related company on the ARK Invest portfolio, across their various ETFs. However, it is not a quantum company, Quantum-Si is a biotechnology firm.

When considering the reasoning behind ARK’s investment in Quantum-Si, one discovers that the investment in Quantum-Si is more from the standpoint of genetic science evolution and has nothing to do with the use of quantum technology by Quantum-Si. This means that Quantum technology is still unrepresented in ARK’s portfolio of innovative stock.

The ARK Fund Investment Criteria

ARK claims to choose its investments through an iterative process that combines two styles of research, both the top-down and bottom-up approach. Their focus is on identifying opportunities for innovation early and capitalizing on these opportunities to provide investors with long-term value. If this is the case, the quantum industry fits into much of the criteria.

It is still pretty nascent, the industry qualifies as disruptive and innovative, and it aims to solve existing inefficiencies that investors can capitalize on to deliver real commercial value, however, the ARK Fund Portfolio lacks any quantum stock still.

In a times article, Wood talked about the five innovation platforms around which ARK is centering their research for 2022, which are DNA sequencing, Robotics, Energy Storage, Artificial Intelligence, and FinTech.

Some might argue that with the wide applicability of quantum technology across even the areas of research that ARK focuses on, that quantum stock should make the cut in one or some of their research focuses. So why are there few to none? A big reason could be the uncertainty when it comes to the nature of what the quantum industry is doing. Like was said earlier, the quantum industry is highly theoretical and much of those involved are academics. Maybe the ARK team hasn’t found enough commercial viability based on their standards to pursue an investment. Another reason could be that it simply isn’t on their radar. These are all simply speculations though, and a proper reason would have to come from ARK themselves.

Conclusion

It is safe to say that the quantum industry does in fact meet the publicly available criteria that Wood’s ARK fund requires of the stocks invested in, in fact, it is perfect for what the fund stands for – innovation and disruption. On the surface, it looks like the ARK fund needs to start seriously looking into an investment in the Quantum Industry, which although mainly theoretical and nascent, has shown huge potential in real-world application.

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