Ark Investment Management’s ESG fund, the Nikko AM Ark Positive Change Innovation Fund (ticker NIPCIPJ LX), emerged as a standout performer in 2023, achieving an impressive 68% return, surpassing the gains of the S&P 500 index. The fund’s success is attributed to its bold bet on cryptocurrencies, notably its significant investment in Coinbase Global Inc., comprising nearly 10% of the portfolio.
In a market where traditional ESG funds faced challenges related to setbacks in clean-tech assets, the Nikko-Ark fund thrived by focusing on disruptive technologies aligned with the United Nations sustainable development goals. The fund’s emphasis on tech investments, including Coinbase, proved advantageous, especially with the surge in the market value of Coinbase, which contributed significantly to the fund’s stellar performance.
The positive momentum for cryptocurrencies extended into 2024 with the approval of Bitcoin exchange-traded funds by the US Securities and Exchange Commission. However, market fluctuations and a decline in Bitcoin’s value led to speculation about a “buy the rumor, sell the fact” scenario. Despite this, Thomas Hartmann-Boyce, a portfolio manager at Ark, remains optimistic about Coinbase’s upward trajectory, considering its crucial role as a custodian for underlying Bitcoin assets.
ESG funds focusing on technology rather than traditional green assets outperformed their counterparts, exemplified by the success of funds like the JPMorgan US Technology Fund (JPMUSTC LX). Ark’s high-conviction public equities, including investments in companies like CRISPR Therapeutics AG and Block Inc., aim for a compound annual rate of return of at least 15% over the next five years.
Investors in the Nikko Ark fund have experienced volatility, with substantial gains in 2023 following a decline of over 50% in 2022. Despite a modest loss in the early part of the current year, the fund remains committed to its strategy. Similarly, Coinbase’s value has decreased year-to-date, but Peter Graf, the chief investment officer for Nikko in the Americas, underscores the fund’s dedication to long-term exposure to sustainability-related innovation, emphasizing the resilience of new technologies across business cycles.
