ARK’s strategies generally underperform in “risk off” markets (down market). This happens, in part, because we believe other investors and advisers tend to return to benchmark names at such times, which ARK generally does not. ARK believes that at such times, the fundamentals for the companies held in our portfolios look better. As businesses in tough times seek to make changes and become more efficient, we believe that the companies held in the ARK portfolios are ultimately more in demand.
During “risk-on” markets, ARK’s strategies could outperform. Volatility can be positive on the up-side, and investors come to recognize the misunderstood nature of many companies’ fundamentals and look to identify companies that are leaders rather than largest market capitalization company in a passive index. The names ARK invests in generally do not comprise significant portions of broad-based indices.