WEBVTT - Ark Investment's Cathie Wood Talks ARKW, TikTok's Future

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Joining our conversation now is Kathy Woods. She is the

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<v Speaker 2>Arkaves CEO and CIO. Kathy, you're with us for the

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<v Speaker 2>whole show, which is a real luxury. And I want

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<v Speaker 2>to start with crypto because it's day three of Donald

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<v Speaker 2>Trump's second administration. We've heard a lot about immigration, AI

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<v Speaker 2>and tariffs just in those three days.

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<v Speaker 3>Not as much about crypto just yet. What do you

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<v Speaker 3>make of that?

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<v Speaker 1>Oh?

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<v Speaker 4>I think he is very committed to crypto. Actually, what

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<v Speaker 4>happened the night before his inauguration, I think he launched

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<v Speaker 4>some meme coins and that caused quite a stir in

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<v Speaker 4>the crypto community. He's also named Paul Atkins to be

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<v Speaker 4>the SEC Commissioner.

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<v Speaker 1>He is pro crypto.

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<v Speaker 4>Senator Lummis has said that she's looking forward to the

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<v Speaker 4>Atkins diet are under at Kins as he becomes the

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<v Speaker 4>SEC Commissioner and really regulates digital assets.

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<v Speaker 1>The way they should be regulated.

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<v Speaker 5>And so, Kathy, let's talk about this just because it

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<v Speaker 5>just happened. A filing came in. It had ETFs that

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<v Speaker 5>will track dosee, Trump coin Bonk along with some other ones,

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<v Speaker 5>and it was a forty Act filing. Which would use

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<v Speaker 5>the Kman subsidiary move. You know this is going to

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<v Speaker 5>be either approved or denied in seventy five days. Do

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<v Speaker 5>you see the SEC being like totally liberal letting all

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<v Speaker 5>this stuff through or do you think they will draw

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<v Speaker 5>a line somewhere?

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<v Speaker 4>I think the SEC is going to be prudent, But

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<v Speaker 4>in terms of liberal, I think that as long as

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<v Speaker 4>the sponsors are following the forty Act laws, that they

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<v Speaker 4>will allow many of these new products.

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<v Speaker 1>Yes.

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<v Speaker 6>So, speaking of new products, you mentioned the trump coin.

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<v Speaker 6>I want to get your as someone who sees a

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<v Speaker 6>lot of value in crypto, what do you think is

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<v Speaker 6>the best way to understand trump coin? Given that there's

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<v Speaker 6>no intrinsic value, what purpose does it serve beyond as

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<v Speaker 6>an advertising advertisement marketing tool for him?

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<v Speaker 4>Yes, it is a it's a meme coin. In twenty seventeen,

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<v Speaker 4>we went through the ico movement, which was very much

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<v Speaker 4>if you remember, crypto Kitties started a movement back then

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<v Speaker 4>in icos.

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<v Speaker 1>This is part of the meme coin moment.

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<v Speaker 4>Isn't going to have any utility we shall see.

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<v Speaker 1>I mean, there are there.

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<v Speaker 4>Is speculation that you know, you'll get to meet President Trumpez,

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<v Speaker 4>one of the utilities.

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<v Speaker 1>Of owning this coin.

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<v Speaker 4>I don't know if that's the case or not, but

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<v Speaker 4>so far we don't know of much utility for this

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<v Speaker 4>coin except that it is a mean coin of President

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<v Speaker 4>Trump himself in the early days of I think he's

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<v Speaker 4>ushering in the next phase of the crypto revolution.

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<v Speaker 2>Well, Kathy, with all that in mind, would you buy

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<v Speaker 2>trump coin or or do you generally stay away from

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<v Speaker 2>the meme type coins.

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<v Speaker 4>Yeah, we've pretty much stayed away from the meme coins.

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<v Speaker 1>Uh. You know, we're very focused on the big three.

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<v Speaker 4>So Bitcoin, uh and as you know, ar kb is

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<v Speaker 4>one of the larger spot bitcoin ETFs out there. Happily uh,

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<v Speaker 4>Ether and Solana in in our private funds.

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<v Speaker 1>So those those we believe are the big three.

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<v Speaker 4>And then we think that the decentralized financial services movement

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<v Speaker 4>some people call it DeFi or Internet financial Services or

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<v Speaker 4>even finternet. We think that is going to be big.

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<v Speaker 4>That's very Ethereum and Solana based. And so there are

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<v Speaker 4>some uh there, there are some crypto assets that are

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<v Speaker 4>providing great utility for that movement.

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<v Speaker 6>Kathy, I just want to ask one final question here

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<v Speaker 6>on trump coin. Do you share the concerns of some

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<v Speaker 6>in the crypto industry that perhaps this reinforces the worst

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<v Speaker 6>part of the industry, that it's a mockery of serious tokens.

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<v Speaker 1>You know, it's interesting.

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<v Speaker 4>And Chris Berniski, who was our first crypto analyst, now

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<v Speaker 4>we would call that digital assets analysts, he made a

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<v Speaker 4>comment on Excess Weekend that I think is true that

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<v Speaker 4>the ic Ico movement in twenty seventeen really brought this

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<v Speaker 4>new technology, or at least curiosity about this new technology to.

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<v Speaker 1>A whole new group of people.

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<v Speaker 4>And while you know, some in the traditional crypto world

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<v Speaker 4>considered it, I think he used the word cringe or

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<v Speaker 4>something like that, it really did open a lot of eyes,

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<v Speaker 4>and we were it.

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<v Speaker 1>Did usher in that year.

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<v Speaker 4>We had I think, if I'm not mistaken, Bitcoin went

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<v Speaker 4>from one thousand to twenty thousand as part of this movement.

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<v Speaker 4>This is a lot like the early days of the Internet,

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<v Speaker 4>and we lay it a lot of fiber right, a

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<v Speaker 4>lot of money and eyeballs attracted at that time. And yes,

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<v Speaker 4>some of that buyer beware, some of that ended badly

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<v Speaker 4>or ended badly for many years, but it really did

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<v Speaker 4>spawn a very important movement in technology, and we think

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<v Speaker 4>the name is true here.

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<v Speaker 5>Kathy, let's move on to Trump's second term. Here. Obviously,

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<v Speaker 5>stocks have had a great run the past two years.

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<v Speaker 5>He generally has seen as bullish for stocks. But then

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<v Speaker 5>there's tariffs. You're running all these funds, You've got stocks

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<v Speaker 5>to buy and sell. What are you doing differently now

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<v Speaker 5>that he is fully in office.

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<v Speaker 4>Well, we are doing what we've always done, which is

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<v Speaker 4>investing in truly transformative innovation across sectors, so.

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<v Speaker 1>That we have not changed at all.

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<v Speaker 4>There is a meme out there going around which is

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<v Speaker 4>very interesting and unfortunately in these momentum driven markets, perhaps.

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<v Speaker 1>More true than we would have liked.

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<v Speaker 4>If you look at the beginning of the last administration,

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<v Speaker 4>that was our peak, the peak in innovation, and we

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<v Speaker 4>went through, as did everybody, a bear market hit disproportionately,

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<v Speaker 4>and we had been underperforming until it seems the idea

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<v Speaker 4>that we were going to have a new administration started

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<v Speaker 4>moving into the market. So when you say the market

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<v Speaker 4>has been very strong, sure yes it has, but it

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<v Speaker 4>has been very concentrated to a very few names. In fact,

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<v Speaker 4>if you use a Goldman study, it has never been

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<v Speaker 4>more concentrated. And this includes during the Great Depression when

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<v Speaker 4>that was a binary decision. With twenty five percent unemployment

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<v Speaker 4>and thirty percent drop.

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<v Speaker 1>In GDP, is this company going to survive?

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<v Speaker 4>We were more concentrated than that, so I would say

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<v Speaker 4>even though the market did hit all time highs, it

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<v Speaker 4>was powered by very cash rich companies. And there has

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<v Speaker 4>been a lot of fear out there, and I think

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<v Speaker 4>what the new administration is doing is changing fear into optimism.

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<v Speaker 4>And you know, with deregulation, I think that's highly underestimated

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<v Speaker 4>how important deregulation is going to be to unleashing animal spirits.

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<v Speaker 1>So we're pretty excited about this.

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<v Speaker 4>And yes, our strategies are starting to break out.

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<v Speaker 1>I don't know if it's momentum or not. We haven't

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<v Speaker 1>changed what we're doing.

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<v Speaker 4>We think these companies are going to transform the world.

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<v Speaker 4>They're just now being recognized a little bit more. But

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<v Speaker 4>that now that risk appetite is picking up a bit.

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<v Speaker 6>Focus here on private assets and Kathy, you of course

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<v Speaker 6>have a ARC venture fund that invests in private companies

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<v Speaker 6>and among those holdings are a couple of names that

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<v Speaker 6>are familiar to everyone. SpaceX, Epic Games, open Ai, Anthropic.

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<v Speaker 6>I want to ask you about open Ai because following

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<v Speaker 6>yesterday's announcement with SoftBank and Oracle forming this joint venture

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<v Speaker 6>within an initial investment of one hundred billion dollars, that company,

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<v Speaker 6>open ai just got a lot more valuable. How are

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<v Speaker 6>you thinking about how much you want to maybe not

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<v Speaker 6>double down or increase your investment in a company like

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<v Speaker 6>open ai.

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<v Speaker 1>Well, yes, we have a nice exposure now.

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<v Speaker 4>And you know, it's interesting to have watched that announcement

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<v Speaker 4>because we know how close Elon Musk with his XAI

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<v Speaker 4>is to President Trump. And I think what President Trump

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<v Speaker 4>do is doing here is spreading the wealth.

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<v Speaker 1>I mean, there are some very.

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<v Speaker 4>Innovative companies who are going to accelerate this ai AH,

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<v Speaker 4>which in itself is moving at an incredible pace, a

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<v Speaker 4>pace that we've never seen before.

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<v Speaker 1>What we're acquainting stargate to you.

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<v Speaker 4>So this is the five hundred billion dollar project is

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<v Speaker 4>to the building out of the highway system in the

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<v Speaker 4>United States. If you look back and put that investment

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<v Speaker 4>into twenty twenty five dollars, it's roughly.

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<v Speaker 1>The same amount.

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<v Speaker 4>So these are the digital highways that are going to

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<v Speaker 4>transform everything. They're going to transform everything and really accelerate

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<v Speaker 4>GDP growth in a way that I think most people.

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<v Speaker 1>Do not participate. Understand right now.

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<v Speaker 2>And let's talk a little bit about rappers. Of course,

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<v Speaker 2>we're talking about the ARC Venture Fund. It's a closed

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<v Speaker 2>end interval fund because you can't yet directly put private

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<v Speaker 2>private companies, private bonds, private credit in into an ETF.

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<v Speaker 2>You have seen some filings come through to that effect

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<v Speaker 2>that you think about what State Street is trying to

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<v Speaker 2>do with Apollo, for example. I haven't yet seen private

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<v Speaker 2>assets ETF filing come from ARC, though.

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<v Speaker 3>Is that something that you're potentially thinking about?

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<v Speaker 4>Well, right now, we're very happy with the interval fund structure.

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<v Speaker 1>So this is a forty act fund as well.

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<v Speaker 4>An interval fund allows daily inflows and quarterly redemptions up

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<v Speaker 4>to five percent of nav That seems to be a

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<v Speaker 4>better wrapper. I would think for these public private funds.

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<v Speaker 4>Roughly eighty percent of our interval fund is private, twenty

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<v Speaker 4>percent is public, so that we can allow for redemptions.

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<v Speaker 4>And I think the most important thing about this interval fund,

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<v Speaker 4>as would be true of an ETF, of course, is

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<v Speaker 4>the democratization that this is allowing for venture capital. Finally,

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<v Speaker 4>retail investors with less than I think it's I'm not

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<v Speaker 4>going to get this exactly right, But two hundred and

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<v Speaker 4>fifty thousand dollars in income per year and one million

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<v Speaker 4>dollars in net worth. They have access to some of

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<v Speaker 4>the most amazing companies in the world at much earlier

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<v Speaker 4>stages than has been the case historically.

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<v Speaker 1>So we're pretty excited about this wrapper.

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<v Speaker 5>Kathy, Just to push back on that a little bit,

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<v Speaker 5>there's this ETF called x XOVR, the er shares public

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<v Speaker 5>private crossover. It was basically an ETF living in oblivion

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<v Speaker 5>doing an active strategy. It changed its focus to add

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<v Speaker 5>a little private Fifteen percent of the stock of the

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<v Speaker 5>ETF is now SpaceX. Since it did that in December,

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<v Speaker 5>the flows of just came have come in gangbusters. It's

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<v Speaker 5>now double your venture fund, which has been around for longer.

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<v Speaker 5>Is it just the case that people want it an

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<v Speaker 5>ETF even if the ETF trades, it's something like a

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<v Speaker 5>hybrid closed end fund with prems and discounts.

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<v Speaker 3>People just prefer that rapper.

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<v Speaker 5>Does that concern you at all?

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<v Speaker 1>I mean it doesn't concern me.

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<v Speaker 4>I think the more access to innovation anyone offers, the

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<v Speaker 4>better for our markets and the better for our competitive

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<v Speaker 4>positioning around the world.

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<v Speaker 1>So it doesn't bother me. It doesn't mean we won't

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<v Speaker 1>do it ourselves.

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<v Speaker 4>And I will tell you that mutual funds, many mutual

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<v Speaker 4>funds have allocated fifteen percent of their portfolios to private

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<v Speaker 4>companies as well. They don't disclose their holdings at the

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<v Speaker 4>end of every day like ETFs do, so maybe they

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<v Speaker 4>don't get as much publicity, but this has been done before,

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<v Speaker 4>and I think as more and more people understand what

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<v Speaker 4>our fund is and the kind of access we do

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<v Speaker 4>have to these incredible ideas, I think there's a place

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<v Speaker 4>for both.

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<v Speaker 2>So, Kathy, people call this the Trump two point zero

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<v Speaker 2>ETF Toddstone.

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<v Speaker 3>Of course, do you agree with that label? Do you

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<v Speaker 3>think that makes sense?

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<v Speaker 4>Well, I think this administration is going to be incredible

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<v Speaker 4>for innovation, so I'm definitely not going to find that.

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<v Speaker 1>The only thing I would add is.

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<v Speaker 4>The flagship strategy A RKK includes the space, the innovation

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<v Speaker 4>space that has been hit the hardest, was hit the

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<v Speaker 4>hardest by regulation and a lack of M and A,

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<v Speaker 4>and that was what we call the multiomics or genomics

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<v Speaker 4>space that we think is.

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<v Speaker 1>Going to have.

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<v Speaker 4>We're going to see the most profound implications of artificial

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<v Speaker 4>intelligence in that part of the market. So when it

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<v Speaker 4>comes to AI, we think that the biggest application in

0:13:50.200 --> 0:13:55.520
<v Speaker 4>the next five to ten years is Robotaxi's autonomous taxi platforms.

0:13:55.840 --> 0:14:00.960
<v Speaker 4>The most profound is curing disease. That's what you would see.

0:14:01.000 --> 0:14:05.079
<v Speaker 4>And this new administration is all about innovation and kind

0:14:05.120 --> 0:14:09.439
<v Speaker 4>of rethinking what the heck we're doing in healthcare and

0:14:09.520 --> 0:14:13.079
<v Speaker 4>why it's up to twenty percent of GDP and still

0:14:13.160 --> 0:14:16.320
<v Speaker 4>our results are not as good as in other countries.

0:14:16.400 --> 0:14:18.400
<v Speaker 4>So there's going to be a whole new rethink, and

0:14:18.440 --> 0:14:24.200
<v Speaker 4>I think that's going to fall into benefiting AARKG and

0:14:24.480 --> 0:14:25.640
<v Speaker 4>ARKK as well.

0:14:25.720 --> 0:14:28.480
<v Speaker 6>Okay, so a rethink on that front. Also rethink when

0:14:28.480 --> 0:14:31.360
<v Speaker 6>it comes to what's going to happen with TikTok. It's

0:14:31.360 --> 0:14:34.960
<v Speaker 6>still not clear the future of this social media company,

0:14:34.960 --> 0:14:37.600
<v Speaker 6>but we do know that President Trump is open to

0:14:37.680 --> 0:14:41.160
<v Speaker 6>Elon Musk or Larry Ellison buying it in concert with

0:14:41.200 --> 0:14:43.520
<v Speaker 6>the US government. Is this something that you would, if

0:14:43.560 --> 0:14:47.040
<v Speaker 6>it's publicly traded, want to buy for RW.

0:14:47.800 --> 0:14:50.680
<v Speaker 4>Well, of course, we look at the valuation as always

0:14:50.960 --> 0:14:53.960
<v Speaker 4>and see if during the next five.

0:14:53.800 --> 0:14:58.520
<v Speaker 1>Years it were we believed it would.

0:15:00.240 --> 0:15:04.120
<v Speaker 4>Appreciate at more than a fifteen percent compound annual rate

0:15:04.120 --> 0:15:06.480
<v Speaker 4>of return per year. So we know there are a

0:15:06.520 --> 0:15:08.360
<v Speaker 4>lot of bidders out there, a lot of people very

0:15:08.400 --> 0:15:10.040
<v Speaker 4>excited about TikTok.

0:15:09.600 --> 0:15:12.920
<v Speaker 1>And we understand why. We just want to see the valuation.

0:15:14.280 --> 0:15:17.040
<v Speaker 4>It is one of the most important social media companies

0:15:17.040 --> 0:15:17.720
<v Speaker 4>of our age.

0:15:17.920 --> 0:15:20.360
<v Speaker 5>All Right, Kathy, I have a request question from James

0:15:20.400 --> 0:15:24.359
<v Speaker 5>Seyfert on my team. Of all your individual strategies, including AARKK,

0:15:24.840 --> 0:15:27.000
<v Speaker 5>what do you think has the best setup right now?

0:15:29.000 --> 0:15:34.880
<v Speaker 4>I think the most underestimated is ARKG and the reason

0:15:34.960 --> 0:15:41.200
<v Speaker 4>for that is regulatory rethink altogether of what we're doing

0:15:41.240 --> 0:15:45.440
<v Speaker 4>in healthcare, but as important for G and for a

0:15:45.440 --> 0:15:48.000
<v Speaker 4>lot of our other names. You know, the lack of

0:15:48.120 --> 0:15:50.960
<v Speaker 4>M and A over the last four years has been

0:15:51.560 --> 0:15:53.120
<v Speaker 4>a very big problem.

0:15:53.400 --> 0:15:55.520
<v Speaker 1>There has not been price discovery.

0:15:55.920 --> 0:16:00.280
<v Speaker 4>What will a strategic buyer pay for these assets because

0:16:00.280 --> 0:16:02.760
<v Speaker 4>they weren't allowed to buy them. Now, if you look

0:16:02.760 --> 0:16:06.200
<v Speaker 4>at biotech of pharma, I think that four hundred billion

0:16:06.280 --> 0:16:09.800
<v Speaker 4>dollars of revenue, thirty percent of the space is going

0:16:09.800 --> 0:16:12.960
<v Speaker 4>to go off patent in the next five years.

0:16:13.480 --> 0:16:15.960
<v Speaker 1>Our companies will fill that space, but.

0:16:16.080 --> 0:16:19.680
<v Speaker 4>They were not allowed to be acquired by and therefore

0:16:19.760 --> 0:16:22.560
<v Speaker 4>we had no price discovery, right, that is change?

0:16:22.760 --> 0:16:24.720
<v Speaker 2>All right, Kathy, We have about a minute left with you,

0:16:24.880 --> 0:16:27.400
<v Speaker 2>and you mentioned M and A. Something we're also waiting

0:16:27.400 --> 0:16:29.760
<v Speaker 2>for is for IPOs to come back. And you think

0:16:29.760 --> 0:16:32.640
<v Speaker 2>about the innovative companies that you care about, a lot

0:16:32.640 --> 0:16:34.480
<v Speaker 2>of them just aren't going public.

0:16:34.520 --> 0:16:35.840
<v Speaker 3>The extreme example would.

0:16:35.680 --> 0:16:38.440
<v Speaker 2>Be SpaceX, but also down in the small cap space

0:16:38.480 --> 0:16:38.960
<v Speaker 2>as well.

0:16:39.160 --> 0:16:40.560
<v Speaker 3>What do you make of that? Do you think that's

0:16:40.600 --> 0:16:42.680
<v Speaker 3>going to change?

0:16:43.000 --> 0:16:43.680
<v Speaker 1>I hope so.

0:16:44.120 --> 0:16:48.320
<v Speaker 4>I do think regulatory changes will go a long way

0:16:49.360 --> 0:16:52.520
<v Speaker 4>towards bringing back public markets. I think the number of

0:16:52.760 --> 0:16:55.000
<v Speaker 4>stocks in the public markets has been cut in half

0:16:55.040 --> 0:16:58.480
<v Speaker 4>in the last twenty twenty years. And I understand why

0:16:58.600 --> 0:17:03.520
<v Speaker 4>companies want to stay private. The regulatory quagmire that they

0:17:03.760 --> 0:17:08.919
<v Speaker 4>enter in the public markets is really a lot of friction.

0:17:09.119 --> 0:17:12.120
<v Speaker 4>And there's another reason, I would say, and that is

0:17:12.359 --> 0:17:17.000
<v Speaker 4>in the private markets there is a longer time horizon

0:17:17.400 --> 0:17:20.959
<v Speaker 4>than there is in the public markets today. But I

0:17:21.040 --> 0:17:23.480
<v Speaker 4>think that's going to change. I think that's going to

0:17:23.600 --> 0:17:27.840
<v Speaker 4>change as more and more people understand how profound AI

0:17:28.000 --> 0:17:29.400
<v Speaker 4>is going to change everything.

0:17:29.720 --> 0:17:32.000
<v Speaker 2>All right, Kathy, So great to get so much time

0:17:32.000 --> 0:17:34.040
<v Speaker 2>with you. Hope to speak against him. Our thanks of

0:17:34.040 --> 0:17:36.040
<v Speaker 2>course to Kathy would of ARC invest