Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Joining our conversation now is Kathy Woods. She is the
Speaker 2: Arkaves CEO and CIO. Kathy, you're with us for the
Speaker 2: whole show, which is a real luxury. And I want
Speaker 2: to start with crypto because it's day three of Donald
Speaker 2: Trump's second administration. We've heard a lot about immigration, AI
Speaker 2: and tariffs just in those three days.
Speaker 3: Not as much about crypto just yet. What do you
Speaker 3: make of that?
Speaker 1: Oh?
Speaker 4: I think he is very committed to crypto. Actually, what
Speaker 4: happened the night before his inauguration, I think he launched
Speaker 4: some meme coins and that caused quite a stir in
Speaker 4: the crypto community. He's also named Paul Atkins to be
Speaker 4: the SEC Commissioner.
Speaker 1: He is pro crypto.
Speaker 4: Senator Lummis has said that she's looking forward to the
Speaker 4: Atkins diet are under at Kins as he becomes the
Speaker 4: SEC Commissioner and really regulates digital assets.
Speaker 1: The way they should be regulated.
Speaker 5: And so, Kathy, let's talk about this just because it
Speaker 5: just happened. A filing came in. It had ETFs that
Speaker 5: will track dosee, Trump coin Bonk along with some other ones,
Speaker 5: and it was a forty Act filing. Which would use
Speaker 5: the Kman subsidiary move. You know this is going to
Speaker 5: be either approved or denied in seventy five days. Do
Speaker 5: you see the SEC being like totally liberal letting all
Speaker 5: this stuff through or do you think they will draw
Speaker 5: a line somewhere?
Speaker 4: I think the SEC is going to be prudent, But
Speaker 4: in terms of liberal, I think that as long as
Speaker 4: the sponsors are following the forty Act laws, that they
Speaker 4: will allow many of these new products.
Speaker 1: Yes.
Speaker 6: So, speaking of new products, you mentioned the trump coin.
Speaker 6: I want to get your as someone who sees a
Speaker 6: lot of value in crypto, what do you think is
Speaker 6: the best way to understand trump coin? Given that there's
Speaker 6: no intrinsic value, what purpose does it serve beyond as
Speaker 6: an advertising advertisement marketing tool for him?
Speaker 4: Yes, it is a it's a meme coin. In twenty seventeen,
Speaker 4: we went through the ico movement, which was very much
Speaker 4: if you remember, crypto Kitties started a movement back then
Speaker 4: in icos.
Speaker 1: This is part of the meme coin moment.
Speaker 4: Isn't going to have any utility we shall see.
Speaker 1: I mean, there are there.
Speaker 4: Is speculation that you know, you'll get to meet President Trumpez,
Speaker 4: one of the utilities.
Speaker 1: Of owning this coin.
Speaker 4: I don't know if that's the case or not, but
Speaker 4: so far we don't know of much utility for this
Speaker 4: coin except that it is a mean coin of President
Speaker 4: Trump himself in the early days of I think he's
Speaker 4: ushering in the next phase of the crypto revolution.
Speaker 2: Well, Kathy, with all that in mind, would you buy
Speaker 2: trump coin or or do you generally stay away from
Speaker 2: the meme type coins.
Speaker 4: Yeah, we've pretty much stayed away from the meme coins.
Speaker 1: Uh. You know, we're very focused on the big three.
Speaker 4: So Bitcoin, uh and as you know, ar kb is
Speaker 4: one of the larger spot bitcoin ETFs out there. Happily uh,
Speaker 4: Ether and Solana in in our private funds.
Speaker 1: So those those we believe are the big three.
Speaker 4: And then we think that the decentralized financial services movement
Speaker 4: some people call it DeFi or Internet financial Services or
Speaker 4: even finternet. We think that is going to be big.
Speaker 4: That's very Ethereum and Solana based. And so there are
Speaker 4: some uh there, there are some crypto assets that are
Speaker 4: providing great utility for that movement.
Speaker 6: Kathy, I just want to ask one final question here
Speaker 6: on trump coin. Do you share the concerns of some
Speaker 6: in the crypto industry that perhaps this reinforces the worst
Speaker 6: part of the industry, that it's a mockery of serious tokens.
Speaker 1: You know, it's interesting.
Speaker 4: And Chris Berniski, who was our first crypto analyst, now
Speaker 4: we would call that digital assets analysts, he made a
Speaker 4: comment on Excess Weekend that I think is true that
Speaker 4: the ic Ico movement in twenty seventeen really brought this
Speaker 4: new technology, or at least curiosity about this new technology to.
Speaker 1: A whole new group of people.
Speaker 4: And while you know, some in the traditional crypto world
Speaker 4: considered it, I think he used the word cringe or
Speaker 4: something like that, it really did open a lot of eyes,
Speaker 4: and we were it.
Speaker 1: Did usher in that year.
Speaker 4: We had I think, if I'm not mistaken, Bitcoin went
Speaker 4: from one thousand to twenty thousand as part of this movement.
Speaker 4: This is a lot like the early days of the Internet,
Speaker 4: and we lay it a lot of fiber right, a
Speaker 4: lot of money and eyeballs attracted at that time. And yes,
Speaker 4: some of that buyer beware, some of that ended badly
Speaker 4: or ended badly for many years, but it really did
Speaker 4: spawn a very important movement in technology, and we think
Speaker 4: the name is true here.
Speaker 5: Kathy, let's move on to Trump's second term. Here. Obviously,
Speaker 5: stocks have had a great run the past two years.
Speaker 5: He generally has seen as bullish for stocks. But then
Speaker 5: there's tariffs. You're running all these funds, You've got stocks
Speaker 5: to buy and sell. What are you doing differently now
Speaker 5: that he is fully in office.
Speaker 4: Well, we are doing what we've always done, which is
Speaker 4: investing in truly transformative innovation across sectors, so.
Speaker 1: That we have not changed at all.
Speaker 4: There is a meme out there going around which is
Speaker 4: very interesting and unfortunately in these momentum driven markets, perhaps.
Speaker 1: More true than we would have liked.
Speaker 4: If you look at the beginning of the last administration,
Speaker 4: that was our peak, the peak in innovation, and we
Speaker 4: went through, as did everybody, a bear market hit disproportionately,
Speaker 4: and we had been underperforming until it seems the idea
Speaker 4: that we were going to have a new administration started
Speaker 4: moving into the market. So when you say the market
Speaker 4: has been very strong, sure yes it has, but it
Speaker 4: has been very concentrated to a very few names. In fact,
Speaker 4: if you use a Goldman study, it has never been
Speaker 4: more concentrated. And this includes during the Great Depression when
Speaker 4: that was a binary decision. With twenty five percent unemployment
Speaker 4: and thirty percent drop.
Speaker 1: In GDP, is this company going to survive?
Speaker 4: We were more concentrated than that, so I would say
Speaker 4: even though the market did hit all time highs, it
Speaker 4: was powered by very cash rich companies. And there has
Speaker 4: been a lot of fear out there, and I think
Speaker 4: what the new administration is doing is changing fear into optimism.
Speaker 4: And you know, with deregulation, I think that's highly underestimated
Speaker 4: how important deregulation is going to be to unleashing animal spirits.
Speaker 1: So we're pretty excited about this.
Speaker 4: And yes, our strategies are starting to break out.
Speaker 1: I don't know if it's momentum or not. We haven't
Speaker 1: changed what we're doing.
Speaker 4: We think these companies are going to transform the world.
Speaker 4: They're just now being recognized a little bit more. But
Speaker 4: that now that risk appetite is picking up a bit.
Speaker 6: Focus here on private assets and Kathy, you of course
Speaker 6: have a ARC venture fund that invests in private companies
Speaker 6: and among those holdings are a couple of names that
Speaker 6: are familiar to everyone. SpaceX, Epic Games, open Ai, Anthropic.
Speaker 6: I want to ask you about open Ai because following
Speaker 6: yesterday's announcement with SoftBank and Oracle forming this joint venture
Speaker 6: within an initial investment of one hundred billion dollars, that company,
Speaker 6: open ai just got a lot more valuable. How are
Speaker 6: you thinking about how much you want to maybe not
Speaker 6: double down or increase your investment in a company like
Speaker 6: open ai.
Speaker 1: Well, yes, we have a nice exposure now.
Speaker 4: And you know, it's interesting to have watched that announcement
Speaker 4: because we know how close Elon Musk with his XAI
Speaker 4: is to President Trump. And I think what President Trump
Speaker 4: do is doing here is spreading the wealth.
Speaker 1: I mean, there are some very.
Speaker 4: Innovative companies who are going to accelerate this ai AH,
Speaker 4: which in itself is moving at an incredible pace, a
Speaker 4: pace that we've never seen before.
Speaker 1: What we're acquainting stargate to you.
Speaker 4: So this is the five hundred billion dollar project is
Speaker 4: to the building out of the highway system in the
Speaker 4: United States. If you look back and put that investment
Speaker 4: into twenty twenty five dollars, it's roughly.
Speaker 1: The same amount.
Speaker 4: So these are the digital highways that are going to
Speaker 4: transform everything. They're going to transform everything and really accelerate
Speaker 4: GDP growth in a way that I think most people.
Speaker 1: Do not participate. Understand right now.
Speaker 2: And let's talk a little bit about rappers. Of course,
Speaker 2: we're talking about the ARC Venture Fund. It's a closed
Speaker 2: end interval fund because you can't yet directly put private
Speaker 2: private companies, private bonds, private credit in into an ETF.
Speaker 2: You have seen some filings come through to that effect
Speaker 2: that you think about what State Street is trying to
Speaker 2: do with Apollo, for example. I haven't yet seen private
Speaker 2: assets ETF filing come from ARC, though.
Speaker 3: Is that something that you're potentially thinking about?
Speaker 4: Well, right now, we're very happy with the interval fund structure.
Speaker 1: So this is a forty act fund as well.
Speaker 4: An interval fund allows daily inflows and quarterly redemptions up
Speaker 4: to five percent of nav That seems to be a
Speaker 4: better wrapper. I would think for these public private funds.
Speaker 4: Roughly eighty percent of our interval fund is private, twenty
Speaker 4: percent is public, so that we can allow for redemptions.
Speaker 4: And I think the most important thing about this interval fund,
Speaker 4: as would be true of an ETF, of course, is
Speaker 4: the democratization that this is allowing for venture capital. Finally,
Speaker 4: retail investors with less than I think it's I'm not
Speaker 4: going to get this exactly right, But two hundred and
Speaker 4: fifty thousand dollars in income per year and one million
Speaker 4: dollars in net worth. They have access to some of
Speaker 4: the most amazing companies in the world at much earlier
Speaker 4: stages than has been the case historically.
Speaker 1: So we're pretty excited about this wrapper.
Speaker 5: Kathy, Just to push back on that a little bit,
Speaker 5: there's this ETF called x XOVR, the er shares public
Speaker 5: private crossover. It was basically an ETF living in oblivion
Speaker 5: doing an active strategy. It changed its focus to add
Speaker 5: a little private Fifteen percent of the stock of the
Speaker 5: ETF is now SpaceX. Since it did that in December,
Speaker 5: the flows of just came have come in gangbusters. It's
Speaker 5: now double your venture fund, which has been around for longer.
Speaker 5: Is it just the case that people want it an
Speaker 5: ETF even if the ETF trades, it's something like a
Speaker 5: hybrid closed end fund with prems and discounts.
Speaker 3: People just prefer that rapper.
Speaker 5: Does that concern you at all?
Speaker 1: I mean it doesn't concern me.
Speaker 4: I think the more access to innovation anyone offers, the
Speaker 4: better for our markets and the better for our competitive
Speaker 4: positioning around the world.
Speaker 1: So it doesn't bother me. It doesn't mean we won't
Speaker 1: do it ourselves.
Speaker 4: And I will tell you that mutual funds, many mutual
Speaker 4: funds have allocated fifteen percent of their portfolios to private
Speaker 4: companies as well. They don't disclose their holdings at the
Speaker 4: end of every day like ETFs do, so maybe they
Speaker 4: don't get as much publicity, but this has been done before,
Speaker 4: and I think as more and more people understand what
Speaker 4: our fund is and the kind of access we do
Speaker 4: have to these incredible ideas, I think there's a place
Speaker 4: for both.
Speaker 2: So, Kathy, people call this the Trump two point zero
Speaker 2: ETF Toddstone.
Speaker 3: Of course, do you agree with that label? Do you
Speaker 3: think that makes sense?
Speaker 4: Well, I think this administration is going to be incredible
Speaker 4: for innovation, so I'm definitely not going to find that.
Speaker 1: The only thing I would add is.
Speaker 4: The flagship strategy A RKK includes the space, the innovation
Speaker 4: space that has been hit the hardest, was hit the
Speaker 4: hardest by regulation and a lack of M and A,
Speaker 4: and that was what we call the multiomics or genomics
Speaker 4: space that we think is.
Speaker 1: Going to have.
Speaker 4: We're going to see the most profound implications of artificial
Speaker 4: intelligence in that part of the market. So when it
Speaker 4: comes to AI, we think that the biggest application in
Speaker 4: the next five to ten years is Robotaxi's autonomous taxi platforms.
Speaker 4: The most profound is curing disease. That's what you would see.
Speaker 4: And this new administration is all about innovation and kind
Speaker 4: of rethinking what the heck we're doing in healthcare and
Speaker 4: why it's up to twenty percent of GDP and still
Speaker 4: our results are not as good as in other countries.
Speaker 4: So there's going to be a whole new rethink, and
Speaker 4: I think that's going to fall into benefiting AARKG and
Speaker 4: ARKK as well.
Speaker 6: Okay, so a rethink on that front. Also rethink when
Speaker 6: it comes to what's going to happen with TikTok. It's
Speaker 6: still not clear the future of this social media company,
Speaker 6: but we do know that President Trump is open to
Speaker 6: Elon Musk or Larry Ellison buying it in concert with
Speaker 6: the US government. Is this something that you would, if
Speaker 6: it's publicly traded, want to buy for RW.
Speaker 4: Well, of course, we look at the valuation as always
Speaker 4: and see if during the next five.
Speaker 1: Years it were we believed it would.
Speaker 4: Appreciate at more than a fifteen percent compound annual rate
Speaker 4: of return per year. So we know there are a
Speaker 4: lot of bidders out there, a lot of people very
Speaker 4: excited about TikTok.
Speaker 1: And we understand why. We just want to see the valuation.
Speaker 4: It is one of the most important social media companies
Speaker 4: of our age.
Speaker 5: All Right, Kathy, I have a request question from James
Speaker 5: Seyfert on my team. Of all your individual strategies, including AARKK,
Speaker 5: what do you think has the best setup right now?
Speaker 4: I think the most underestimated is ARKG and the reason
Speaker 4: for that is regulatory rethink altogether of what we're doing
Speaker 4: in healthcare, but as important for G and for a
Speaker 4: lot of our other names. You know, the lack of
Speaker 4: M and A over the last four years has been
Speaker 4: a very big problem.
Speaker 1: There has not been price discovery.
Speaker 4: What will a strategic buyer pay for these assets because
Speaker 4: they weren't allowed to buy them. Now, if you look
Speaker 4: at biotech of pharma, I think that four hundred billion
Speaker 4: dollars of revenue, thirty percent of the space is going
Speaker 4: to go off patent in the next five years.
Speaker 1: Our companies will fill that space, but.
Speaker 4: They were not allowed to be acquired by and therefore
Speaker 4: we had no price discovery, right, that is change?
Speaker 2: All right, Kathy, We have about a minute left with you,
Speaker 2: and you mentioned M and A. Something we're also waiting
Speaker 2: for is for IPOs to come back. And you think
Speaker 2: about the innovative companies that you care about, a lot
Speaker 2: of them just aren't going public.
Speaker 3: The extreme example would.
Speaker 2: Be SpaceX, but also down in the small cap space
Speaker 2: as well.
Speaker 3: What do you make of that? Do you think that's
Speaker 3: going to change?
Speaker 1: I hope so.
Speaker 4: I do think regulatory changes will go a long way
Speaker 4: towards bringing back public markets. I think the number of
Speaker 4: stocks in the public markets has been cut in half
Speaker 4: in the last twenty twenty years. And I understand why
Speaker 4: companies want to stay private. The regulatory quagmire that they
Speaker 4: enter in the public markets is really a lot of friction.
Speaker 4: And there's another reason, I would say, and that is
Speaker 4: in the private markets there is a longer time horizon
Speaker 4: than there is in the public markets today. But I
Speaker 4: think that's going to change. I think that's going to
Speaker 4: change as more and more people understand how profound AI
Speaker 4: is going to change everything.
Speaker 2: All right, Kathy, So great to get so much time
Speaker 2: with you. Hope to speak against him. Our thanks of
Speaker 2: course to Kathy would of ARC invest