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Speaker 1: Let's get right to our next guest. Kathy would joining

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Speaker 1: us right now, the CEO and CIO of the ARC

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Speaker 1: Investment Empire. Just taking a look here, Kathy, right now

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Speaker 1: at the performance, oh of at least your primary etf

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Speaker 1: ARC Innovation. A certain degree about performance that we've seen

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Speaker 1: over the last few months, a bit of a turnaround

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Speaker 1: from what we saw I think towards the end of

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Speaker 1: last year. And I am curious as what you make

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Speaker 1: of some of the naysayers out there, and I'm just

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Speaker 1: going to put it out there, Kathy, they said you

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Speaker 1: were done well.

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Speaker 2: I know recently there's been commentary on our flows and

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Speaker 2: we took a look at our flows relative to are

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Speaker 2: what we would consider a competition. I think our flows

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Speaker 2: are kind of in the middle of the pack, and

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Speaker 2: yet other flows aren't being mentioned. So that's interesting. And yes,

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Speaker 2: it's been a great year this year. I think one

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Speaker 2: of the things that's going on is active management is

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Speaker 2: making a comeback. Now. I say that knowing full well

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Speaker 2: that the NASDAQ one hundred is one of the strongest

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Speaker 2: gainers out there, and yet we are outperforming the Nasdaq

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Speaker 2: one hundred, even without the mega cap tech stocks, and

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Speaker 2: even though we have a twenty five percent exposure to

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Speaker 2: healthcare or life sciences. Life sciences for the year is down.

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Speaker 2: Our selection of life sciences companies stocks are up about

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Speaker 2: twenty five north of twenty five percent, So we really

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Speaker 2: do believe that active management is making a comeback. Here.

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Speaker 1: There is a lot more competition. I mean, let's face it.

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Speaker 1: I mean, when you came to everyone's attention, you know,

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Speaker 1: you were kind of the unicorn to a certain extent, Kathy.

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Speaker 1: You were doing something that a lot of other folks

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Speaker 1: weren't doing. You are very transparent, of course, also in

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Speaker 1: the way that you were doing it. But I'm not

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Speaker 1: sure as you know, that transparency also brought a certain

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Speaker 1: degree of criticism, whether it was fair or not. Listen

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Speaker 1: to some of those critics, if you listen to them

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Speaker 1: at all here, what do you say to them when

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Speaker 1: you compare your performance of your some of your funds

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Speaker 1: versus some of the ets that would be considered your peers.

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Speaker 2: Well, most of the ETF peers, I would say, are

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Speaker 2: indexed in some way. So I think that the competition

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Speaker 2: that actually we're surprised not to see is competition based

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Speaker 2: on research and active management. It is the reason why

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Speaker 2: our portfolios don't look like any of the others. You'll

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Speaker 2: see an indexed like component to the others, and so

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Speaker 2: you know, we have some comparisons out there. The MSCI

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Speaker 2: Innovation indexes. Actually they work with our research team to

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Speaker 2: surface new keywords and use artificial intelligence to really scope

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Speaker 2: the world for companies who will be involved in these technologies.

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Speaker 2: That's a very broad based strategy, and yet it feel

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Speaker 2: if you look at the returns relative to our returns,

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Speaker 2: we're very focused. We have more of a rifle shot

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Speaker 2: approach and therefore more of an active management approach that

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Speaker 2: we're just going to continue working. Given how quickly innovation

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Speaker 2: is evolving now, it's very hard for indexes to catch up.

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Speaker 3: Kathy, you do want to talk a little bit more

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Speaker 3: about the flows, because it's interesting it's not just your funds.

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Speaker 3: If you look at some of the best performing ETFs,

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Speaker 3: you're to date their crypto link to ETFs. They track

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Speaker 3: equities that are related to crypto companies, and yet they're

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Speaker 3: not seeing the flows come in despite the performance. And

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Speaker 3: when you think about that and you think about your lineup,

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Speaker 3: what do you think is going to take for you

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Speaker 3: to really see the flows come back. Is that going

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Speaker 3: to be a rate cut or what do you envision?

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Speaker 2: I actually in July we're seeing the flows come back.

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Speaker 2: Studies out there through June, so flows are coming back,

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Speaker 2: and I think one of the reasons is we established ARKK,

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Speaker 2: our flagship strategy, established a base over the last year,

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Speaker 2: and it has been trading up and down through that base,

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Speaker 2: and the base topped out at forty five. Well, we

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Speaker 2: broke through that, and I think a lot of investors

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Speaker 2: and maybe more who are technically oriented, are looking now

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Speaker 2: at a breakout in our strategy. So we'll see if

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Speaker 2: it continues. We've enjoyed positive inflows in July which have

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Speaker 2: cut in half the outflows. I think our outflows are

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Speaker 2: just something like two hundred or two hundred plus million,

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Speaker 2: which on a nine billion dollar plus fund is quite

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Speaker 2: is quite a small outflow year to date now.

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Speaker 3: And to your point, I'm looking at RKK inflows over

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Speaker 3: the past week, we're looking at nearly a two hundred

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Speaker 3: and fifty million dollars, So we'll continue to track that.

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Speaker 3: I do want to get your thoughts on crypto though,

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Speaker 3: specifically when it comes to coinbase, because it was interesting

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Speaker 3: if we look at ARK you actually sold a little

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Speaker 3: bit of your coin based steak for the first time

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Speaker 3: in nearly a year. I'm curious what your current thinking

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Speaker 3: is on coin base, especially given it's year to day

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Speaker 3: rally of nearly two hundred percent.

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Speaker 2: Yes, well, we are very positive on Coinbase, especially in

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Speaker 2: light of the court ruling for Ripple and against the

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Speaker 2: SEC not all together. There were some puts in takes,

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Speaker 2: but by and large very positive for exchanges, and so

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Speaker 2: we're very optimistic. The stock has had a significant move.

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Speaker 2: Remember in March, and I think in June we were

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Speaker 2: looking at Wells Notice and an SEC suit which really

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Speaker 2: hammered the stock but did not take it to new lows.

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Speaker 2: And you saw we bought at those levels, and so

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Speaker 2: as the stock has escalated to the top of the top,

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Speaker 2: it's the second largest after Tesla now in the flagship strategy,

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Speaker 2: and it's the largest in arkf our fintech strategy. We

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Speaker 2: are simply taking profits and reallocating the capital to perhaps

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Speaker 2: some laggards.

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Speaker 1: We talked, well, where exactly then does that money get

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Speaker 1: reallocated to Kathy where.

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Speaker 2: Well, let's see, we have been buying some of I

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Speaker 2: can't talk about all of these trades.

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Speaker 1: But.

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Speaker 2: We have been buying some because they're still in process.

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Speaker 2: We have been buying some of the genomics names that

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Speaker 2: have not caught fire and have been held hostage by

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Speaker 2: the by the pression in health the healthcare sector generally.

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Speaker 2: So that's what you'll see us do is again we

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Speaker 2: probably already owned these stocks. We have initiated UH reinitiated

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Speaker 2: Terradyne UH. Terradyne is still in a base UH and

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Speaker 2: so we did use some of the coinbase UH for Terradyne,

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Speaker 2: which is a play both on the semiconductor cycle around

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Speaker 2: AI and automation. It bought Universal Robots, a Danish company

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Speaker 2: several years ago, and we think that that space is

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Speaker 2: about to boom.

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Speaker 1: Did you find anything at all attractive about in Vidia.

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Speaker 1: I know there's been some discussion as to why we

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Speaker 1: didn't see those positions in r K elsewhere here. What

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Speaker 1: was the reason for I guess not pursuing that.

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Speaker 2: Well, we actually bought Nvidia for because we knew it

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Speaker 2: was going to be a player in autonomous vehicles autonomous

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Speaker 2: taxi platforms. We bought it into two twenty fourteen when

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Speaker 2: the fund began at five dollars, and wrote it up

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Speaker 2: to three hundred and fifty dollars and then saw it

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Speaker 2: take off with AI and leave many other companies that

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Speaker 2: we think are going to be huge beneficiaries of AI

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Speaker 2: leave them behind. So we basically reallocated into other AI

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Speaker 2: plays that are not as obvious. Nvidia is very obvious.

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Speaker 2: Now everybody knows that it's priced accordingly twenty five times revenues.

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Speaker 2: We're cycling Tesla's the biggest AI play opportunity out there,

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Speaker 2: and it's roughly seven seven times, right.

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Speaker 1: I am curious on one thing, though, Kathy, because I

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Speaker 1: think what people think of you, and if this is

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Speaker 1: a mischaracterization, correct me, But they sort of think to

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Speaker 1: you as kind of that big thinker. You know, you're

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Speaker 1: sort of investing in these kind of moonshots here, these

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Speaker 1: big structural shifts in our economy, in our society. Here

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Speaker 1: does valuation, meaning the current multiples, does that matter that

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Speaker 1: much if that is the end goal?

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Speaker 2: So great question, Thank you Romain for asking it. So

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Speaker 2: our valuations are based on a five year investment time horizon,

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Speaker 2: so we must believe, or we do believe to be conservative,

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Speaker 2: that we should not assume that current multiples or valuations

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Speaker 2: will extend into the five year period, we actually assume

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Speaker 2: they will decay and go more towards market like multiple.

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Speaker 2: So that's a headwind we face. We must believe that

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Speaker 2: the combination of revenue growth and margin expansion is going

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Speaker 2: to more than overcome that valuation headwind and deliver a

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Speaker 2: compound annual rate of return of fifteen percent over the

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Speaker 2: next five years. And you'll see within Vidia in video

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Speaker 2: last year when we sold it and then again in

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Speaker 2: over sold it, it had dropped below that fifteen percent.

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Speaker 1: Kathy, we really appreciate you taking time for us. Kathy

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Speaker 1: would there over at Art Investment