Bloomberg Audio Studios, podcasts, radio news. Let's talk more about this, not ETF, with Kathy Woods. She is CEO and CIO of ARC invest Kathy, great to have you with us. We'll get into the ETF conversation, but let's start with your holdings in your venture fund, because I'm taking a look,
it looks like your second biggest holding is SpaceX. Of course, as we know, that is a private company, one of Elon Musk's company right now in talks to potentially merge with XAI and in talks potentially to IPO later this year. I mean, as you digest these news events, how are you feeling about your current slice in SpaceX, which I believe is about seven and a half percent of this fund.
Yes, we're feeling great, especially the rumors are we have no idea if it will go out at one point five trillion again rumors, rumors, but SpaceX has big ideas orbital data centers being the latest an EXSAI, which we also own in ARKVX, is going to become a part of this ecosystem. We do believe, and I think we're getting more information now that this is becoming more and more likely.
So when SpaceX does make its debut on the public markets when it lists, when it IPOs, what does that do to your fund? How do you respond to that?
Yes, the wonderful thing about ARKVX and Interval funds generally, in terms of the way we've constructed this one, is that it's twenty percent roughly twenty percent public eighty percent private. And when SpaceX goes, we will obviously bump up the public position, but we don't have to sell it now. It would be unusual if all of these names, SpaceX and thropic XAI, if they all were to go public. Yes, we would want to diversify into more private names. We
don't have to sell right away now. The other things that our companies really like is that they can see we have thirty billion dollars of assets under management, and most of those are in the public equity market. So we will be feeding these names into our ETFs as time goes on.
So, Kathy, let's talk about this conundrum.
Right.
This is one of the most fascinating topics to me that I'm writing about. You've got all these stocks, you have five hundred million. Meanwhile, there's been three tfs that have sort of I don't know, we'll called bend the rules or whatever. But they've added privates into their funds. XOVR immediately one point five billion a crane shares ETF has to privates and then ron B added twenty two percent of SpaceX and immediately assets jump fifty percent in a week. Clearly the demand is to get this in
the ETF format, but it's not the right format. How is this going to play out?
It's going to be very interesting, Eric, Thank you for doing the research on this, and this space is moving very quickly. The reason we chose the interval fund format was we could have more than fifteen percent of our fund in ill liquid assets. Now it may be that the definition of ill liquid is changing.
I know.
We actually have gone to some of our private companies, the ones in the interval fund saying hey, we'd love to add you into our ETFs because we think this is such an important story. All we do is focus on disrupt of innovation. You are one of the biggest disruptors, let's just say SpaceX, and what we found over time is that they have been reticent. So something is changing here, Eric, and it would be very interesting to get to the bottom of it. The SEC, of course, is deregulating, so
that could be part of it. Secondary markets are beginning to grow, meaning private shairs on secondary markets, so there's access there. So maybe this definition of ill liquid or less liquid is changing here.
Yeah. Our understanding and Bloomberg Intelligences understanding, Kathy, is that basically Barren classified their SpaceX holdings as less liquid rather than e liquid. As we were talking about, we're learning that that comes from the issuer rather than the SEC. But you also make another interesting point when it comes to the private companies themselves maybe being a little bit reticent to be in a vehicle such as an ETF.
Of course, we talk about it from the issuer perspective all the time, so interesting to hear it from the perspective of the companies. But you mentioned that, you know, when it comes to going ahead of that fifteen percent cap in an ETF, that that's not something that you necessarily want to do. But have you thought about adding perhaps less than that, you know, in the realm of five to ten percent into an ETF.
Yes, we certainly have thought about it, so much so that we've gone to the companies and as I said, there at least when we went to these companies, there was some reticence because they're in the worst case, let's just say black Swan, the public markets go down dramatically. These private positions are not marked to market every day, they could end up easily above fifteen percent, and then what would a fun be faced doing trying to find
a secondary market. Now, maybe the secondary markets are becoming more liquid themselves. They're much more liquid today than they were when they first started, maybe five, six, seven years ago. So we've been, i would say, from a compliance point of view, very careful. And then you know, our market makers are also trying to figure out what to do with this. How do they price in real time when at any minute something crazy could happen coming from one
of these private companies. So there are some ecosystem challenges here.
Some ecosystem challenges, and it's something that we will be watching for certainly. It's an involving story. Kathy, I do want to get your take on what a lot of people are calling the debasement trade, the effort to diversify beyond the US dollar and US dollar assets, moving to other assets like precious metal, specifically as a hedge against the dollar. What's different this time around from what we saw last year is the crypto is not part of this.
It's not getting the bid from folks who are looking to diversify, who believe in this debasement idea.
How do you think about that? A couple of thoughts. I've been writing a lot about it recently. I think if you look over time, if you look for the last five years and you do a correlation between gold and bitcoin, you'll find very little correlation at all. What you will see if you look back a little further, the last two major cycles for bitcoin were preceded by
the gold price increasing first. Now, I think, what's going on This so called debasement trade, if I can just back up a little bit, I think is misplaced, And especially when we think about the dollar, if you put the dollar into perspective, you will see that over the years and in recent years, it's toward the higher end
of its range against other currencies. And we think that the combination of deregulation here in the United States, big tax changes, especially for corporations, and very business and capital friendly policies here in the United States. We think because of those, the returns on invested capital in the United States are going to go up relative to those elsewhere in the world. And this we think is because trump Eanomics, if you want to call it, that is like Reaganomics
on steroids. If you look at what happened to the dollar under Reagan, it doubled, it nearly doubled, so much so and so quickly that we ended up in the Plaza and Louver Accords to try and get it down. So I think it's a little misplaced.
Kathy. We had Todd soone, thank you for explaining that. By the way, we had Todstone of Strutigis on with us last week and he was talking about the key man risk idea for funds that are tightly tied to their star managers. And you're nothing of not a star manager. Take a listen to what Todd said.
Think of arc. Kathy would is the arc. She's the face of that company. What happens when Kathy says, you know, I'm moving on or whatever it might be. This is gonna be really interesting over the next thirty years of all these established players coming into the ETF market and you're gonna lose these key man key woman risk up there.
Key woman risk, I'm just curious about the state of your succession planning over at ARC invest. If one day you want to move on to do something.
Else, oh my goodness, I can't imagine that day. Let's just say that to start, But we have a very firm succession plan here the way we've set up the firm with directors of research, chief futurists, analyst research associates, and really the equivalent of investment committees for each of our funds. I think any due diligence effort would look at what we've done here at ARC and be pretty reassured by it.
All right, Kathy, that's a good place to leave it. Really appreciate you taking the time for us on our relaunch day. That is Kathy Wood of ARC Invest. And you can read all about this drill down plus the latest in the ETF industry when you subscribe to my weekly etf iqnewsletter that is Bloomberg dot com slash ETFIQ Newsletter