Last week, the Federal Reserve (Fed) delivered the in more than two decades, raising interest rates by 50 basis points. A sharp multi-day sell-off on Wall Street followed the initial post-announcement rally.
Then, on May 11, markets suffered further when Wall Street found out that the (CPI) hit 8.3% in April, and the index increased 0.3% last month. Analysts are now debating whether the Fed can halt inflation without triggering an economic turndown in the months ahead.
Since the start of the year, broader indices and high-growth shares have come under significant pressure. Financial technology (fintech) stocks and digital assets have also seen steep declines while the risk-off mood on the Street has grown.
For instance, the has fallen 28.7% year-to-date (YTD). By comparison, the has declined 26.6%.
Meanwhile, as we write on Wednesday, the global crypto market capitalization (cap) has tanked below $1.4 trillion. and have lost over a third of their values so far in 2022.
Such declines are unnerving for most retail investors. However, they also mean opportunities for those who want to invest in fintech shares and digital assets and exchange-traded funds (ETFs) that give access to these asset classes. Therefore, today’s article introduces two such funds.
1. ARK Fintech Innovation ETF
- Current Price: $15.64
- 52-week range: $15.63 – $55.28
- Expense ratio: 0.75% per year
Our first fund is Cathie Wood’s actively managed ARK Fintech Innovation ETF (NYSE:). It seeks long-term capital growth by investing in disrupting-financial-service companies, meaning firms that offer solutions such as blockchain technology, funding networks, or customer-facing platforms.
ARKF, which was launched in February 2019, currently has 30 holdings. The top 10 names account for roughly two-thirds of $1.5 billion in net assets. In terms of sectoral exposure, we see information technology (44.4%), financials (28.8%), and consumer discretionary (12.2%), among others.
Leading holdings include digital payment services provider Block (NYSE:); e-commerce platform Shopify (NYSE:); cryptocurrency exchange platform Coinbase Global (NASDAQ:); cloud-based communication platform-as-a-service group Twilio (NYSE:); and the Argentinian e-commerce marketplace Mercadolibre (NASDAQ:).
ARKF saw a record high on Sept. 7, 2021. But since then, it has suffered from a steep sell-off and is now changing hands around record lows. The ETF has plummeted more than 61.7% YTD and 66.7% over the past 52 weeks.
Despite the decline on Wall Street, recent research suggests the global fintech market value should reach:
“$324 billion by 2026, growing at a compound annual rate of about 25.18% over the forecast period 2022-2027.”
Therefore, we can expect many fintech stocks to create shareholder value in the coming quarters. Buy-and-hold investors could consider a fintech-focused fund like ARKF around these levels.
2. Invesco Alerian Galaxy Crypto Economy ETF
- Current Price: $9.47
- 52-week range: $9.58 – $35.24
- Dividend yield: 1.29%
- Expense ratio: 0.60% per year
With digital adoption gaining traction during the pandemic, cryptocurrencies have also become the buzz worldwide. Although government agencies and lawmakers debate the way forward with how to regulate such digital assets, many institutional investors now hold cryptos in their portfolios, and merchants accept crypto payments as well.
Therefore, next up on our list today is the Invesco Alerian Galaxy Crypto Economy ETF (NYSE:). It gives exposure to shares of companies that are at the forefront of the crypto space and exchange-traded products (ETPs) that focus on cryptos.
SATO is a new and small fund that began trading in October 2021. Net assets stand at $5.8 million. Therefore, investors should remember that the ETF does not have much trading history.
Over 40% of the portfolio is in the leading 10 names. The Grayscale Bitcoin Trust (OTC:) has the most significant slice with 16.2%.
Next come the Hong Kong-based digital assets financial services company Eqonex (NASDAQ:); British cryptocurrency mining name Argo Blockchain (LON:); Germany-based investment company Bitcoin Group (H:) and the financial infrastructure solutions provider Silvergate Capital (NYSE:).
With regards to sectoral exposure, we have information technology (60.6%), investment companies (16.2%), and financials (15.8%). More than half of the holdings are from the US, Canada (13.4%), and China (12.3%).
SATO has lost over half of its value since January, and like ARKF, is currently trading at record lows. Investors looking for diversified exposure to the emerging crypto economy should research SATO further.