ARKK vs. IEF: What’s The Difference?

The ARK Innovation ETF (ARKK) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and IEF is a iShares Long Government fund. So, what’s the difference between ARKK and IEF? And which fund is better?

The expense ratio of ARKK is 0.60 percentage points higher than IEF’s (0.75% vs. 0.15%). ARKK also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, ARKK has provided higher returns than IEF over the past 5 years.

In this article, we’ll compare ARKK vs. IEF. We’ll look at fund composition and annual returns, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss ARKK’s and IEF’s performance, risk metrics, and holdings and examine how these affect their overall returns.

Summary

ARKK IEF
Name ARK Innovation ETF iShares 7-10 Year Treasury Bond ETF
Category Mid-Cap Growth Long Government
Issuer ARK ETF Trust iShares
AUM 25.52B 13.44B
Avg. Return 55.45% 5.06%
Div. Yield 0.0% 0.84%
Expense Ratio 0.75% 0.15%

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

ARKK’s dividend yield is 0.84% lower than that of IEF (0.0% vs. 0.84%). Also, ARKK yielded on average 50.39% more per year over the past decade (55.45% vs. 5.06%). The expense ratio of ARKK is 0.60 percentage points higher than IEF’s (0.75% vs. 0.15%).

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Fund Composition

Holdings

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

IEF - Holdings

IEF Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

ARKK IEF
Mean Return 0 0.32
R-squared 0 77.56
Std. Deviation 0 5.42
Alpha 0 -1.2
Beta 0 1.59
Sharpe Ratio 0 0.6
Treynor Ratio 0 1.97

The ARK Innovation ETF (ARKK) has a Treynor Ratio of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Beta is 0 while ARKK’s Standard Deviation is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Sharpe Ratio of 0.6 with a Standard Deviation of 5.42 and a Beta of 1.59. Its R-squared is 77.56 while IEF’s Alpha is -1.2. Furthermore, the fund has a Mean Return of 0.32 and a Treynor Ratio of 1.97.

ARKK’s Mean Return is 0.32 points lower than that of IEF and its R-squared is 77.56 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than IEF. The Alpha and Beta of ARKK are 1.20 points higher and 1.59 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

ARKK vs. IEF - Annual Returns

Year ARKK IEF
2020 152.52% 9.84%
2019 35.73% 8.38%
2018 3.58% 0.82%
2017 87.38% 2.47%
2016 -1.96% 1.0%
2015 3.76% 1.55%
2014 0.0% 8.92%
2013 0.0% -6.12%
2012 0.0% 4.06%
2011 0.0% 15.46%
2010 0.0% 9.29%

ARKK had its best year in 2020 with an annual return of 152.52%. ARKK’s worst year over the past decade yielded -1.96% and occurred in 2016. In most years the ARK Innovation ETF provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 3.58% respectively.

The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

ARKK vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ARKK $10,000 $65,218 55.45%
IEF $10,000 $12,421 5.06%

A $10,000 investment in ARKK would have resulted in a final balance of $65,218. This is a profit of $55,218 over 5 years and amounts to a compound annual growth rate (CAGR) of 55.45%.

With a $10,000 investment in IEF, the end total would have been $12,421. This equates to a $2,421 profit over 5 years and a compound annual growth rate (CAGR) of 5.06%.

ARKK’s CAGR is 50.39 percentage points higher than that of IEF and as a result, would have yielded $52,797 more on a $10,000 investment. Thus, ARKK outperformed IEF by 50.39% annually.


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