So far this year, Ark Invest has been given more money to manage than both BlackRock & State Street.

In total, Ark ETFs have approximately $55 Billion assets under management. (For comparison, that is still tiny in relation to BlackRock, whose 383 ETFs have total assets under management of $2,126.26B)

Still, these huge inflows of money holds an interesting implication for us retail investors.

Ark is on track to be managing $100 billion dollars within the next year or two. When you're managing $100 billion dollars, you become less interested in investing small companies that have only a $1 billion market cap. And there's good reason for this.

A $1 billion dollar company's entire market cap amounts to only 1% of a $100 billion dollar fund. Plus, you're not going to be able to buy the whole company even if you wanted to- so the shares you can buy are going to be a even smaller than 1% of your portfolio.

It becomes such a tiny piece of your fund, it not even worth it to do the homework and ongoing due diligence necessary to add it the ETF.

Buying shares in a company that can't move the needle is actually a drain on analyst time and resources that could be put towards following companies that can.

Additionally, it's very hard to get in and out of small companies without moving the stock's price. If the amount of shares you wants to buy represents 20% of all outstanding shares of the company, guess where the share price is going to go as you try and buy it? Yeah, up.

So what does this mean for retail investors? It means there is a sweet spot in the $1B-$3B market cap range where our time spent researching is more differentiated, and therefore more valuable.

If you can find a company that has a compelling reason why it will go from a $2 billion to a $6 billion company, you get first dibs, because even if Ark agrees with you, they won't buy it until it can make a difference for them. Some companies that might fit this discription are Bionano $BNGO and DermTech $DMTK (which, full disclosure, I own shares of both- you can check my Commonstock profile page for further info on how much I'm allocating to them)

"Smaller companies carry greater risk", is true, but that's generally because there is less attention and research on them. That means directing your own attention and research here can be extra fruitful for you. If you can find a good company before the analysts are allowed to buy it, that's another huge tailwind for you.

And this is an advantage that you will likely always have. Not to be mean, but none of us will (probably) ever be billionaires. So, for your own personal portfolio, you have a perpetual advantage over big funds when looking at smaller cap companies.

I'll be publishing another memo on Bionano in the next week or so, if you have done any work looking into this company, I'd love to chat with you.