I know that's their policy, but it is kind of a self-defeating policy.
What it guarantees, is that their portfolio performance is limited by the worst performing stock they own.
Since every better performing one periodically hits the 10% mark and gets trimmed until the entire portfolio is performing exactly as bad as the worst stock.
In other words: even if their projection about TSLA is correct and it will grow ~20x in the next 5 years, they will never benefit from the 20x growth, because their TSLA portion will be sold down to 10% every time TSLA outperforms their average stock performance.
Example: suppose TSLA doubles next week in response to a stellar unexpected ER, as a consequence ARK has to trim their TSLA holding to half. That means their growth can never reach 20x only 10x IFF there is no more trimming(i.e. TSLA becomes their worst from there on), in case of TSLA continued out-performance of their worst, more trimming will occur and their growth from TSLA is even lower.
IMHO: the correct version of the policy would be to never buy more of a stock if its over 10%, but no forced selling due to over-performance. So if they invest only 10% in a stock to start with, but that stock outperforms everything else so much that it becomes 90% of their portfolio, its still fine, they just don't buy more of it and only sell when it reaches their projected price target.