Investors poured $1.5 billion into Cathie Wood’s flagship Ark fund in the first half of 2022, even as a sharp tech selloff hammered its top holdings.
Shares of exchange-traded fund Ark’s Innovation – known by its symbol ARKK – have fallen more than 50% since the start of the year, and more than 70% since their all-time high in February 2021, amid sentiment soured on speculative assets.
Some of the fund’s biggest bets, including electric vehicle maker Tesla, have been hit hard as central banks aggressively raise interest rates to curb searing inflation. In turn, ARKK’s assets under management fell to less than $9 billion from a peak of nearly $28 billion.
But in a sign that many believe Wood’s legacy is not yet behind it, ARKK has still pulled in nearly $1.5 billion in admissions year-to-date, according to TrackInsight – the enthusiasts focusing on the longer-term opportunities of thematic investing in ETFs.
Todd Rosenbluth, head of research at VettaFi, a New York-based consultancy, said ARKK’s focus on “disruptive innovation” as a long-term investment theme has sparked strong interest. from US financial advisors.
“Financial advisors use a small portion of their portfolios to hold thematic ETFs like ARKK. Many see this [price weakness] as a buying opportunity,” he added.
Still, some anticipate further market turmoil in the coming months, painting a grim picture for growing businesses rocked by higher borrowing costs. Many such organizations enjoyed a period of “easy money” at the start of the Covid-19 pandemic, with near-zero interest rates flattering their cash flow and projected profits.
ARKK’s fall this year has been a boon for SARK, the Tuttle Capital Short Innovation ETF launched in November 2021 as a direct way to bet against ARKK’s performance.
SARK posted a 68% return in the first six months of the year, ranking it as one of the best performing ETFs over the period, according to VettaFi. The fund recorded net inflows of $223 million in the first half of this year, helping to boost its assets to $459 million.
Ihor Dusaniwsky, managing director of predictive analytics at S3, pointed to a mix of fundamental, momentum and sentiment factors that were driving both buying and selling activity at ARKK.
“Sentiment in the tech sector, and specifically stocks in the ETF ARKK, have more than just a fundamental or technical basis for investing,” Dusaniwsky said. “There are also momentum and sentiment factors which can sometimes give conflicting views on both the buy and sell side.”
ARKK rose to fame for Wood and provided its early investors with exceptional returns after the actively managed ETF generated returns of over 150% in 2020. However, its performance reversed sharply in 2021 and it closed the year. year down more than 23%.
The fund’s disgrace encouraged a growing army of short sellers who were willing to bet ARKK’s miserable run would continue this year. The value of ARKK shares that were sold short stands at $1.23 billion after rising $55 million in June alone, according to S3 Partners, a specialist data provider.
Ark Invest declined to comment.