In early 2021, Ark Invest, led by tech investor Cathie Wood, managed a staggering $59 billion across six funds, making it the world’s largest active ETF manager.
Three years later, a significant 80% downturn occurred, with assets under management in those funds plummeting to just $11.1 billion. This decline can be attributed to a combination of factors, including high interest rates dampening Wood’s long-term speculative tech investments and the subsequent wave of outflows from disillusioned investors.
To give a sense of the scale, investors had withdrawn a substantial $2.24 billion from Wood’s actively managed funds by the end of the third week of April 2024, nearly tripling the outflows seen throughout all of 2023.
Notably, Ark’s flagship fund, the ARK Innovation ETF ARKK, experienced outflows exceeding $1.3 billion in less than four months this year, far surpassing the $578 million seen in 2023.
Below is a breakdown of the fund flows for Ark’s actively managed ETFs in 2024 compared to 2023:
| ARK Actively Managed ETFs | YTD 2024 Fund Flows (as of Apr. 19) | 2023 Fund Flows |
|---|---|---|
| ARK Innovation ETF | -1.37 B | -578.15 M |
| ARK Next Generation Internet ETF ARKW | -211.66 M | -63.93 M |
| ARK Genomic Revolution ETF ARKG | -363.74 M | 40.41 M |
| ARK Fintech Innovation ETF ARKF | -144.93 M | -58.26 M |
| ARK Autonomous Technology & Robotics ETF ARKQ | -126.76 M | -53.14 M |
| ARK Space Exploration & Innovation ETF ARKX | -21.97 M | -42.23 M |
| Total | 2.24 B | 755.3 M |
"The loyal shareholders have become frustrated," Todd Rosenbluth, head of research at data provider VettaFi, told The Wall Street Journal.
Despite the promising outlook for Ark’s growth and disruptive technology investment style this year, Rosenbluth said heavy concentration of funds in underperforming companies remains a concern.
With the sole exception of Coinbase Global Inc. COIN and Robinhood Markets Inc. HOOD, none of the other top 10 holdings in the Ark innovation ETF have yielded positive returns in 2024.
| Name | Weight | Return |
| Coinbase Global, Inc. COIN | 9.38% | 35.60% |
| Tesla, Inc. TSLA | 9.32 | -41.76 |
| Roku, Inc. ROKU | 8.27 | -33.26 |
| Block, Inc. SQ | 6.98 | -4.80 |
| UiPath Inc. PATH | 5.69 | -21.46 |
| CRISPR Therapeutics AG CSRP | 4.92 | -7.28 |
| Zoom Video Communications, Inc. ZM | 4.50 | -15.59 |
| Roblox Corporation RBLX | 4.47 | -19.14 |
| Robinhood Markets, Inc. | 4.21 | 38.85 |
| Unity Software Inc. U | 3.33 | -43.14 |
Short Strategies On Cathie Wood’s Ark Funds Emerge
The underperformance of Cathie Wood’s actively managed funds has prompted other ETF issuers to undertake short strategies on Ark ETFs.
AXS Investments launched the AXS Short Innovation Daily ETF SARK at the end of 2021, which shorts Wood’s flagship ARKK fund and has seen a 40% increase since inception. During the same timeframe, the ARKK Innovation ETF were down by over 60%.
In May 2022, AXS Investments also launched the AXS 2X Innovation ETF TARK, which shorts ARKK with a leverage of 2x.
Chart: Shorting Cathie Wood’s Flagship Fund Brings Robust Returns
Greg Bassuk, CEO of AXS Investments, highlighted on CNBC last month a spike in inflows affecting these two funds: "With thousands of startups and small high growth companies driving innovation having received financing from Silicon Valley Bank and others like it, this really could be a harbinger for concern around the ability of these kinds of innovation-driving companies to get financing going forward."
Seven days following the fallout of Silicon Valley Bank, the AXS Short Innovation Daily ETF and the AXS 2X Innovation ETF witnessed an 80% and 50% jump in trading activity, respectively.
Cathie Wood photo courtesy of Ark Invest.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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