The ETF betting against Ark's disruptive tech stars has seen AUM soar and returns nearly mirror Cathie Wood's losses since inception
- Tuttle Capital's Short Innovation ETF has seen assets soar amid a period of poor returns for Ark.
- The SARK ETF seeks to generate inverse returns of ARK Invest's flagship innovation ETF.
- Since its launch in November, SARK has returned nearly 40% while ARKK has fallen 32%.
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Ark Invest's pain has been Tuttle Capital's gain over the past two months, as the latter's Short Innovation ETF sees its assets under management soar to new records.
Tuttle Capital's SARK ETF seeks to generate inverse daily returns of Ark Invest's flagship Disruptive Innovation ETF. The ticker symbol "SARK" stands for "Short ARK." So far, Tuttle is doing a pretty good job in achieving its objective. While the ARKK ETF was down 3% on Thursday, the SARK ETF was up about 2.8%.
The timing couldn't have been better for Tuttle Capital, which launched the ETF in November. Since then, Ark's flagship fund has declined by about 32%, while the SARK ETF has gained 39%.
The strong performance for SARK has helped drive a surge in assets under management since its inception, rising 2,900% from its first-week base of $5 million in November to $150 million as of Wednesday. Still, that pales in comparison to the ARK ETF's $15 billion in assets.
But Ark's Cathie Wood isn't fazed by the short bets against her holdings, according to a November interview with Bloomberg. "This is what makes a market, right? I never worry about anyone shorting the stocks underlying Ark or with this new ETF," Wood said.
Still, the weakness in ARK has been ongoing since high-growth tech stocks peaked in February 2021. And the decline has been exacerbated in recent weeks by a hawkish pivot from the Federal Reserve. The prospect of higher interest rates and a reduction in the Fed's balance sheet after two years of stimulus has led to a re-rating in the high-tech growth stocks that Wood is known for investing in.
The nearly year-long pain in ARK's flagship ETF has led to its asset being cut in half, from a prior peak of about $28 billion. Based on the fund's 0.75% expense ratio, the $14 billion decline in AUM represents a $105 million loss in annual revenue for Ark Invest.
Wood is feeling the pain along with her investors, revealing in a recent market update that the ARK ETFs make up more than half of her retirement account and a considerable amount of her net worth.
"I do want you to know that, of course, we've been through a very difficult time since the significant rotation from growth into value started nearly a year ago in mid-February, and I want you to know that we're in there with you," Wood said.
