Ark Invest, once the world’s largest active ETF manager with $59 billion in assets under management in early 2021, has seen a significant decline in recent years. As of April 2024, those funds had plummeted to just $11.1 billion, marking an 80% downturn. 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.
Investors have withdrawn a substantial $2.24 billion from Wood’s actively managed funds by the end of the third week of April 2024, nearly tripling the outflows seen throughout all of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.
According to Todd Rosenbluth, head of research at data provider VettaFi, the decline is partly due to the heavy concentration of funds in underperforming companies. With the 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.
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. In May 2022, AXS Investments also launched the AXS 2X Innovation ETF (TARK), which shorts ARKK with a leverage of 2x.
Shorting Cathie Wood’s flagship fund has brought robust returns, with the AXS Short Innovation Daily ETF and the AXS 2X Innovation ETF witnessing an 80% and 50% jump in trading activity, respectively, following the fallout of Silicon Valley Bank.
