Bets on Cathie Wood’s flagship ETF hit a record high

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Exchange Traded Fund Update

Short sellers increased their bets on Cathie Wood’s flagship Ark Innovation Fund, as confidence in its strategy showed signs of faltering.

According to data from professional data provider S3 Partners, investors who bet on falling shorted a record 12% of ARKK exchange-traded fund stocks-on August 3 they bet valued at more than $2.7 billion. A year ago, this figure was only 40 million U.S. dollars.

As the market bounced back from the impact of the coronavirus lockdown, increasing skepticism and the emergence of new ETFs designed to counter all Wood’s bets reflect people’s attitudes towards this technological re-strategy that is very effective for ARKK funds. Suspect last year.

Todd Rosenbluth, CFRA ETF and Mutual Fund Research Director, said: “Some investors who have been waiting for the fund to repeat itself in 2020 in 2021 have lost confidence and exited.”

In 2020, the ARKK fund brought investors nearly 150% return, helping to achieve this goal, and Wood is some well-known figures in the field of fund management in the United States.

Wood is known for making bold bets and surprising statements about the prospects of what she considers to be optimistic assets, including shares of electric car maker Tesla and Bitcoin prices.

In the first few months of this year, it was painful to bet on ARKK funds; Ihor Dusaniwsky, head of forecast analysis at S3 Partners, said that from January to June, short sellers’ market-valued losses were reduced by $38 million, or 2.26%. But now their sharp reversal means that ARKK shorts have risen by US$137 million, or 7.8%, so far this year.

“As ARKK short trades become profitable, we have seen additional short sales of $369 million in the past 30 days,” Dusanivsky said.

Ark declined to comment.

ARKK recorded its largest monthly net capital outflow of the year in July, as the fund’s holdings in Tesla, TV streaming platform Roku, digital medical services company Teladoc, and small business e-commerce platforms Shopify and Zoom fell 8.2%. According to data from ETF.com, the fund had a net outflow of US$944 million last month, and the value of the fund fell by more than 1% in 2021.

The double tick and histogram show the net inflows and assets under management (in billions of U.S. dollars) from January 2020 to July 2021, showing that ARKK has been hit by outflows in recent months

To some extent, this is due to the relative recovery of stocks in industries other than technology such as finance and energy.

Debbie Fuhr, the founder of ETFGi, said: “Some investors believe that the technology industry has no room for further growth because it is expensive and may be in a bubble field, and as the world reopens, other parts of the US economy may Will perform better.” The consulting firm added that many traders believe that the ARKK fund’s holdings in Tesla are “risky and expensive”.

Ark Innovation can still attract people; according to ETF.com, it has attracted a net inflow of US$6.7 billion this year, and now has total assets under management of US$22.45 billion. But this total has fallen from US$25.52 billion at the end of June.

ARKK funds soared at the beginning of the year as investors injected more than US$5 billion into ETFs in the first two months of 2021. After falling sharply to March, it set its lowest price this year in mid-May, but the strong gains faded gradually at the end of June.

Return line chart, YTD (re-adjusted) showing ARKK and Vanguard Total World Stock ETF (VT)

Some ARKK fund skeptics go further. Regulatory filing Tuttle Capital Management, a provider of thematic and active ETFs, has made plans to launch a short-term ARKK ETF called SARK. If approved, it will seek to provide the reciprocal of ARKK’s performance, betting on all stocks purchased by the ARKK fund.

However, Fuhr stated that the increased interest in short selling ARKK could be misleading. “Short is a risky transaction, the possibility of making big money is very small.”

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