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Cathie Wood’s Flagship ETF Added $341M Ahead of Big Gain

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What You Need to Know

  • The Ark Innovation fund sold off earlier this year, as investors sought more defensive positions amid global stock-market turmoil.

Cathie Wood fans are back at it — and this time they got the timing right.

Dip-buyers rushed into Wood’s flagship exchange-traded fund on Tuesday, adding more than $341 million to the ARK Innovation ETF (ticker ARKK), the largest single-day inflow since May of last year, according to data compiled by Bloomberg. A day later, ARKK jumped 10.4%, its steepest surge since last March.

Wood has received both ire and praise for her dogged style of handpicking long-term growth companies with visionary stories. Believers in her approach have steadily added money to ARKK, with the ETF on track for the sixth straight week of inflows.

This is despite the fund losing roughly 35% so far this year. Many are using the decline as an opportunity to buy the fund, analysts said.

“ARKK is just a monster of an ETF nowadays,” said James Seyffart at Bloomberg Intelligence. “People are trading it as if it were a non-profitable tech basket.”

Meanwhile, the Tuttle Capital Short Innovation ETF (SARK), which is structured to deliver the inverse of ARK Innovation’s performance each day, posted a 10% decline on Wednesday, its largest drop since its inception at the end of last year.

BI’s Seyffart says SARK has added to its competitor’s ecosystem, which in addition to the inverse fund also includes options on ARKK.

The sustained inflow of money into ARKK is also likely because some investors are trying to time the end of the selloff, given that the fund’s price had fallen to spring 2020 levels, BI’s Seyffart said.

ARKK sold off this year as investors sought more defensive positions amid global stock-market turmoil. That, coupled with the Federal Reserve’s rate hiking cycle, dented the growth prospects of the companies that the ETF tracks.

Some strategists say that the selloff might have gone too far and many hard-hit stocks could start to recover.

There are “great opportunities in high beta, beaten-down segments that now include innovation, tech, biotech, emerging markets (e.g. China), as well as more broadly in smaller capitalization and more volatile stocks,” JPMorgan Chase & Co. strategists led by Marko Kolanovic wrote in a note. “These segments are already pricing in a severe global recession, which will not materialize in our view.”

Many investors could have found ARKK’s selloff as an attractive entry point, said Mohit Bajaj, director of ETFs at WallachBeth Capital.

“With the fund down 40% prior to the move the past few days, it might have been an opportunity to get back in,” he said. “There are still some Cathie Wood believers out there.” –With assistance from Lu Wang.

(Image: Courtesy of ARK Invest)

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