Meet the ETF That's Betting Against Cathie Wood

Investing

Published: August 4, 2021 9:41 am

ARK Invest’s family of exchange-traded funds (ETFs) has been a force to be reckoned with in the markets over the past few years, and with Cathie Wood at the helm, why not? Investors have seen these ETFs double and triple in a few years’ time. However, with the impressive year that Wood and company had in 2020, the year-over-year comps look a little tough to keep up these gains, and as a result some are looking to bet against ARK Invest.

Only recently has an ETF been put together to play against ARK Invest’s biggest fund. Essentially, this new fund is looking to short ARK Innovation ETF (NYSEARCA: ARKK). The Short ARK ETF (trading under the ticker SARK) would seek to track the inverse performance of ARKK and it would charge a 0.75% operating expense, which is in line with the ARK Innovation ETF’s fee.

The SARK fund would be managed by Matt Tuttle, the CEO of Tuttle Capital Management, which issues thematic and actively managed ETFs. Tuttle commented about SARK:

In sum, as ARKK already represents a long exposure to a basket of unprofitable tech stocks, we thought that investors should have access to the short side as well. Keep in mind there are a lot of non-institutional investors that cannot short stocks or ETFs or they may have trouble finding a borrow to put on the stock.

As it stands now, there are about 19.3 million shares short on ARKK, worth about $2.3 billion at Tuesday’s closing price of $120.22. This fund currently has net assets of $25.5 billion. So there is obviously a market out there for those looking to bet against Wood.

The case of year-over-year comps may be compelling in the short term, as ARKK is down over 3% year to date. In the past six months alone, the fund is actually down 18%. Again, the stock is up roughly 46% from this time last year, so wringing out more gains may be difficult in the short term. However, all the ARK Invest funds are very actively managed, with a nightly list of each fund’s purchases and sales, so they are fairly flexible. Recently ARK Invest reduced its positions in many big Chinese internet stocks amid ongoing trade concerns.

Ultimately, SARK provides investors and traders at any level an opportunity to play the other side of the trade on ARK Invest. This comes whether some are betting for a long-term decline or even a short-term hedge. While betting against Wood may be somewhat of a gamble, traders now have the ability to do so, which is a net positive for the little guy.