High-tech and innovation ETFs are not on investors' radar this year as central banks take more hawkish stances to combat inflation by expressing their intentions to raise interest rates. Higher rates can hurt growth sectors like tech, which need to sustain higher growth rates to justify the risks investors take for a higher return. Also, rising rates can erode the value of future cash flows, reducing the valuation of the companies' shares.
Fund Flows gush out of ARK ETFs except for …
Cathie Wood's popular active ARK ETFs have been a large testament to current investors' sentiment regarding risky "disruptors" ETFs — after witnessing close to $800 million of combined net outflows this year and heading for their 8th straight month of net exits. Among the fleet's biggest flow bleeders this year are ARK Next Generation Internet ETF (ARKW) losing -$360 million, followed by ARK Autonomous Technology & Robotics ETF (ARKQ, -$224 million), ARK Fintech Innovation ETF (ARKF, -$128 million), and ARK Genomic Revolution ETF (ARKG, -$87 million). Meanwhile, the flagship ARK Innovation ETF (ARKK) gained around $100 million of net flows this year as investors go bargain hunting for the hammered down shares. ARKK share price closed on Tuesday at $63.39 its lowest level since mid-June 2020 and 60% off from its all-time high reached in mid-February of last year.
Betting against ARK Innovation ETF
Launched on the Nasdaq in November of last year, the Tuttle Capital Short Innovation ETF (SARK) has gained traction among investors hoping to feed off ARK Innovation ETF's downfall — raising over $270 million and reaching $334 million in assets under management. The fund is an actively managed ETF that attempts to achieve the inverse (-1x) of the return of the ARK Innovation ETF (NYSE Arca: ARKK) for a single day, not for any other period. SARK has generated +65% in returns since launch, while ARK lost -48%.
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