(Bloomberg) – A 20% drop from its all-time high left Cathie Wood’s main exchange-traded fund with the smallest of gains for 2021. That seemed more and more at risk on Thursday.
Ark Innovation ETF (ticker ARKK) fell 5.2% at 10:18 am in New York. Assuming this decline continues, the $ 22.9 billion fund will easily wipe out all of its price advance for the year – the last falling mark for what is still one of Wall Street’s hottest products.
ARKK was caught up in a sale in expensive parts of the market, in particular the technology sector, as fears of inflation rise and bond yields soar. ARKK’s biggest stake, Tesla Inc., fell lower on Thursday after a sharp drop the day before. Among some of the fund’s other major investments, Square Inc. plunged 7% and Roku Inc. 4.9%.
“In a low-growth world, where rates are low, inflation expectations are low and GDP growth is low, this type of company has done well,” said Ross Mayfield, investment strategy analyst at Baird, about ARKK’s holdings. “When bond yields soar, when economically sensitive areas of the market, such as energy and finance are outperforming, these are the types of companies that are first in line to take control.”
Even with the recent drop, ARKK’s performance in the past year is still remarkable by almost any measure. The fund has risen more than 240% since its low in March, almost 12 months ago, and assets have soared by $ 1.5 billion.
The $ 7.8 billion ARKK and Ark Next Generation Internet ETF (ARKW) remain two of the top performing funds in the $ 5.8 billion ETF industry in the United States, according to data from Bloomberg Intelligence.
For the most part, investors remained stable during the ARKK settlement, with a total of $ 611 million added to the fund in Friday and Monday trading. That made up for the $ 150 million pulled on Tuesday, the last day for which data is available.
“After the impressive 2020 and continued gains in 2021, some digestion is expected given ARKK’s focus on high growth companies,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research. “It will be interesting to see if investors show relative patience when bearish days occur.”
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