Cathie Wood’s flagship fund is bleeding assets as its underperformance against benchmark US indices like the Russell 2000, S&P 500 and Nasdaq 100 continues.
ARK Innovation ETF Outflows are Rising
The ARK Innovation ETF (CBOE: ARKK) has had a net outflow of $7 billion in the last 30 days, with its assets under management falling to $6.3 billion. At its peak in 2021, the fund had close to $30 billion in assets under management.
Investors have sold their ARKK ETF holdings following years of underperformance. Data shows that its total return in the last five years was minus 35%. In contrast, the Vanguard S&P 500 (NYSE:VOO) and Invesco QQQ Trust (NASDAQ:QQQ) jumped by 87% and 102%, respectively.
The same trend has continued this year, with ARKK falling by 2.2%, while the other two have risen by 9.5% and 135, respectively. Making matters worse is the fact that ARKK charges a higher fee than these funds.
It has an expense ratio of 0.75%, while VOO and QQQ charge 0.03% and 0.18%, respectively. This simply means that a $100,000 investment in the fund costs an investor $750. A similar investment in the other two costs just $30 and $180, respectively.
ARKK’s underperformance this year has been because it has a little presence in the best-performing theme: memory and semiconductors. Its biggest semiconductor holding is Advanced Micro Devices (NASDAQ:AMD). It also owns smaller stakes in companies like Nvidia (NASDAQ:NVDA) and Cerebras.
Some of the biggest companies in the ETF have slumped this year. Tesla (NASDAQ:TSLA), which accounts for 10% of the fund, has dropped by 17% this year, and its stock may come under pressure after its earnings next week.
Tempus AI, the second-biggest company in ARKK, has dropped by 25% in the last 6 months and by 13% this year. Shopify (NASDAQ:SHOP) has fallen by 23%, while Robinhood is down by 14%. Other large names in the fund like Coinbase, Circle, and Roblox have all fallen this year.
ARKK ETF Fell to a Key Support
ARKK stock chart | Source: TradingView
The next few weeks will be important for ARKK as most of its constituent companies publish their financial statements. Tesla will release its numbers next week, while many others will release a week later.
Technicals suggest that ARKK may bounce back as it dropped to a key support level that connects the lowest levels since April 29 this year. It has also formed what resembles a morning star candlestick pattern and is along the 200-day moving average. Also, it has formed a megaphone pattern.
These patterns point to a rebound in the near term. However, its future remains uncertain if its underperformance persists.
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