ARK Invest Files for 4 New Structured ETFs
- Each proposed ETF seeks to provide investors with a defined risk-return profile for rolling 12-months periods.
- ARK’s filing speaks to just how much demand there is for defined outcomes, Bloomberg's Balchunas said.
ARK Invest is planning to launch four structured exchange-traded funds, according to a Securities and Exchange Commission filing on Thursday. The news comes as more investors look to add defined-outcome products to their portfolios amid market volatility.
The Cathie Wood-led firm filed for the funds:
- ARK Q1 Defined Innovation ETF (ARKI)
- ARK Q2 Defined Innovation ETF (ARKJ)
- ARK Q3 Defined Innovation ETF (ARKL)
- ARK Q4 Defined Innovation ETF (ARKM)
Management fees weren’t disclosed in the filing.
ARK Invest Plans Structured ETFs
Each active ETF seeks to provide investors with a defined risk-return profile for rolling 12-months periods—January to January, April to April, July to July and October to October, per the filing. They’re designed to limit downside participation to approximately 50% of any decline in the share price of the ARK Innovation ETF (ARKK) and provide maximum participation in ARKK’s upside above a predefined approximately 5% hurdle rate.
Bloomberg Senior ETF Analyst Eric Balchunas said in an X post, “Basically it’s ARKK but with 50% downside limit and then on upside (I think) you get everything except the first 5% gains.”
Launched in 2014, ARKK is a $6.9 billion fund that seeks long-term capital growth from companies around the world that are involved with or benefit from disruptive innovation. The fund is up 24.3% year to date and 57.5% over the last year, according to FactSet data.
Investors Turn to Defined Outcomes
ARK’s filing speaks to just how much demand there is for defined outcomes, Balchunas said.
As more investors look to shield their portfolios from the ups and downs of the market, more are turning to structured or buffered ETFs that place limits on declines and gains. During the market downturn in early April, buffered ETFs recorded $393 million in flows for the week—up from $206.1 million during the previous week, according to Morningstar.
“Even for those taken by buffer ETFs’ attributes, it’s worth remaining mindful of the trade-offs they involve, including higher cost and complexity, partial exposure to stock market losses, and lack of participation in equity dividends (as the ETFs’ payoff is typically tied to a ‘price only’ index return),” Jeffrey Ptak, managing director for Morningstar Research, wrote at the time.
