It's interesting to see a fund go out with an anti-ARK fund. Yes, there's been a filing by Tuttle Capital Management to track the inverse performance of the Ark Innovation ETF (ARKK) . In a market where shorting has been hunted down like wild, rabid animals, some folks have to think this move is crazy. Surely, the Short ARKK ETF (SARK) will be squeezed, but it may not be that simple. SARK will operate via swap contracts, which is the approach used by most inverse funds on the market.
That means someone, somewhere will likely be short some of the ARKK holdings. However, it may be spread across many institutions, and in some cases simply be a hedge against an existing long position for them. In short, no pun intended, any "squeeze" will be more psychological than forced as I see it.
Whether it is a smart move by Tuttle is an entirely different question. From a standpoint of making money as a fund manager, yes, it is a smart move. There are plenty of people out there who love to cheer for failure, so Cathie Wood has painted a target on herself because of success. I'm not saying it is warranted. It just is what it is. So, Tuttle is likely going to rake in assets quickly and collect a nice paycheck.
As to performance, I'm guessing it will be even more volatile than the core ARKK fund. Inverse funds can be a challenge as they constantly attempt to keep up with proper exposure to the underlying index or manager they strive to maintain inverse consistency against. I have found the slippage will eat away against returns over time.
Tuttle's bet is against the unprofitable tech companies that have been compiled within ARKK, but what happens if Wood shifts strategies or adds profitable companies? Will Tuttle continue in his path of shorting ARKK? And this ETF really says that Tuttle trusts Wood's ability to pick winners more than its own ability to spot losers. That's like fading a friend who is on a cold streak rather than doing much homework of your own. Again, this goes back to the idea of raking assets in quickly to collect a nice, easy paycheck. It should be easy money for Tuttle, but impressive? Hardly. The inverse ETF will be a hard pass for me and I think most investors should take the same approach unless it can show a consistency of avoiding slippage for at least a few months.
