LONDON / NEW YORK (Reuters) – The biggest exit on record for Cathie Wood’s ARK fund was not enough to prevent the company from increasing its bet on Tesla Inc after the electric carmaker’s action closed below $ 700 for the first time this year on Tuesday.
Wood, whose $ 26.6 billion exchange-traded fund ARK Innovation (ETF) was the best-performing actively managed U.S. equity fund tracked by Morningstar last year, bought $ 171 million of Tesla shares. , bringing its weight to around 10% of the fund.
The automaker’s shares jumped 4.7% in afternoon trading on Wednesday, helping to erase some of the large losses ARK suffered over the past week as momentum shares rose sharply. folded.
The sale sparked intense trading, with $ 5 billion in ARK Innovation shares changing hands on Tuesday, more than double the volume from the previous session. The fund fell slightly on Wednesday, pushing its loss to almost 9% for the week to date.
Investors withdrew $ 465.3 million from the ARK Innovation fund on Tuesday, according to data from Refinitiv Lipper. Morningstar said Tuesday was the fund’s biggest daily exit on record. Over the past 35 trading days, the fund has only seen five daily exits and has attracted $ 5.691 billion from new investors through February 23.
Bets on companies that thrived during the pandemic, including Tesla, streaming company Roku Inc, and payments company Square Inc, helped fund assets grow from $ 1.8 billion at the end of 2019 to 27.6 billion. billion dollars until mid-February of this year, according to Lipper.
Meanwhile, short interest in the fund’s shares has seen a massive spike, with 100% of the shares available for short sale currently on loan, according to data from FIS Astec Analytics.
Short sellers typically borrow and sell stocks that they expect to decline in value, hoping to buy them back at a lower price to pay off the loan and pocket the difference.
David Lewis of FIS Astec Analytics said his firm’s cost of borrowing data suggests a potential buy of the ETF as the price drops.
According to the Ark Invest website, the purchases of Tesla shares were made in three installments worth approximately $ 124 million, $ 39 million and $ 8 million. On the same day, Ark Invest funds also sold Taiwan Semiconductor US-listed shares for $ 126 million.
Ark Invest now holds more than 0.5% of Tesla’s capital for a weighting of 6.6% on all of its funds.
The ARK Innovation fund holds significant positions in so-called momentum stocks, which tend to attract investors based on thematic trends rather than fundamentals or valuation.
Reporting by Thyagaraju Adinarayan in London and David Randall in New York; Additiona report by Danilo Masoni in Milan and Saikat Chatterjee; Editing by David Goodman and Matthew Lewis