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Investment firms bet against Cathie Wood’s best ETF as technology falters

(Bloomberg) – Cathie Wood’s recent troubles have been a boon to some of her peers in the financial management arena. About two dozen investment advisers, including Balyasny Asset Management and a unit of Blackstone Group Inc., have purchased bearish put options during the first quarter on the Ark. Although fund managers often buy put options on ETFs to protect their portfolios against market downturns, the options are typically tied to passively managed index funds such as the SPDR S&P 500 ETF Trust. Yet tech-driven Ark Innovation has grown so quickly – to $ 28 billion in mid-February from $ 1.9 billion at the end of 2019 – that some managers have seen the fund actively managed. as a better alternative to hedge against a fall in stocks that Big Take: Cathie Wood’s Bad Spring is a blip when the future is so great “The Ark Innovation fund has had a tremendous run during 2020 and early in 2021, ”Efrem Kamen, director of New York-based Pura Vida Investments, said in an email. “However, the level of fund flow to the ETF appeared to be extreme.” Representatives of Wood’s Ark Investment Management did not respond to telephone and email messages seeking comment. Ark Innovation, with the ticker symbol ARKK, posted a return of 153% last year, supported by investments such as Tesla Inc. and Zoom Video Communications Inc., his fortunes started to deteriorate in mid-February, as signs of inflation prompted investors to move away from tech stocks in favor of value games that would benefit from higher prices, such as banks and mining ETFs have been found to be more volatile than some of the index funds which have traditionally served as a proxy for the tech industry, making it a more profitable way to bet against such stocks or hedge other holdings. ARKK fell 29% on Wednesday from its February 12 high, while ETF Invesco QQQ, which tracks the Nasdaq 100, fell 0.7%. it was a successful strategy, ”said Chris Murphy, Co-Director of Derivatives Strategy at Susquehanna International Group, of the ARKK put purchase. Investors pay a premium to acquire put options, which gives them the right to sell shares of a public company or ETF to another investor in the future at a fixed price. While some managers and market makers hold a combination of ARKK shares with put and call options, the companies Bloomberg analyzed held those options exclusively or primarily Deer Park Road Management Co., a Steamboat Springs-based company , Colorado, which trades in assets. – and mortgage-backed securities and corporate debt, bought put options during the first quarter on 2.15 million ARKK shares, according to its 13F quarterly filing with the Securities and Exchange Commission. The stocks covered by the put options had a face value of nearly $ 258 million at the end of March and the put options were priced too low given the ETF’s past volatility. that made them more attractive as a risk hedging tool, Deer Park Chief Investment Officer Scott Burg said in a telephone interview. Deer Park bought them to protect against rising interest rates, he said. “As rates went up, tech stocks crashed,” said Burg, whose company managed about $ 3.7 billion at the end of the year. “You can see it in the first trimester.” Read more: Cathie Wood fans buckle down as ETF assets FallPura Vida acquired puts on 622,500 ARKK shares with a par value of nearly $ 75 million in the first quarter, according to his file. The hedge fund’s portfolio was exposed to some of the same areas as the ETF, including genomics and telemedicine, according to Kamen. “The volatility on Ark Innovation ETF was an effective way to hedge some of the factor risk in our portfolio,” said Kamen. Factors refer to the characteristics of a stock, such as being growth or value play.Blackstone Alternative Solutions revealed that it bought puts options on 1.3 million ARKK shares in the first quarter, while Balyasny acquired put options on 436,500 shares with a par value of $ 52 million as at March 31. Other buyers of the puts during the period included Taconic Capital Advisors, Ikarian Capital and Davidson Kempner Capital Management. get a kill here, ”said Eric Balchunas, ETF analyst for Bloomberg Intelligence. “If you’ve done a few of these trades, you’ve probably done well in the past few months.” More articles like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP


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Perry Perrie

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