ARK Innovation ETF Sell-Off Deepens as Outflows Accelerate

Cathie Wood’s flagship fund, the ARK Innovation ETF (CBOE: ARKK), remains under pressure as both its performance and investor demand continue to weaken. The ETF has fallen to its lowest level in three months and is down 15.5% from its year-to-date high, weighed down by the continued decline in many of its largest holdings.

ARKK ETF Outflows are Rising

Wood is continuing to lose investor support as outflows from her flagship ETF accelerate. According to ETFDB data, the fund recorded more than $123 million in net outflows in July alone. Over the past 12 months, investors have withdrawn more than $1.49 billion, while cumulative net outflows over the last five years have climbed to $6.7 billion.

As a result, the fund now holds just $6.5 billion in assets under management (AUM), down from over $50 billion at its peak in 2021. This retreat happened because of its outflows and its performance. It has dropped by over 55% from its all-time high, making it one of the top laggards. In contrast, ETFs tracking the S&P 500 and Nasdaq 100 indices jumped to a record high.

Beyond its weak performance, investors are also likely deterred by ARKK’s relatively high fees. Despite consistently lagging the broader market, the fund still charges a 0.75% expense ratio. By comparison, the Vanguard S&P 500 ETF (NYSE:VOO) has an expense ratio of just 0.03%, while the SPDR Portfolio S&P 500 ETF (NYSE:SPLG) charges only 0.02%.

Top ARKK Stocks Have Dived This Year

Looking at its top constituents, most of its companies have dropped substantially in the past few months. Tesla (NASDAQ:TSLA) dropped by over 37% from its highest point in December. This sell-off continued after its recent earnings, which showed that its gross margin narrowed, while its free cash flow turned negative. 

SpaceX (NASDAQ:SPCX), the second biggest name in the fund, has also dropped to a record low a month after its highly anticipated IPO. This sell-off may take a breather this week after its earnings on Tuesday.

Tempus AI (NASDAQ:TEM), another top company in the fund, has also plunged by 58% from its peak last year. This retreat is mostly because of the ongoing software sell-off, valuation concerns, and its recent Personalis buyout. 

Other top companies in the ARKK ETF, like Coinbase, Shopify, Circle Internet Group, and Robinhood, have all plunged by double digits this year. Robinhood and Coinbase stocks dropped after their recent earnings showed the impact of the ongoing crypto market sell-off.

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