The Tuttle Capital Short Innovation ETF (NASDAQ: SARK) has begun trading on the NASDAQ. This ETF offers investors a direct alternative to the hugely popular ARK Innovation ETF (NYSEARCA: ARKK). SARK is an actively managed ETF attempting to achieve the inverse (-1x) of ARK Invest's ARK Innovation ETF return. It is rebalanced daily, meaning it aims to achieve the inverse of ARKK for a single day at a time.
Betting against disruptive innovation
For those speculative investors with a bearish outlook on ARKK, SARK provides a simple way to short it. As shorting is a highly risky practice, many retail investors are fearful to attempt it on their own. But buying this ETF now gives them the opportunity without the extended risk.
ARKK holds a portfolio of stocks betting on the future of industries such as electric vehicles, next-gen internet, genomics and fintech. SARK meanwhile, bets on their downfall or the chance the companies involved won't succeed.
“Whether you believe that the current bull thesis for transformational industries is stretched, or you are looking to provide protection to an existing portfolio of high-growth stocks, SARK is a potentially attractive opportunity worth exploring.”
SARK versus ARKK
Tuttle Capital Management had $140 million in assets under management (AUM) as of September 30. Its popular flagship offering is The SPAC and New Issue ETF (NYSEARCA: SPCX), which gives investors an easy way to invest in pre-deal Special Purpose Acquisition Companies (SPACs). It seems Tuttle Capital is taking an opportunistic approach to jumping on the bandwagon of speculative trends.
In contrast, ARK Invest has $42.4 billion in AUM.
Cathie Wood has risen to prominence since FOMO led her disruptive ETFs to take off like a rocket during the pandemic lockdowns of 2020. Her dynamic range of ETFs currently includes:
ARK Innovation ETF (NYSEARCA: ARKK)
ARK Autonomous Tech. & Robotics ETF (NYSEARCA: ARKQ)
ARK Next Generation Internet ETF (NYSEARCA: ARKW)
ARK Genomic Revolution ETF (NYSEARCA: ARKG)
ARK Fintech Innovation ETF (NYSEARCA: ARKF)
ARK Space Exploration & Innovation ETF (NYSEARCA: ARKX)
The 3D Printing ETF (NYSEARCA: PRNT)
ARK Israel Innovative Technology ETF (NYSEARCA: IZRL)
ARK Invest looks to the future, with each fund focusing on innovations expected to disrupt the status quo as time goes by. Wood's biggest bet has been on Tesla, which has helped carry the funds higher and higher over the past two years.
Nevertheless, with Elon Musk's erratic behavior and Tesla's astronomical valuation, many skeptics believe it's only a matter of time before ARK Invest and all its followers are in for a sharp wake-up call.
For those betting against Cathie Wood, the SARK ETF now offers a simple way to do so.
Risky business
There is no guarantee either investment strategy will succeed. But investors on both sides of the debate have strong convictions. Wood's disruptive innovation makes a lot of sense, but whether the companies involved will survive long enough to bring investors long-term wealth remains to be seen.
Yet SARK comes with an additional warning: The use of inverse instruments may expose the Fund to additional risks that it would not be subject to if it invested only in "long" positions. That's because shorting stocks comes with exponential downside risk and limited upside.
Matthew Tuttle, CEO and CIO of Tuttle Capital Management, said:
“Many investors with whom we speak, including financial advisors, are cautious on current valuations for unprofitable innovative companies. Whether you believe that the current bull thesis for transformational industries is stretched, or you are looking to provide protection to an existing portfolio of high-growth stocks, SARK is a potentially attractive opportunity worth exploring.”
There's no doubt it will be interesting to see how AUM look at both organizations this time next year.