ETF Edge

Why the fund shorting Cathie Wood’s ARKK is now ultra-long the ETF

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From SARK to TARK: The man shorting Cathie Wood's ARKK, now going ultra-long

The ETF shorting Cathie Wood's ARK Innovation Fund (ARKK) has been a big winner in 2022. The Tuttle Capital Short Innovation ETF (SARK) has soared more than 75% year-to-date while the ARKK ETF has fallen more than 55% in the same time period.

And now the creator behind the SARK ETF is taking the opposite bet with his latest instrument, the AXS 2X Innovation ETF (TARK). This new long-leveraged ETF is designed to receive two times the return of the ARKK ETF.

AXS Investments managing director Matt Tuttle launched the short ETF in response to demand for a way to bet against Wood's ETF. But after seeing the interest in the ARKK ETF, the firm decided to add the ultra-long ETF.   

"The one thing people will agree on is that that's an ETF that's going to move and it's going to have large moves. So we wanted to give investors that tactical ability to play both sides," Tuttle told CNBC's "ETF Edge" in an interview on Monday.

"Plus, we think it's an interesting opportunity for some of ARKK shareholders who are really committed to the story," Tuttle added.

In an interview last month with CNBC's Bob Pisani, ARKK founder Cathie Wood described the SARK ETF as shorting American innovation.

Tuttle pushed back against those remarks, saying, "What we're providing here is tools. [Cathie] went on CNBC at one point and did say: 'ARKK is the new innovation index.' Every index out there, there are tools that allow you to go long and there are tools that allow you to go short," the SARK creator said.

ARK Invest did not immediately respond to CNBC's request for comment.

AXS Investments also recently launched the AXS Short China Internet ETF (SWEB), an inverse ETF which bets against the popular KraneShares China Internet ETF.

"There's a lot of stuff going on in China that is really scary from an investment standpoint. So, in our mind – nothing against KWEB – this is just another tool for investors to hedge their portfolio," Tuttle explained.

KraneShares CIO Brendan Ahern said in a statement to CNBC that there were "non-fundamental factors that have weighed on KWEB's portfolio companies" and that the timing of the SWEB ETF is "a great contrarian indicator."

In the same interview with Tuttle, John Davi, chief investment officer of Astoria Advisors, points out that while AXS's inverse ETFs are new tools, he sees it as adding to investors' trading options.

"This is a new space obviously, so only time will tell. My bottom line is the more tools out there the better," Davi said.

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