Excess Returns

Could ARK Pose a Systemic Risk to the Market? A Look at How ETFs Work Can Help Us Find Out


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The growth of ARK investments has been one of the biggest stories of the past decade in the ETF space. its flagship fund, the ARK Innovation ETF has seen its asset explode over the past year or so. In January of 2020 the fund had about $1.8B in assets and at the peak earlier this year the fund was at $27B. 

But many in the investing community have worried that the firm's rapid growth and concentrated approach to investing could have a significant downside if investor sentiment turns against the stocks it owns and investors begin redeeming their shares in the fund. Some worry this could result in a cascading effect that could have major implications not only for ARK shareholders, but also for the market as a whole. 

In this episode we take a behind the scenes look at the ETF structure and how the way ETFs work could both contribute to and mitigate the possibility of this type of event. 

We hope you enjoy the discussion. 

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