Earlier this month something very weird happened with Cathie Wood’s flagship actively-managed fund, the ARK Innovation ETF.
Take a look at this wild chart of its assets under management:
The fund (known by its ticker ARKK) mysteriously saw its AUM suddenly balloon from $7.1bn on August 8 to $12.8bn on August 14, before swiftly falling back to $7.2bn on August 20. It’s now resting fairly steady at ca $7.5bn. So what caused this massive and sudden inflation and deflation of ARKK?
ETF.com reckons that it was a huge “heartbeat trade”, an old trick that ETF managers pull to limit capital gains tax bills. This involves pushing money into an ETF and almost immediately redeeming it in the form of shares, which are then sold.
We’re not convinced. The pattern of massive inflows and outflows does look a little like an ETF heartbeat trade. But heartbeat trades tend to be two-day things — in and out — not things that happen over several days. The timing is also . . . curious.
