ARK ETFs have been hot and competitors have emerged. Now they are all falling.

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ARK Invest’s exchange traded funds suffered a major setback this week.

In its worst week since last March, the company’s flagship product, the $ 24 billion

ARK innovation

the exchange-traded fund (ticker: ARKK) fell 14.6%, some of its top holdings including

You’re here

(TSLA) and

Year

(ROKU) – fell sharply. The

S&P 500,

meanwhile, fell 2.4%.

The improving economic outlook – which could lead to higher prices and interest rates – pushed stocks down this week, especially those of top-performing tech companies. At its peak on February 12, ARK Innovation was up 26% for 2021, compared to 5% for the S&P. At the end of the month, ARK Innovation was up 4.7% and the S&P was up 1.5%. Investors withdrew more than $ 1 billion from ARK ETFs on Wednesday and Thursday, the largest net outflows in the company’s seven-year history and a sharp reversal from previous weeks. The funds have so far registered $ 16 billion in inflows this year.

As the Wall Street saying goes, when the ducks quack, feed the ducks. Fund companies have taken note of ARK’s entries and have deployed similar, specialized, ARK-type funds that focus on innovative and disruptive companies.

Cathie Wood, the economist who founded ARK Investment Management, is a thoughtful observer and excellent stock picker. But ARK’s phenomenal rise is due to more than skill: five of ARK’s seven ETFs returned over 100% last year, a historic anomaly. Returns like this attract hot money from people rushing into a “sure thing” and selling as soon as stocks weaken – hence the $ 1 billion in two-day exits.

Fidelity deployed a suite of six actively managed disruption funds last April. Five focus on specific areas such as automation, communications, finance, medicine and technology; a,

Loyalty disruptors

(FGDFX), encompasses the five themes. In total, the suite has $ 558 million in assets; since the start of the year, they have increased by 3.3% on average.

Its disruption funds use a new time-based pricing model. Annual fees start at 1%, drop to 0.75% after one year, and 0.5% after another two years. “The overall goal is to get investors to invest for the long term,” says Chris Peixotto, vice president of Fidelity’s investment products group. This makes particular sense for disruptive funds, which can be volatile and take years to materialize.

The $ 421 million

Goldman Sachs Innovate Equity

ETF (GINN), launched in November, tracks an index of nearly 500 stocks, which is around 10 times more than ARK Innovation. This lack of focus and the lack of active management make this ETF much more like the big market, with top-notch stocks such as

Alphabet

(GOOG),

Nvidia

(NVDA), and

Facebook

(FB), none of which is part of the ARK Innovation ETF. The Goldman Innovate ETF has generated a return of 4.8% so far this year.

The $ 181 million

Direxion Moonshot Innovators ETF

(MOON), also launched in November, is probably the fund that most closely resembles ARK. It only owns 50 stocks, but unlike most ARK ETFs, it is not actively managed. Instead, it tracks an index that uses natural language processing to examine company filings, identify innovation-related remarks, and select disruptive early-stage companies. The fund is up 34% this year.

The $ 1.1 billion

Invesco NASDAQ Next Gen 100

ETF (QQQJ), a mid-cap version of the popular

Invesco QQQ Trust

(QQQ), was a big hit when it launched in October. It follows from the 101st to the 200th largest “emerging” company listed on the Nasdaq, primarily in technology and other innovation-driven industries. Many of today’s mega names were once in the Next Gen cart. The fund is up 7.1% this year.

All of those innovation funds have plummeted over the past week, but none have seen the kind of exits ARK has made. Maybe being the first to come isn’t always an advantage.

Write to Evie Liu at [email protected]