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Thursday, September 29, 2022

Cathie Wood hits back at ‘Big Short’ Michael Burry over ARK ETF short

Star US fund manager Cathie Wood has hit back at renowned hedge fund manager Michael Burry after it was revealed he has made a big bet against her flagship strategy.

Burry — the inspiration behind the Oscar-winning film “The Big Short” after correctly calling the US subprime mortgage crisis — disclosed in a regulatory filing on 16 August that his firm, Scion Asset Management, had put options against the ARK Innovation ETF which were valued at more than $31m during the second quarter.

Having a put contract means Scion Asset Management can sell shares in the flagship $26.5bn ETF at a previously agreed price before a certain date. If ARK Innovation’s shares drop below the threshold before the options expire, the hedge fund can sell the shares for a profit.

ARK Innovation emerged as one of the top-performing ETFs last year, delivering performance of around 150%. So far this year, the fund is down 6%.

In a series of Tweets on 17 August, Wood — whose actively managed exchange traded funds have pulled in tens of billions of dollars from investors —hit back at Burry, saying that her fund was poised to take advantage of growth opportunities.

“To his credit, Michael Burry made a great call based on fundamentals and recognized the calamity brewing in the housing/mortgage market. I do not believe that he understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space,” Wood said.

READ Cathie Wood’s Ark Innovation fund: Will the bears be right to short it?

Burry’s quarterly filing also revealed his firm had increased his short bets against electric car maker Tesla, which is the ARK Innovation ETF’s top holding.

“Unlike the tech and telecom bubble, this equity bull market has broadened beyond the innovation strategies that boomed last year to value and other stocks that had trailed. The bull market has strengthened, setting the stage we believe for another leg up in innovation strategies,” Wood tweeted.

She continued: “In our view, the seeds for the innovation explosion that is dedicated to researching were planted during the 20 years ending with the tech and telecom bust. Having gestated for more than 20 years, these technologies should transform the world during the next 10 years.”

ARK has attracted significant interest from short sellers following a dip in performance, and concerns over some of Wood’s holdings in tech stocks in Tesla and Square, as well as sizeable positions in smaller companies.

READ Why Cathie Wood’s Ark ETF spooks UK fund managers: ‘I don’t want to be the one holding the bag’

Earlier this month US-based Tuttle Capital Management lodged a filing with the Securities and Exchange Commission to launch the Short ARKK ETF under the ticker SARK.

The fund would seek to track the inverse performance of the $23bn Ark Innovation ETF through swaps contracts.

To contact the author of this story with feedback or news, email David Ricketts


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