Ark Investments tops Morningstar list of 'wealth-destroying ETF issuers -report

Feb 5 (Reuters) - U.S.-listed exchange-traded funds (ETFs) managed by Ark Investment Management have wiped out a total of $14.3 billion in shareholder value over the 10 years ended Dec. 31, 2023, according to a report by Morningstar Inc.

That is more than double the estimated total losses incurred by each of the next four fund families on Morningstar's list. Morningstar calculated total losses by measuring the decline in assets in dollar terms, after excluding inflows or outflows.

Ark, whose funds invest in specialist and often volatile tech stocks, did not respond to Reuters requests for comment. Its high-profile founder Cathie Wood has said in the past that the ETFs are long-term plays.

Ark's flagship fund, the ARK Innovation ETF, accounted for most of those losses, said Amy Arnott, the Morningstar analyst who compiled the list which was published on Friday.

That fund, whose assets have fallen from $11.8 billion two years ago to $7.8 billion today, according to FactSet data, had a blockbuster gain of 152.82% in 2020 only to post losses of 26.38% in 2021 and 66.97% in 2022. Although it outperformed most ETFs in 2023, with a gain of 67.64%, it still saw outflows. It is down another 10% so far in 2024.

Ark Innovation invests in what Wood calls "disruptive" technology companies which can offer high rates of growth but also have a volatile track record. Nonetheless, Wood has remained confident that her strategy will outperform over the long haul, even in the face of big losses.

"The worst results in terms of wealth destruction tend to come from more specialized or volatile categories of funds, and also in funds that had very high short-term returns," said Arnott.

The ProShares UltraPro Short QQQ ETF, which offers traders the chance to profit from single-day declines in the Nasdaq 100 Index, topped the list of individual funds responsible for wiping out shareholder value, Morningstar said. It lost $8.5 billion in the 10-year period.

A ProShares spokesperson noted that this fund "performed as designed and as investors expected." Given the bull market for stocks over the last decade, ProShares said "it is not notable or surprising that inverse ETFs went down during that time."

Ark's flagship Innovation ETF ranked third on the list of "wealth-destroying" funds, with $7.1 billion in total losses. (Reporting by Suzanne McGee; Editing by Stephen Coates)