(Bloomberg) — Cathie Wood’s Ark Investment Management LLC is moving into the fast-growing market for buffer ETFs designed to limit equity losses, at a time when her tech funds continue to bleed assets.
The investment firm last week submitted paperwork to launch four exchange-traded funds that seek to protect investors against modest losses in the equity market while still offering upside. The idea is simple: When stocks drop, the ETFs cushion the fall, shielding investors from some losses. When the market rises, they deliver gains, though these are capped, too.
In Ark’s case, each fund has a 12-month period that resets on a rolling basis, starting in January, April, July and October, according to filings with the US Securities and Exchange Commission. If approved, the ETFs will aim to limit losses to about 50% of any drop in the share price of the $6.8 billion ARK Innovation ETF (ticker ARKK), while allowing full participation in gains above a set hurdle rate of around 5%.
“These are like Diet Ark. Investors are probably telling them ‘we like the taste and the kick but would like to trim the caffeine and sugar,’” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “So maybe they would like to give up a touch of upside for some sleep at night for the downside.”
The funds are ARK Q1 Defined Innovation ETF (ticker ARKI), ARK Q2 Defined Innovation ETF (ARKJ), ARK Q3 Defined Innovation ETF (ARKL) and ARK Q4 Defined Innovation ETF (ARKM). Management fees were not disclosed.
A spokesperson for Ark did not respond to a request for comment.
The filing comes as Ark’s eight actively managed ETFs have seen more than $3 billion in net outflows over the past 12 months, with $2 billion pulled from ARKK alone, data compiled by Bloomberg show. The outflows have persisted despite all of the funds posting double-digit gains over the same period, as tech holdings rebounded from tariff-driven volatility. The broader market has also recovered, helped in part by President Donald Trump walking back some of his more aggressive trade proposals.
The flagship ARKK is up 50% over the past year, while the second-largest, the $2 billion ARK Next Generation Internet ETF (ARKW), is trading higher by around 80%. Since April, both have beaten the S&P 500.
The slew of proposed ETFs harkens back to the pandemic, when structured products tied to Ark ETFs issued by JPMorgan Chase & Co. and Morgan Stanley, among others, dominated the market. Structured notes are debt securities that use derivatives to provide exposure to an underlying asset, like a basket of stocks or an ETF.
“There are a lot of people out there that want more guarantee,” said Balchunas. “There is so much uncertainty, that if you can offer some assurance, people will pay up for that.”
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Despite the rally this year across Wood’s funds, the enthusiasm from retail followers has faded, a far cry from her popularity during the 2021 heydays when multibillion-dollar monthly inflows were not uncommon. ARKK is on track for its 19th consecutive monthly outflow, data compiled by Bloomberg show, while ARKW has seen flows fluctuate.
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So-called buffer ETFs, also known as defined outcome funds, are part of the broader boom in derivatives-powered funds that BlackRock Inc. projects could hit $650 billion by 2030 as investors seek fresh strategies to hedge and diversify portfolios. Assets under management for the category hit nearly $69 billion in 2025, data by Bloomberg Intelligence show.
The appeal of buffer ETFs may be strong in the current market marked by sharp swings and surprises. The S&P 500 hit record highs earlier this year, pulled back amid trade tensions and then staged an unexpected rebound.
Many traditional buffer ETFs are designed for investors to hold the product through the entire outcome period to fully benefit from downside protection. Entering or exiting mid-period can result in different risk/return exposure than originally advertised. Others like ProShares have launched daily variants, which reset their risk levels every day.
To Mohit Bajaj of WallachBeth Capital, the move makes sense for Wood — a famed stock picker — given the success of buffer ETFs.
“She is hoping that her current clientele who are loyalists will possibly buy those funds instead of going to a competitor,” the firm’s director of ETFs said. “She is just offering another product to her lineup as she should.”
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