Popular investor Cathie Wood’s ARK Investment Management is taking a new step to ease investor nerves. The firm has filed to launch four “buffer” ETFs designed to limit sharp losses tied to its flagship fund, ARK Innovation ETF (ARKK). These new funds aim to offer protection in choppy markets while giving up some upside, a major shift for Ark, which is best known for bold, high-growth bets.
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How the New Funds Will Work
The proposed ETFs — ARK Q1, Q2, Q3, and Q4 Defined Innovation — will each follow a 12-month cycle, starting in January, April, July, and October. They aim to shield investors from up to a 50% drop in ARKK’s share price, while passing on gains only if the fund rises more than about 5%.
This strategy falls under the “buffer ETF” model, where options are used to reduce downside risk. It’s already being used by big players like BlackRock (BLK), Allianz SE, and Innovator ETF, which runs a popular suite of defined-outcome funds.
Why This Matters Now
Ark’s move comes at a time when uncertainty across financial markets is building up. With Donald Trump back in the spotlight and warning of new tariffs, market tensions are rising once again. These headlines have sparked new volatility in growth stocks, especially those with global exposure.
That puts ARK Innovation ETF in focus. The fund is up around 24% this year, well ahead of the S&P 500’s (SPX) roughly 6% gain. But investors still remember the fund’s sharp losses it suffered in 2021 and 2022, when many of its high-growth bets fell sharply.
Can Risk Control Bring Back Investors?
Ark’s top holdings, including Tesla (TSLA), crypto exchange Coinbase (COIN), and trading platform Robinhood (HOOD), are all sensitive to market swings. These new ETFs may attract investors who still believe in Cathie Wood’s long-term vision but are no longer comfortable with the full risk that comes with it.
Turning to Wall Street, Coinbase stock scores a Moderate Buy consensus rating, with the average COIN stock price target of $299.47 indicating a 16.14% possible decline from current levels. Robinhood also holds a Moderate Buy rating, with the average HOOD stock price target implying a 17% downside. Meanwhile, Tesla carries a Hold rating, with the average TSLA stock price target of $293.09, reflecting a 0.3% downside risk.
