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The $ 160 billion insanity for speculative technology is quickly waning

(Bloomberg) – The $ 160 billion boom in thematic funds is quickly waning as investors back away from Wall Street’s most speculative bets. The generation of exchange-traded funds targeting niche investment ideas from sports betting to artificial intelligence is for the first time at Pace Month of Outflows in more than a year, according to Bloomberg. Traders have withdrawn around $ 1.6 billion so far in May. While that’s only 1% of the wealth in this category, it’s a notable reversal from the start of the year when inflows peaked at $ 18 billion in January. The most popular funds in the sector are hardest hit. The Ark Innovation ETF (ticker ARKK), the flagship of the thematic noise, has fallen by more than a third since its high in February. Investors have withdrawn around $ 500 million in the past two weeks. “Some of the shorter-term money is getting people kicking out,” said Michael Arone, chief investment strategist for the US SPDR ETF business at State Street Global Advisors. “Investors are a little concerned about the growth prospects for many of these companies and their valuations as interest rates rise.” ARKK fell for the 10th of 12 days on Wednesday and is now down 18% year-to-date. Tech stocks drove further falls on Wall Street on the back of the biggest spike in inflation since 2009 last month. Investors are adjusting their portfolios and turning away from stocks that are most vulnerable to rising yields and prices. This includes expensive-looking tech names, especially those whose valuations are driven by hopes of future growth rather than current earnings. Ark Investment Management’s products are particularly painful. Cathie Wood’s funds, which led to boom inflows of $ 8 billion in January alone, lost a total of around $ 1.3 billion in May. Clean energy ETFs are also struggling after a few record months. Cybersecurity funds are also suffering as Global X’s BUG ETF lost about $ 300 million in May, even after a high-profile hack cut the U.S. fuel supply. Thematic ETFs now have around $ 160 billion in assets, compared to a high of around $ 176 billion, but that is nearly three times as much a year ago. For many, the trend of investing for easy-to-understand narratives is likely to continue even as the specific themes change: “Although the thematic funds have bleeding out about $ 1.6 billion this month, it is relative when compared to their overall size low. ”James Pillow, managing director of Moors & Cabot Inc., said,“ As long as we stick to the narratives, there will always be thematic resources. ”(Updates with the latest trade data.) For more articles like this, visit bloomberg. com. Subscribe now to stay one step ahead with the most trusted business news source. © 2021 Bloomberg LP

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