Industry Updates

Big Short’s Michael Burry closes bet against Cathie Wood’s ARKK ETF

Scion disposed of its ARKK puts before the ETF returned more than 5% since the end of Q3

Jamie Gordon

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Michael Burry’s hedge fund has closed its $31m bet against Cathie Wood’s flagship ARK ETF, having taken a bearish stance on the product during the first half.

A 13F filing regulatory filing made on Monday revealed among other position closures, Scion Asset Management had disposed of its put contracts against 235,000 shares of the Ark Innovation ETF (ARKK) in Q3.

The same regulatory disclosure also showed the firm had closed put positions against more than one million Tesla shares and 1.9 million shares of the iShares 20+ Year Treasury Bond ETF (TLT).

At the end of Q2 Scion held positions against ARKK, with Burry stating unsustainable valuations could lead to “the mother of all crashes” in digital assets and ‘meme’ stocks. During the 11 months from March 2020, Wood’s (pictured) headline ETF returned a considerable 314%.

While Scion AM did not disclose the details or relative success of its put positions, Burry told CNBC in October the put contracts against Tesla were just a trade.

On both the ARKK and Tesla puts, the closure of these positions appears to have been well-timed. ARKK fell around 15% during Q3 but has since rallied more than 5% during the current quarter.

Similarly, while Tesla gained more than 14% during Q3, it has returned a notable 35% so far in Q4 which would have incurred significant losses for Scion AM if it had not exited its positions against the stock when it did.

Responding to the bet against ARKK when Scion AM’s last 13F filing came to light in August, Wood said she did not think he understood the fundamentals driving the “explosive” growth in the innovation space.

Recently, Burry, who shot to fame following his role in the Global Financial Crisis and Michael Lewis’s subsequent book The Big Short, took to Twitter to voice his doubts about Tesla, cryptocurrency and long-dated US Treasuries. Shortly after, the hedge fund manager repeated his trademark behaviour of deleting his Twitter account, once again.

The closure of Scion’s puts against ARKK comes as welcome relief for the ETF, which has lost some steam after seeing $1.4bn outflows over the three months through 16 November, according to data from ETFLogic.

A contrarian play also launched against the ARKK last Tuesday, the Tuttle Capital Short Innovation ETF (SARK). Despite being widely reported on, ARK investors will be heartened by SARK’s relatively muted start, gathering $4.7m by market close on Friday 12 November.

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