Introduction
In our Introduction To The ARK Innovation ETF (ARKK), we outlined how ARK's five innovation platforms—public blockchains, artificial intelligence (AI), multiomic sequencing, energy storage, and robotics—are converging, sparking a new technological revolution that could redefine the next business cycle. Every ARK fund to date has been built to capture that opportunity through long-term growth.
The ARK Active Autocallable Income ETF (ARKY) does something new. Our first dedicated income product built for investors whose primary objective is yield, ARKY is designed to generate high monthly income from ARK's innovation universe.
The Income Problem ARKY Seeks To Address
Income investors today face a frustrating set of choices.
Traditional sources of income like bonds, dividend stocks, and money market funds often don't generate meaningful gains. Covered call ETFs,1 which now dominate the $180+ billion derivative income ETF market, offer more, but typically in the high single digits to low teens. And the highest-yielding option, bank-issued structured notes, historically has come wrapped in incidental problems: six-figure investment minimums, locked-up capital, complicated tax forms, and little transparency with respect to what you actually own.
The result is that millions of investors—including retirees seeking dependable monthly income and growth investors who want their portfolios to finally pay them something—have been forced to choose between yield that is too low and access that's too volatile and potentially painful.
A new category of ETF has emerged to close that gap. Autocallable income ETFs package the high-yield structures once reserved for private banking clients into transparent, daily-liquid funds. Since the first such product launched in June 2025, the category has grown to about $2 billion in assets in its first year illustrating that investor appetite for a new kind of income is real and accelerating.
What Is An Autocallable?
An autocallable is an investment structure that pays high income as long as the price of an underlying holding doesn't fall too far. Think of it as a conditional bond: it pays a higher-than-average coupon,2 provided the stock stays above a defined level, called a “barrier.” If the stock rises, the position can be "called" early, returning capital so that it can be redeployed into a new position.
ARKY uses a version of this structure with a memory feature. If a coupon is missed because a stock dips below its barrier, that coupon isn't necessarily lost. Instead, it is remembered, and paid in full once the stock recovers.
For illustrative purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. This is only an example of how the memory feature would work in an autocallable ETF and is not a guarantee that the declining price of an underlying security will recover.
The risk trade-off is equally simple: in exchange for potentially high though contingent income, investors accept that a severe, sustained decline in the underlying stocks could interrupt coupons or result in losses. Income is not guaranteed.
Five Things To Know About ARKY
- Targeting a 17.5% coupon,3 designed for delivery. ARKY targets one of the most compelling income profiles in the autocallable ETF category. The portfolio is managed to prioritize the consistency of the coupon, not only its size. The objective is not the highest possible nominal coupon, but rather the most dependable coupon in practice—one that income investors can plan around.
- Actively managed, with risk management in mind. Most autocallable ETFs are passive, with parameters that are fixed at launch, and they cannot adapt when markets change. ARKY is different. Its sub-advisor is SCG Asset Management (SCGAM), a quantitative asset manager specializing in derivatives-driven income strategies. SCG Asset Management continuously calibrates each position, considering things like strike levels, maturities, and payoff structures as conditions evolve, with the goal of helping to protect the fund’s net asset value (NAV) while delivering a steady income stream. In other words, active management of an autocallable income ETF manages its risks.
- Built on ARK's universe of innovation companies. Every position in ARKY references a stock from ARK's high-conviction innovation universe—the same research that powers ARKK—now expressed as income rather than growth. Innovation stocks naturally carry more volatility than the broad market, and that volatility is precisely what funds ARKY's high coupon. ARKY harvests around volatility and seeks to convert it into a yield stream. ARK's innovation theses are the source, and active autocallable expertise is the engine.
- Diversified across 25–50 positions, each with meaningful cushion. ARKY isn't a single bet on a single index. While most autocallable ETFs rise and fall on the behavior of one benchmark, ARKY holds a diversified portfolio of single-stock autocallables, each with an average coupon barrier of 55%, meaning that each stock has substantial room to decline before its coupon is at risk. And because the memory feature works position by position, a dip in any one stock affects only that position. The rest of the portfolio may continue to pay.
- The power of a structured note, in the simplicity of an ETF. ARKY is a daily-liquid, fully transparent ETF with simple 1099 tax reporting, no minimums, and no lock-ups, and it delivers the potential payoff profile that historically required bank-issued structured notes. What once demanded a private banking relationship now trades under a single ticker.
How ARKY Fits Into A Portfolio
ARKY is designed to be flexible, in that it genuinely straddles two worlds. For income investors, it can serve as the growth-flavored portion of an income allocation—a high-yield complement to bonds, dividend funds, and covered call ETFs. For growth investors, it can serve as the income-generating portion—a way to stay aligned with ARK's research while potentially collecting a monthly coupon.
Importantly, ARKY is not a replacement for ARK's flagship innovation ETFs. Investors seeking long-term capital appreciation from disruptive innovation are still best served by ARKK and ARK's thematic funds. ARKY sits alongside them, giving investors a new way to participate in ARK's research without changing what they already own.
Why ARKY, Why Now
The search for income has never been more competitive, and the nascent autocallable income ETF category is one of the fastest-growing segments of the income market. But nearly every product in the category is passive, built on the same broad indexes, and unable to adapt when markets shift.
ARKY brings a unique approach: ARK's innovation research as the foundation, active management as the engine, and a potential high monthly coupon with minimal NAV erosion as the outcome. For ARK investors who have wished that their high conviction could pay them a steady income, innovation now can belong in your yield bucket.
Important Information
Investors should carefully consider the investment objectives and risks as well as charges and expenses of an ARK ETF before investing. This and other information are contained in the ARK ETFs' prospectuses and summary prospectuses, which may be obtained by visiting www.ark-funds.com. The prospectus and summary prospectus should be read carefully before investing.
An investment in an ARK ETF is subject to risks and you can lose money on your investment in an ARK ETF. There can be no assurance that the ARK ETFs will achieve their investment objectives. The ARK ETFs’ portfolios are more volatile than broad market averages. The ARK ETFs also have specific risks, which are described in the ARK ETFs' prospectuses.
The principal risks of investing in the ARK Active Autocallable Income ETF (ARKY) include: Derivatives Risk: The Fund's use of derivatives involves risks that may be greater than those associated with traditional investments, including market, leverage, liquidity, counterparty, and valuation risks. Changes in the value of an underlying asset may result in losses that exceed the Fund's initial investment. Derivatives may be difficult to value or exit, particularly during periods of market stress, and the Fund could experience losses if a counterparty fails to meet its obligations. Leverage Risk: The Fund’s use of leverage may magnify gains and losses, increase volatility, and cause the Fund to liquidate investments at unfavorable times to meet its obligations. Liquidity Risk — Synthetic ELNs: There is no liquid secondary trading market for Synthetic ELNs. Terminating the Synthetic ELNs may require the payment of a premium or acceptance of a discounted price and may take longer to complete. These features may adversely impact the value of the Synthetic ELNs and the value of your investment. Equity Securities Risk – Synthetic ELNs: The Fund gains its investment exposure primarily through Synthetic ELNs that reference individual equity securities. The value of these Synthetic ELNs may decline due to market conditions, economic events, industry developments, company-specific factors, changes in interest rates, inflation, or investor sentiment affecting the underlying reference securities. Broad market declines may adversely affect the value of the Fund's investments and performance. SPAC Risk: The Fund's Synthetic ELNs may reference Special Purpose Acquisition Companies (SPACs). SPAC investments may be speculative and highly dependent on management's ability to complete and successfully execute a business combination. If a transaction is not completed or does not perform as expected, the value of the referenced SPAC securities, and therefore the Fund's Synthetic ELNs, may decline. Disruptive Innovation Risk: The Fund's Synthetic ELNs may reference companies pursuing disruptive technologies or business models. Such companies may fail to develop, commercialize, or profit from innovative technologies, may face significant competition or regulatory challenges, and may experience greater volatility than the broader market. The success of a disruptive innovation may not translate into improved financial performance or higher security values, which could adversely affect the Fund's performance. Additional risks of investing in ARKY include market, management and non-diversification risks as well as risks associated with the various sectors and industries in which the fund invests. Detailed information regarding the specific risks of the ARKY ETF can be found in the prospectus.
New Fund Risk. There can be no assurance that the Fund will grow to or maintain an economically viable size, in which case the Board may determine to liquidate the Fund if it determines that liquidation is in the best interest of shareholders. Liquidation of the Fund can be initiated without shareholder approval. As a result, the timing of the Fund’s liquidation may not be favorable. Shares of ARK ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. ETF shares may only be redeemed directly with the ETF at NAV by Authorized Participants, in very large creation units. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from investment returns.
ARK Investment Management, LLC is the investment adviser to the ARK ETFs.
Foreside Fund Services LLC, distributor.
A covered call is an options strategy in which a fund holds an underlying security and sells (writes) call options on that security to generate income from the option premiums. Covered call ETFs apply this strategy across a portfolio, distributing the premium income to shareholders. In exchange for that income, the strategy caps the fund’s potential upside if the underlying securities rise above the call options’ strike prices.
A periodic cash payment from an investment whose yield relies on financial derivatives (like options or futures) rather than standard bond interest. These payouts are generated by strategies such as selling covered calls to harvest option premiums or capitalizing on market volatility.
Periodic cash payments from an investment whose yield relies on financial derivatives (like options or futures) rather than standard bond interest. These payouts are generated by strategies such as selling covered calls to harvest option premiums or capitalizing on market volatility. ARKY creates current income exposure through Synthetic Equity-Linked Notes ('Synthetic ELNs'). A Synthetic ELN is a structured instrument, built using options or other derivatives rather than a traditional issued note, that is designed to replicate the economic exposure of an equity-linked note. In ARKY's case, this exposure is tied to the performance of ARK's innovation equity universe.
ARK’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. ARK and its clients as well as its related persons may (but do not necessarily) have financial interests in securities or issuers that are discussed. Certain of the statements contained may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements.
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