ARKY
Overview
Fund Objective
The ARK Active Autocallable Income ETF (ARKY) seeks to provide income through actively managed investments in a portfolio of autocallable notes that reference equity securities from ARK’s innovation universe.
Fund Description
Volatility is not necessarily the same as risk; it is a measure of the uncertainty of price fluctuations. Our research leads us to feel more confident in the long-term outlook of our names, and ARKY allows investors to potentially monetize the volatility.
ARKY targets a compelling income profile, but with built-in active management to prioritize the consistency of the contingent coupon, not just its size. ARKY’s target income is achieved through a yield enhancement strategy that seeks to capture value from price movement in ARK’s innovation universe, accessed through swaps that reference the economics of synthetic single-stock phoenix autocallable payoffs.
ARKY's sub-adviser, SCG Asset Management, structures and manages the portfolio with NAV preservation as its central objective. It calibrates the terms and size of each exposure, diversifies across companies and maturity dates, and can wait, resize, or decline a trade when the available premium does not justify the downside risk. In this way, ARKY seeks to preserve the capital base from which future income is generated, rather than pursue the highest available coupon.
Importantly, ARKY seeks income, not appreciation: the Fund's upside is limited to the contingent coupons it receives, and it does not share in the price gains of the reference stocks. For clients seeking growth potential alongside income, ARKY may be paired with ARK's Innovation ETFs.
Key Autocallable Features
- Autocallable notes pay a contingent coupon tied to where a reference asset sits on scheduled observation dates.
- Contingent coupons are typically higher than most investment-grade bonds because investors are accepting equity-linked downside risk, not just credit or duration risk.
- Upside is capped at the coupons received, and principal can be reduced if the index finishes below the maturity barrier.
- The ETF wrapper removes the large minimums, the illiquidity, the tax complexity, and the single-date timing risk of holding one note.
Fund Details
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Autocallable Dashboard
Performance
Performance
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal will fluctuate so that an investor’s shares when redeemed may be worth more or less than the original cost. Extraordinary performance is attributable in part due to unusually favorable market conditions and may not be repeated or consistently achieved in the future. The Fund’s most recent month-end performance can be found in the fund material section. Returns for less than one year are not annualized. Net asset value (“NAV”) returns are based on the dollar value of a single share of the ETF, calculated using the value of the underlying assets of the ETF minus its liabilities, divided by the number of shares outstanding. The NAV is typically calculated at 4:00 pm Eastern time on each business day the New York Stock Exchange is open for trading. Market returns are based on the trade price at which shares are bought and sold on the Cboe BZX. using the last share trade. Market performance does not represent the returns you would receive if you traded shares at other times. Total Return reflects the reinvestment of distributions on ex-date for NAV returns and payment date for Market Price returns. The market price of the ETF’s shares may differ significantly from their NAV during periods of market volatility. Median 30 Day Spread is a calculation of Fund's median bid-ask spread, expressed as a percentage rounded to the nearest hundredth, computed by: identifying the Fund's national best bid and national best offer as of the end of each 10 second interval during each trading day of the last 30 calendar days; dividing the difference between each such bid and offer by the midpoint of the national best bid and national best offer; and identifying the median of those values.
Underlying Reference Companies
| Ticker | Company | Coupon Rate |
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What Is An Autocallable?
Autocallable Overview
An autocallable is an equity-linked instrument that pays regular contingent coupons and returns principal at maturity (or if called early), as long as a reference asset, like ARK's innovation universe, doesn't fall below specific thresholds (e.g., -54%)—think of it like a bond whose income and principal depend on the stock market not falling too far.
The trade-off is simple: monthly income potential typically greater than traditional fixed income, in exchange for the risk that a severe market downturn could interrupt your coupon payments or, in the worst case, result in principal loss.
This is illustrated in the chart. Contingent coupons are paid so long as the underlying reference index is above the -54% coupon barrier, and principal is only at risk if the reference index falls below -54% at maturity.
ARKY's Memory Feature
ARKY utilizes Phoenix Autocallables, which include a memory coupon feature that allows previously missed coupons to be paid upon a subsequent recovery above the coupon barrier.
If an underlying company in ARKY's portfolio drops below its coupon barrier at an observation date, then the autocallable will not pay income. But if that company recovers back above the coupon barrier at the next observation date, all missed income is paid.
The example graphic shows the journey of an autocallable note where the reference asset is negative until its fourth observation date, on which the reference asset is positive, and all stored coupons are captured.
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ARK Invest
As investment adviser, ARK defines and maintains the investable universe of disruptive-innovation equities from which the fund's Reference Assets are drawn, and sets the overall thematic framework and investment objective of current income.
SCG Asset Management
SCG Asset Management is ARKY's sub-adviser and the specialist behind the Fund's autocallable exposure, and is responsible for constructing and actively managing the underlying portfolio.
Morgan Stanley
Morgan Stanley serves as the ETF’s primary swap counterparty and hedge provider, bringing balance sheet strength and structuring expertise in an effort to ensure optimal execution and risk management. Morgan Stanley Institutional Equity also serves as the Fund's Sales Service team.
Distribution Detail
| Declaration Date | Ex Date | Record Date | Payable Date | Distribution |
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ARKY FAQs
ARKY seeks to generate monthly income by investing in a diversified portfolio of autocallable exposures tied to individual stocks from ARK’s innovation universe.
The income comes from contingent coupon payments. If the referenced stock is above its coupon barrier on an observation date, the coupon is paid. If it is below the barrier, the coupon for that position may be skipped for that period. The Fund is designed to hold 25 to 50 individual autocallable positions, which helps spread exposure across multiple names instead of relying on one stock or one broad index.
The main risks are that income is contingent and capital can be lost.
Coupons are not guaranteed, and if a reference stock falls below its coupon barrier on an observation date, income from that position may not be paid. If the stock falls below its maturity barrier at the end of the position’s term, ARKY may be exposed to its negative performance, potentially resulting in capital loss. ARKY also uses Synthetic Equity-Linked Notes and other derivatives that carry counterparty, liquidity, valuation, market, and leverage risks. In addition, the underlying stocks are tied to disruptive innovation themes and may be more volatile than broad market averages.
ARKY packages 25-50 autocallable exposures into a daily-liquid ETF, instead of requiring investors to buy and manage individual structured notes directly.
Bank-issued structured notes can have six-figure minimums, limited liquidity, complex tax reporting, and less transparency. ARKY is designed to offer similar economic exposure through an ETF structure with no minimums, no lock-ups, full portfolio transparency, and 1099 tax reporting.
ARKY’s outcomes depend on the performance of its underlying reference innovation stocks relative to their defined barrier levels.
In flat or moderately declining markets, ARKY may continue generating income if those stocks remain above their coupon barriers on average 54%. In strongly rising markets, the Fund may generate income but generally will not capture the full upside of the reference stocks. In sharply declining markets, coupons may be missed, and ARKY could experience capital losses.
Covered call ETFs seek income by selling call options, while bond ETFs earn interest from debt securities. ARKY takes a different approach, seeking coupon income through Synthetic Equity-Linked Notes designed to capture the volatility premium from stocks in ARK’s innovation universe.
Portfolio Valuation And Risk Management Data Files
The Portfolio Valuation File contains the official marks for each of the structured notes held in the portfolio and a good estimate of the risk sensitivities/Greeks. The Portfolio Risk Metrics File contains refined risk sensitivities and Greeks for each structured note in the portfolio.
