ARK Invest Introduces Buffered ETF for Innovation Exposure

Launch of ARK DIET Q4 Buffer ETF (ARKT)

ARK Investment Management LLC has introduced the ARK DIET Q4 Buffer ETF (ARKT), marking its entry into the defined outcome exchange-traded fund (ETF) space. This new fund, the first in its Defined Innovation Exposure Term (DIET) ETF suite, commenced trading on the Cboe BZX Exchange on October 1, 2025. The ARKT ETF is engineered to offer investors exposure to ARK's flagship ARK Innovation ETF (ARKK) strategy while specifically reshaping its risk and return profile over a 12-month outcome period.

Defined Risk-Return Profile

The DIET ETFs employ an actively managed options-overlay strategy to manage volatility. Specifically, ARKT is structured to provide approximately 50% downside participation in any decline of ARKK's net asset value (NAV) over its 12-month outcome period, which runs from October to October. For illustrative purposes, if ARKK experiences a 10% decline, ARKT would be expected to decrease by roughly 5%.

Regarding upside potential, ARKT incorporates a 5% hurdle rate. This implies that if ARKK's returns fall between 0% and 5% during the outcome period, ARKT will not generate a positive return. Beyond this initial hurdle, ARKT offers a set upside participation rate, which for its inaugural outcome period stands at 63.72% of ARKK's positive returns. Notably, there is no fixed cap on the potential gains. The expense ratio for ARKT is 0.89%, which compares to ARKK's expense ratio of 0.75% as of September 30, 2025.

ARK plans to roll out three additional DIET buffer ETFs—ARKD (Q1), ARKI (Q2), and ARKE (Q3)—each with its own distinct 12-month outcome period commencing in subsequent quarters, thereby providing quarterly entry points for investors.

Strategic Shift Towards Managed Risk

1The introduction of ARKT signifies a strategic evolution for ARK Invest, directly addressing the inherent volatility historically associated with its pure-play innovation-focused strategies, exemplified by ARKK. While ARKK is recognized for its potential in high-growth, early-stage companies, it also carries substantial downside risk. ARKT is specifically designed to cater to investors who maintain conviction in ARK's long-term innovation themes but seek a reduced risk profile or have shorter investment horizons. The fund aims to democratize access to structured product-like exposures within an ETF wrapper, a segment historically dominated by larger financial institutions. This strategic move aligns with a growing market trend for structured products that manage risk, enabling investors to tailor their exposure to disruptive innovation without fully exiting the market or relying solely on defensive assets.

Broader Market Context and Implications

The launch of ARKT occurs within a broader strategic realignment for ARK's ETFs, including ARKK, ARK Next Generation Internet ETF (ARKW), and ARK Fintech Innovation ETF (ARKF), which transitioned their primary listing to the Cboe BZX Exchange on March 31, 2025. This relocation was intended to enhance liquidity and visibility for these funds. Historically, ARKK has demonstrated notable volatility; as of March 2025, ARKK, ARKW, and ARKF experienced year-to-date losses of 16%, 13%, and 11% respectively, underperforming the S&P 500 Index, which retreated 6.1% over the same period. The DIET ETFs are structured to mitigate such potential drawdowns.

Rahul Bhushan, Global Head of Investment Products at ARK Invest, is leading the product development efforts for these new strategies. The firm draws a parallel, stating that "Much like Coca-Cola's introduction of Diet Coke in 1982, ARK DIET is…" positioning the new offering as a broader appeal product. This development could attract new capital to ARK's innovation theme from more risk-averse investors, potentially increasing Assets Under Management (AUM) for the firm and influencing other asset managers to develop similar buffered products.

Outlook: Expanding Defined Outcome Offerings

The launch of ARKT and the planned quarterly rollout of additional DIET ETFs underscore ARK Invest's commitment to diversifying its product offerings to address a wider spectrum of investor risk appetites. The performance of these defined outcome ETFs will be closely monitored, particularly how effectively their options-overlay strategy delivers its stated risk-return profile across various market conditions, including significant downturns or rapid rallies in the underlying ARKK fund. The increasing adoption of built-in downside protection coupled with managed upside participation within an ETF structure is likely to gain further momentum, offering investors more precise control over their exposure to volatile, high-growth sectors.