Cathie Wood, a prominent investor, is preparing to launch her second new US exchange traded fund (ETF) in nearly three years this week, while funds that she had bet on disruptive technology are being hit by a sell-off in growth stocks.

ARK Transparency ETF (code CTRU) will be the ninth ETF of ARK Investment Management LLC and the third ETF that tracks the index. The fund is expected to start trading on Wednesday, according to the company's website. The ETF aims to track the share price movements of the 100 most transparent companies in the world. ARK believes that transparency improves the company's performance, which could lead to exponential growth opportunities.

Affected by the sell-off triggered by the Omicron panic, flagship ARK Innovation ETF (ARKK) had its worst week since February, falling 12.7 per cent and prices at their lowest level in more than a year. ARKK has fallen 23.73 per cent so far this year, while the NASDAQ and the Russell 3000 are up 18 per cent and 20 per cent, respectively.

Over the past few years, ARK has begun to build its own brand by betting on Tesla, Inc. and emerging industries such as space travel and 3D printing. But until 2020, with the spread of COVID-19 's epidemic and the soaring technology stocks, ARK raised a lot of money and became a household name.

However, the excitement surrounding small speculative growth companies peaked around February. Since then, the prices of former "home-led stocks" such as Teladoc, Peloton and Zoom have plummeted. High valuations and slowing revenue growth have prompted investors to sell sectors that used to lead gains.

The size of the fund is also one of the important factors affecting the performance of ARKK in the past two years. By 2020, ARK Invest will be able to buy almost any type of small-cap company without having much impact on prices or liquidity problems. But now, Wood's fund has expanded dramatically and is beginning to have a huge impact on the price and trading behavior of his shares.

In 2020, as technology stocks outperformed in the epidemic, investors rushed to put money into ARK. In its heyday, ARKK ETF was worth $25 billion. That means the average position will be close to $1 billion. In many cases, ARK will end up holding 10% or more of a company's outstanding shares because it has too much capital to allocate.

There is no problem with owning a 10% or 15% stake in a rising technology company. However, when the market starts to sell, these positions become a huge burden. The whole market knows what ARK has-after all, shareholdings are announced every day. So when people withdraw from ARK, it guarantees that the shares will be sold to meet redemption needs. With such a large position held by ARK, it could take weeks to sell, given the limited number of positions held by Wood.