Some of the hottest retail trades have been hijacked by professional money managers.
From unprofitable tech companies, to Chinese electric vehicle makers, to space-tourism company Virgin Galactic Holdings Inc., institutional cash is in the driver’s seat according to Ben Onatibia and Giacomo Pierantoni of VandaTrack Research.
Just look at the $25 billion ARK Innovation ETF (ticker ARKK), which has rallied by 29% since mid-May. In that period, appetite for the fund among individual investors actually cooled, according to Vanda data, which tracks traffic on retail trading platforms and industry-wide order flows.
Purchases from individual traders has been “very underwhelming,” indicating that “institutional investors have been responsible for the rallies in EV, Hydrogen, Space and other speculative stocks,” Onatibia wrote in an email.
The data suggest that hedge funds and professional traders are attempting to capitalize on the retail craze that’s taken the likes of AMC Entertainment Holdings Inc. to 2,300% year-to-date gains. That’s an opposite dynamic to the market platitude that retail traders — so-called dumb money — follow in the footsteps of institutional traders, and typically jump in when it’s too late, according to CIBC Private Wealth Management’s David Donabedian.