(Bloomberg) — A tough week for Cathie Wooden is reminding Wall Avenue that Ark Funding Administration has a number of money in not that many corporations. In reality, the agency’s dominance in some shares could also be even better than it appears.Ark now owns greater than 10% of at the least 29 corporations through its exchange-traded funds, up from 24 simply two weeks in the past, based on knowledge compiled by Bloomberg.Much less mentioned are holdings of Nikko Asset Administration, the Japanese agency with a minority stake in Ark that it has partnered with to advise on a number of funds.When mixed, the pair personal greater than 25% of at the least three companies: Compugen Ltd., Organovo Holdings Inc. and Intellia Therapeutics Inc. Collectively they management 20% or extra of a further 10 corporations.These concentrations would seem to exist as a result of a number of Nikko merchandise comply with the funding blueprint supplied by Ark. The corporate Wooden based in 2014 invests in disruptive themes like genomics and fintech — and the Nikko merchandise do, too.As a result of there are solely so many shares that match these rising themes and Wooden has been so profitable at attracting new money, a lot of it floods into the identical corporations.“At arms-length, Ark supplies non-discretionary funding advisory companies to sure Nikko merchandise, and Nikko is a distributor of Ark’s merchandise,” a spokesperson for the U.S. agency stated. Ark’s web site identifies 5 of its methods as being “obtainable in Japan in partnership with Nikko Asset Administration.”Ark and Nikko didn’t reply to requests for touch upon the focus threat.The excessive shareholdings aren’t essentially an issue for both the fund managers or the businesses, and the connection between the 2 corporations is clearly introduced on each their web sites. However such concentrated possession stirs concern in some quarters about unintended penalties.“The most important threat has all the pieces to do with their footprint,” stated Ben Johnson, Morningstar’s world director of ETF analysis. “Even treading evenly, they’re going to have some form of market influence that’s going to push costs in opposition to them.”In different phrases, fund outflows may have an outsized influence on the shares held by Ark and Nikko if they’re pressured to promote.There’s no signal of this but. Three of Wooden’s funds — the flagship ARK Innovation ETF (ARKK), ARK Genomic Revolution ETF (ARKG) and the ARK Subsequent Era Web ETF (ARKW) — are on observe for report outflows this week after rising yields and lofty valuations hit the tech sector, however there was no apparent particular contagion. ARKK closed up 0.7% on Friday after a four-day hunch, bringing its weekly loss to 14.6%.Wooden has been utilizing mega-cap shares to take in the pile of money her agency acquired, which ought to assist restrict Ark’s influence in less-liquid names.Nonetheless, there are worries that these possession concentrations are a threat for Ark and Nikko and their buyers. A pullback in any of the closely owned sectors may pressure them to cut back their stakes, which may set off extra declines and subsequently extra promoting.“The priority could be efficiency slips, buyers start exiting the Ark funds and that might in the end lead to redemptions,” stated Nate Geraci, president of the ETF Retailer, an advisory agency. “That would put additional adverse stress on these securities and also you create this adverse suggestions loop. This isn’t a difficulty for bigger broad-based ETFs, however for ETFs which can be extra concentrated and personal small-cap securities there completely might be some adverse stress there.”Typically, corporations closely owned by Ark present higher-than-average quick curiosity, although it’s unimaginable to say if that’s linked to worries about possession or just because they’re riskier bets.The typical quick curiosity as a share of float for ARKK holdings is 4.4%, based on Bloomberg calculations primarily based on knowledge from IHS Markit Ltd. The typical is 3.4% for Russell 3000 corporations and a couple of.3% for these within the Russell 1000.The choices market exhibits that bears haven’t jumped in fairly but, nevertheless. Of the 29 shares that ARKK owns greater than 10% of, solely 5 have seen extra places than calls commerce on common over the past 5 days. Whereas put exercise has elevated broadly, the common put-to-call ratio stands at 0.7, just a little greater than half of what it’s for Russell 3000 shares.Maybe that’s as a result of wagering in opposition to Wooden hasn’t labored out very nicely up to now. Virtually each wager like that has misplaced cash within the subsequent six months as costs rebounded, Bloomberg Intelligence analyst Eric Balchunas wrote in a be aware this week.“The fund’s outflows not often final, and dips have tended to draw consumers up to now,” Balchunas wrote.For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with probably the most trusted enterprise information supply.©2021 Bloomberg L.P.