Is there an upside limit to returns (cap)?​

There is no exact upside limit (or cap) for the ARK Defined Innovation Exposure Term (DIET) ETFs.

Typically, a cap exists because the fund uses put options to protect investors from losses, and those cost money. To pay for this protection, defined outcome ETFs give up some of the potential gains by selling call options.

For the ARK DIET ETFs, instead of a true ‘cap’ investors instead have no returns during the ‘hurdle’ (between 0-5% of reference asset returns), and then have a limited upside participation rate. 

This is like making a trade: 

• An investor buys limited downside protection.
• The investor funds it by giving up part of the upside. 

In other words, investors are not paying cash for the insurance (the buffer). Instead, investors are paying with the first few percent of gains - in the case of ARK DIET, generally the first 5% of gains, and by accepting a limit on investors' returns. 

This trade-off is what makes a buffered ETF a defined outcome product: investors know how much protection they have, and generally how much upside they’ll get. 

Additionally, while there is no fixed maximum return, your participation rate means you will never capture 100% of gains, even in very strong markets.