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What happens if I buy when the fund has already cleared the “hurdle” (the reference asset is up >5%)?​

If an investor buys a buffered ETF, like one of ARK’s DIET Buffer ETFs, after it has already cleared the hurdle, in the case of ARK DIET, risen more than 5% during its current 12-month outcome period, they're entering at a time when the remaining upside is limited, depending on the structure’s participation rate.

This has a few implications: 

  • An investor might have little to no room for additional gains—because the ETF has already captured most of the available upside. 
  • The buffer may also be reduced or partially used, offering less downside protection. 
  • Personal investment outcomes will be different from what was originally defined at the start of the period. 
In short, an investor would be buying at a time when the defined risk/reward profile is no longer in its most favorable state. That’s why ARK offers quarterly launches (ARKD, ARKI, ARKE, ARKT), so an investor can choose a fresh outcome period rather than buying midstream into one that’s already well advanced.