This is something I never knew or considered. When an ETF is very large every purchase or sale makes bigger moves for each individual holding thereby effecting the price of that holding in ways that might be bad for the fund.

What about ARK? The firm grew so big so fast that it quickly ended up owning large percentages of many of its holdings. That could limit its ability to trade them without adversely affecting the price, says Corey Hoffstein, chief investment officer at Newfound Research, an asset-management firm in Wellesley, Mass.

When a fund has to trade large blocks of stock, that can inflate their prices when the fund buys and crush their prices when it sells. Those moves can hurt returns.

“You can end up with a strategy and structure mismatch,” says Mr. Hoffstein. “The ETF might have been a perfectly fine structure when ARK was smaller, but there comes a point when the structure can become a drag on the strategy.”

How a Flood of Money Swamped Cathie Wood’s ARK – WSJ