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LONDON/NEW YORK - The largest outflow on record for Cathie Wood's ARK fund was not enough to stop the firm from increasing its bet on Tesla Inc after the electric carmaker's stock closed below $700 for the first time this year on Tuesday.

Wood, whose $26.6 billion ARK Innovation exchange-traded fund (ETF) was the top-performing actively managed U.S. equity fund tracked by Morningstar last year, bought $171 million of Tesla shares, pushing its weight to about 10% of the fund.

Shares of the carmaker jumped 4.7% in afternoon trading on Wednesday, helping erase some of the steep losses ARK has suffered over the last week as momentum stocks have pulled back sharply.

The sell-off triggered heavy trading, with $5 billion of ARK Innovation shares changing hands on Tuesday - more than double the previous session's volume. The fund dipped slightly on Wednesday, pushing its loss to nearly 9% for the week to date.

Investors pulled $465.3 million from the ARK Innovation fund on Tuesday, according to Refinitiv Lipper data. Morningstar said Tuesday was the fund's biggest daily outflow on record. Out of the last 35 trading days, the fund has witnessed only five daily outflows and attracted $5.691 billion in new investor dollars through Feb. 23.

Bets on companies that have thrived during the pandemic including Tesla, streaming company Roku Inc and payments company Square Inc, have helped the fund's assets swell from $1.8 billion at the end of 2019 to $27.6 billion through mid-February of this year, according to Lipper.

Meanwhile, short interest in the fund's shares showed a massive spike, with 100% of the shares available for shorting currently out on loan, FIS Astec Analytics data showed.

Short sellers typically borrow and sell shares they expect to fall in value, hoping to buy them back at a lower price to pay back the loan and pocket the difference.

David Lewis of FIS Astec Analytics said his firm's data on borrowing costs suggests potential buying of the ETF as the price falls.

According to Ark Invest's website, the Tesla share purchases were carried out in three instalments worth about $124 million, $39 million and $8 million. On the same day Ark Invest's funds also sold $126 million of Taiwan Semiconductor's U.S.-listed shares.

Ark Invest now holds a more than 0.5% stake in Tesla for a weighting of 6.6% across all its funds.

The ARK Innovation fund has large positions in so-called momentum stocks, which tend to attract investors based on thematic trends rather than fundamentals or valuation.