Cathie Wood — known for her innovation ETFs that garnered billions in inflows during the pandemic — said Ark Invest is internally testing a fund that takes the strategy a step further by simultaneously betting against major stocks in the benchmarks that are being disrupted.

“We’re testing out a portfolio but it’s really Ark on steroids,” Wood told CNBC’s “Squawk Box” on Wednesday. Wood said she wants to test the strategy on Ark’s employees and did not say when the fund would be made available to retail investors.

“We think the benchmarks are where the big risks are long-term because they are filling up with value-traps, those companies that have done very well historically but are going to be disintermediated and disrupted by the massive amount of innovation that’s taking place,” Wood added.

Wood has long waved the flag about the so-called value traps in the major averages. She categorizes these companies as those that catered to short-term oriented shareholders that leveraged their balance sheets to pay dividends and buy back shares. As a result, these companies did not invest enough in innovation.

“What we would be doing is shorting stocks that are in the big benchmarks and when we get into a risk-off situation, what happens is portfolio managers and analysts generally run back to those stocks, get closer to their benchmarks and they dump our stocks, which are either small parts of benchmarks or not in benchmarks. Great opportunity for us as we have experienced during these last few days to pick up those stocks because its simply a risk-off move to get closer to benchmarks,” she said.

With Wood’s flagship fund, Ark Innovation ETF, down nearly 15% in 2021 and the S&P 500 up 25%, this new strategy could see some big losses.

Wood acknowledged the new method could be quite volatile but believes over the next five years it will be a huge winner as her innovation companies further emerge and the older bellwethers fade away.

“In five years, the world will look nothing like it does today and we’re invested in all the disruptors, the winners, that are going to disrupt the traditional world order,” Wood added.

Tesla is Ark Innovation’s top holding, with other names like Coinbase, Teladoc, Unity Software, Roku and Zoom Video. Wood has consolidated into her highest-conviction names in 2021 amid a rotation from growth into value. She continues to buy the dip in beaten down names.

To put numbers to Wood’s theory, she said that innovation is currently priced in the public global market place at roughly between $10 and $15 trillion. In ten years, disruptive innovation will be about $200 trillion of that market capitalization.

“It will go from a little bit more than 10% of global equity market caps to what we believe could be more than half,” said Wood. “That’s how much disruption is evolving thanks to DNA sequencing, robotics, energy storage, artificial intelligence and blockchain technology.”