Cathie Wood of Ark Investment Management, whose flagship Ark Innovation ETF (ARKK) is off 73% from its February 2021 peak, on June 9 dropped hints that she would soon start up a crossover fund. It would include both public and private investments.
"We're [the] closest to a venture capital fund in the public equity markets, and we're going to start a crossover fund,” Wood she said in an interview with Bloomberg. She said she couldn’t say more for regulatory reasons.
In February Ark registered with the Securities and Exchange Commission for a fund named Ark Venture. The filing indicated that the vehicle would focus on illiquid securities and would limit investor exits in periods of volatility.
Wood leaped to fame when her young, “disruptive” technology stocks soared in 2020. This sent Ark Innovation into the stratosphere, with a return of 153% that year.
Ark Innovation Falls Back
But the fund has come down to earth since then, as speculative technology stocks have tumbled. Roaring inflation and soaring interest rates have hammered them this year. Ark Innovation fell 23% last year and has given up 55% so far in 2022.
The fund’s biggest holdings are videoconferencing service Zoom Video Communications (ZM), streaming-video platform Roku (ROKU), electric-vehicle titan Tesla (TSLA) and biotechnology company Crispr Therapeutics (CRSP).
Wood has developed a loyal following among retail investors, with her down-to-earth manner and frequent social-media appearances. They have taken to calling her Mamma Cathie.
And apparently many of Wood's investors aren’t too worried about Ark Innovation’s underperformance. The fund enjoyed a net inflow of $1.28 billion in the six months through June 7, according to VettaFi, an ETF research firm.
Underperforms the S&P 500
As Ark Innovation and other Wood funds have tumbled in recent months, she has defended herself by noting that she has a five-year investment horizon.
And the five-year track record of Ark Innovation could indeed give investors comfort until May 9. The fund’s five-year return beat that of the S&P 500 until then. But the five-year annualized return of Ark Innovation totaled 10.79% through June 8, far behind the S&P 500’s 13.09% return.
“Most [fund managers] would probably collapse if they had the same performance, but Cathie and Ark have a strong following,” Bloomberg Intelligence ETF analyst Athanasios Psarofagis told his company’s news service.
Private markets are inherently volatile, and even experienced investors can suffer harsh losses. Investors soon might get the chance to bet on Cathie Wood to succeed in that arena.
