Despite the recent slump of exchange-traded funds managed by Cathie Wood at Ark Investment Management, many investors aren’t abandoning them.
The total investment inflow for Ark ETFs peaked at $42 billion last year, and only 25% of that money has exited, Bloomberg reports.
That’s pretty impressive given that ARK’s flagship fund, Ark Innovation ETF (ARKK), has slid 23% so far this year, after dropping the same amount last year.
To be sure, the fund soared 157% in 2000, helping to make Wood a household name. It’s still up 40% over the past two years and has returned 324% since its 2014 start.
Image source: Cindy Ord/Getty
Ark Has Struggled Recently
Ark’s ETFs hold speculative technology stocks that have been hammered in recent months by rising bond yields and anticipation of Federal Reserve interest-rate hikes. Rising rates make tech companies’ potential earnings streams less attractive compared to safe assets like Treasury bonds.
Ark Innovation’s No. 1 holding, electric vehicle maker Tesla (TSLA), has actually held up well, climbing 5% over the past year. But Ark Innovation’s No. 2 holding, virtual healthcare company Teladoc Health (TDOC), has plunged 73% during that period. No. 3, video meeting platform Zoom Video Communications (ZM), has slid 65%, and No. 4, streaming platform Roku (ROKU), has dropped 64%.
Still, Ark Innovation actually enjoyed a net investment inflow for the first 30 days of the year, according to Bloomberg.
Biologist Jonathan Molineaux, who bought ARK Innovation last year, is still a believer. “If you’re going to be team Ark, you’re probably going to be in a good spot,” he told Bloomberg.
Cathie Wood Sees a Buying Opportunity
Meanwhile, Wood sees the drop in tech stocks as a buying opportunity. “The important thing to keep in mind is the long-term horizon that we invest in,” she told investors last week. “We have a five-year horizon. I’ve never seen innovation on sale like it is today.”
But Barron’s cites four lessons from Ark’s rise and fall:
1. “Be wary of outsize gains.
2. “Don’t chase momentum.
3. “Beware overlap.” Several Ark funds share some of the same stocks.
4. “Assess your risk tolerance--honestly.”
