Asset manager Cathie Wood’s disruptive technology-stock picks are losing ground as inflation roars and bond yields soar.
That’s putting a major hurt on her flagship Ark Innovation ETF (ARKK), which has now dropped close to its pandemic low.
The fund recently traded at $36.45, compared with its March 18, 2020, close at $34.69.
The fund’s biggest holdings are videoconferencing service Zoom Video Communications (ZM), electric-car giant Tesla (TSLA), video-streaming platform Roku (ROKU) and biotechnology company Crispr Therapeutics (CRSP).
Ark Innovation has slumped 61% year to date and has given up 77% from its February 2021 peak.
Mamma Cathie’s Flock
Wood has developed a cult-like 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 $1.25 billion in the six months through June 10, according to VettaFi, an ETF research firm.
To be sure, there was an outflow of $24 million in the five days through June 10, and that was before the June 13 stock drop. But that outflow is a drop in the bucket -- 0.03% -- for a fund with $7.1 billion in assets.
Wood leaped to fame when her tech stocks soared in 2020. This sent Ark Innovation into the stratosphere, with a return of 153% that year. But it has since come back down to Earth.
Underperforming the S&P 500
As Ark Innovation and the other eight 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 6.58% through June 13, behind the S&P 500’s 10.94% 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.
Wood herself is clearly undaunted. She dropped hints again June 8 that she will 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 said in an interview with Bloomberg. She said she couldn’t say more for regulatory reasons.
Ark registered with the Securities and Exchange Commission for a fund named “Ark Venture” in February. The filing indicated the vehicle would focus on illiquid securities and would limit investor exits in periods of volatility.
