It was roughly the year 2022 for famed money manager Cathy Wood, CEO of Ark Investment Management, as her exchange-traded funds flooded.
Wood’s main fund, Ark Innovation ETF (see you) , is down 64% YTD to October 14, hitting its lowest level in five years. Ark Innovation is down 79% from its February 2021 high.
High interest rates and slow economic growth have weakened Wood’s “disruptive” (as she called it) technology companies. Higher interest rates are hurting them because the flow of their profits will be down the road (if at all), while the safe yields of Treasury bonds are now on the rise.
The largest electric holding vehicle of the Ark Innovation Titan Tesla (TSLA) , lost 42% year-to-date. No. 2, video conferencing company Zoom Video Communications (ZM) , by 61%. And No. 3, Roku’s video streaming service (ROKU) decreased by 78%.
Wood describes this year’s decline by technology stocks as a buying opportunity. It defends its recent losses by noting that it has a five-year investment horizon.
Poor performance for five years
Ark Innovation’s five-year track record could give investors rest until May 9. Standard & Poor’s 500 until that time.
But the five-year annual return from Ark Innovation was 1.07% through Oct. 14, well below the S&P 500’s 8.93% return, according to Morningstar.
Despite this poor performance, the $6.7 billion fund enjoyed a net outflow of $1.27 billion annually as of Oct. According to VettaFi, an ETF research firm. It is clear that many investors are loyal to Mama Kathy, as some fans call her.
But the tide may be starting to turn. Over the five days through October 13, Ark Innovation suffered a $204 million outflow.
You might be wondering why so many investors stay with Wood, despite its modest returns. The fact that she has had one wonderful year definitely helps. The Ark Innovation ETF jumped 153% in 2020.
Also, Wood has become one of the rock stars in the investing world. She has appeared frequently in the media over the past two years. They’re clearly smart and clear, and explain financial concepts in ways that even novice investors can understand.
However, Wood has attracted critics. On March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.
He wrote, “ARKK is showing some signs of improving risk management or its ability to successfully navigate the challenging area it is exploring.”
Wood responded to Green Gold Points in an interview with Magnifi Media by Tifin. “I know there are companies like that [Morningstar] Do not understand what we do.
If Wood’s investment performance rebounds, her true believers will say, “I told you so.” If it doesn’t, it will be interesting to see how long investors want to stay with it.
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