Cathie Wood’s Ark Investment Management has lost nearly $50 billion in assets from its stable of exchange-traded funds since its 2021 peak, underscoring the scale of this year’s losses in speculative tech stocks.
Total assets across Ark’s nine ETFs fell to $11.4 billion from a high of $60.3 billion in February last year, according to Morningstar data. This was led by steep declines in its flagship ETF Ark Disruptive Innovation, known by its symbol ARKK, which has lost around two-thirds of its value this year and is on track for its worst annual performance.
“Ark Innovation’s results have been appalling this year and very disappointing for investors,” says Morningstar strategist Robby Greengold, which in April downgraded the ETF from “neutral” to “negative.”
The sharp fall shows how growth investors such as Wood have been caught off guard this year as the US Federal Reserve and other central banks around the world ended a decade of cheap money with interest rate hikes to fight inflation.
This has led to a sell-off in technology stocks, including fast-growing, loss-making companies, which are seen as particularly sensitive to interest rate hikes that lower their potential future returns. Investors have turned to value stocks that look cheap relative to metrics like book value and earnings.
ARKK is the largest of a group of strategies that combine an ETF structure with an ability to pick stocks. Wood seeks to identify the handful of companies that can make exponential gains by shaping the future, spanning areas from space exploration and fintech to robotics and the genomics revolution.
Shares of flagship ARKK are down about 65% this year, remaining at their lowest level in five years and underperforming the tech-heavy Nasdaq Composite, which is down 32% over the same period. .
ARKK’s losses caused its assets under management to drop from a high of $27.9 billion in February 2021 to $6.4 billion today, according to Morningstar. The decline in assets was solely due to the decline in the valuation of its investment portfolio: Overall, the ETF actually accumulated $1.4 billion in new money this year, according to data from Morningstar, as investors bought the dip.
“A huge driver of the underperformance was stylistic in nature…globally, growth stocks suffered and value stocks held up better,” Greengold said.
Greengold added that ARKK represents “the canary in the coal mine for regime change as it began its descent in February 2021” and was the first of many leading growth funds, including Baillie Gifford’s Scottish Mortgage. and Chase Coleman’s Tiger Global, to suffer significant losses. .
Wood, 67, started St. Petersburg, Fla.-based asset manager Ark Investment Management in 2014. She’s known for her big bets focused on “disruptive innovation” and her edge-of-the-moment predictions. extravagance about everything from shares of electric car maker Tesla to price. of bitcoin, as well as its savvy use of social media.
“Cathie Wood is very gullible – as long as there’s a good story to go with something she’s willing to believe,” said Ramin Nakisa, a former UBS analyst who now runs consultancy PensionCraft. “You have to wonder if she has that sanity check on business valuation, market share and potential profitability.”
ARKK soared 149% in 2020 as the pandemic boosted investor enthusiasm for the technologies that underpin its portfolios – DNA sequencing, robotics, energy storage, artificial intelligence and blockchain. After losing 24% last year, the fund continued to decline in 2022.
ARKK’s three largest positions are video communications platform Zoom, a Covid-19 winner that later gave up its pandemic-era gains; Exact Sciences, a provider of molecular cancer screening and prognostic tests; and electric vehicle maker Tesla, whose shares have fallen more than 60% this year.
Wood is also a strong supporter of cryptocurrencies. This year, the price of bitcoin has fallen over 60% to $16,800 amid the collapse of several major hedge funds, exchanges and crypto lenders, including Three Arrows Capital, Celsius, BlockFi and FTX.
In an interview with Bloomberg last month, Wood reiterated his prediction for bitcoin to hit $1 million by 2030. “Sometimes you have to do battle tests, you have to go through crises. . . to see the survivors,” she said. Ark has doubled many of its holdings, buying more shares in crypto exchange Coinbase and adding to its holdings in Grayscale Bitcoin Trust and crypto-focused lender Silvergate Capital.
Ark declined to comment. Wood defended his approach in an investor commentary earlier this month that argued that disruptive innovation is both misvalued and undervalued.
“The companies we invest in are sacrificing short-term profits to capitalize on the exponential growth and highly profitable opportunities that a number of innovation platforms are creating,” she said, adding that “long-term profitability term and equity performance of so- so-called “not-for-profit tech” companies will eclipse those companies that have turned to short-term shareholders with stock buybacks and dividends, at the expense of investing in the future.