Cathie Wood's Ark loses nearly $50 billion in assets since 2021 peak

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Cathie Wood’s Ark Investment Management has lost nearly $50 billion in assets from its stable exchange-traded funds since the 2021 peak, highlighting the scale of this year’s losses in speculative tech stocks.

The total assets of Ark’s nine ETFs fell to $11.4 billion from a peak of $60.3 billion in February last year, according to Morningstar data. That was led by sharp declines in its flagship Ark Disruptive Innovation ETF, known for its ticker ARKK, which has lost about two-thirds of its value this year and is on course for its worst annual performance.

“Ark Innovation’s results have been awful this year and very disappointing for investors,” says Robby Greengold, strategist at Morningstar, who in April downgraded the ETF from ‘neutral’ to ‘negative’.

The sharp drop underscores how growth investors like Wood have gotten it wrong this year, as the US Federal Reserve and other central banks around the world ended a decade-long run of cheap money with interest rate hikes to combat the crisis. inflation.

This has led to a sell-off in tech stocks, notably fast-growing and loss-making companies, which are seen as especially susceptible to interest rate hikes that dampen their potential future returns. Investors have turned to betting on value stocks that look cheap compared to metrics like book value and earnings.

ARKK is the largest of a group of strategies that combine an ETF structure with the ability to pick stocks. Wood seeks to identify the handful of companies that can make exponential gains by shaping the future, spanning areas ranging from space exploration and fintech to robotics and the genomics revolution.

Shares in ARKK’s flagship are down about 65 percent this year, remaining at a five-year low and underperforming the high-tech Nasdaq Composite, which has fallen 32 percent over the same period.

ARKK’s losses led to a decline in its assets under management from a peak of $27.9 billion in February 2021 to $6.4 billion today, according to Morningstar. The drop in assets was purely driven by valuation reductions in its investment portfolio: Overall, the ETF accumulated $1.4 billion in cash from new customers this year, Morninstar data shows, as investors bought into the dip. .

“A big driver of underperformance has been stylistic in nature. 🇧🇷 🇧🇷 globally, growth stocks have suffered and value stocks have been more resilient,” said Greengold.

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Greengold added that ARKK represents “the canary in the coal mine for regime change because it started its downfall in February 2021” and was the first of many prominent growth funds, including Baillie Gifford’s Scottish Mortgage and Chase Coleman, suffering steep losses. 🇧🇷

Wood, 67, launched asset manager Ark Investment Management, based in St. Petersburg, Florida, in 2014. She is known for her big, focused bets on “disruptive innovation” and her outlandish predictions on everything from the shares of electric carmaker Tesla to the price of bitcoin, as well as her clever use of social media.

“Cathie Wood is very gullible – as long as there’s a good narrative to go along with something she’s willing to believe,” said Ramin Nakisa, a former UBS analyst who now runs the PensionCraft consultancy. “You have to question whether it has that sanity check on the valuation of companies, market share and potential profitability.”

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ARKK soared 149% in 2020 as the pandemic fueled investor excitement for the technologies underpinning their portfolios – DNA sequencing, robotics, energy storage, artificial intelligence and blockchain. After losing 24% last year, the fund continued its decline into 2022.

ARKK’s top three positions are video communications platform Zoom, a Covid-19 winner that subsequently gave up its pandemic-era gains; Exact Sciences, provider of molecular cancer screening and prognostic testing; and electric vehicle maker Tesla, whose shares have fallen more than 60% this year.

Wood is also a vocal advocate for cryptocurrencies. This year, the price of bitcoin has dropped more than 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 that bitcoin will reach $1 million by 2030. “Sometimes you have to do a battle test, you have to go through crises. 🇧🇷 🇧🇷 to see the survivors,” she said. Ark has doubled down on many of its holdings, acquiring more shares in crypto exchange Coinbase and increasing its holdings in Grayscale Bitcoin Trust and crypto-focused lender Silvergate Capital.

Arca declined to comment. Wood defended his approach in a commentary to investors earlier this month, arguing that disruptive innovation is undervalued and undervalued.

“Companies we invest in are sacrificing short-term earnings to capitalize on the exponential growth and highly profitable opportunities that various innovation platforms are creating,” she said, adding that “long-term profitability and equity performance – so-called ‘non-profit technology’ companies will overshadow companies that catered to short-term oriented shareholders with share buybacks and dividends, at the expense of investing in the future.”