It’s been a rough 2022 for famed money manager Cathie Wood, CEO of Ark Investment Management, as her exchange-traded funds tank.
Wood’s flagship fund, Ark Innovation ETF (ARKK) , plummeted 64% so far this year through October 1. 14, hitting a five-year low. Ark Innovation is down 79% from its February 2021 all-time high.
Sky-high interest rates and sluggish economic growth have taken a toll on Wood’s young and “disruptive” (as she describes them) tech companies. Rising rates hurt them because their profit stream will come in the future (if at all), while safe Treasury yields are rising now.
Ark Innovation’s largest holding company, electric vehicle titan Tesla (TSLA) , has lost 42% year to date. No. 2, video conferencing company Zoom Video Communications (ZM) , has plummeted 61%. And no. 3, Roku video streaming service (ROKU) 78% submerged.
Wood calls this year’s slide in tech stocks a buying opportunity. And he defends his recent losses by pointing out that he has a five-year investment horizon.
Five-year underperformance
Ark Innovation’s five-year track record could give investors peace of mind through May 9. The fund’s five-year performance outperformed the S&P 500 until then.
But Ark Innovation’s five-year annualized return amounted to a measly 1.07% through October 1. 14, well behind the S&P 500’s 8.93% return, according to Morningstar.
Despite that poor performance, the $6.7 billion fund enjoyed a net inflow of $1.27 billion year-to-date through Oct. 1. 13, according to VettaFi, an ETF research company. Clearly, many investors are loyal to Mama Cathie, as some of her fans call her.
But the tide may be starting to turn. During the five days until October 1. On January 13, Ark Innovation suffered an outflow of $204 million.
investor loyalty
You may be wondering why so many investors have stuck with Wood, despite his lackluster returns. The fact that he had a breakout year certainly helps. Ark Innovation ETF soared 153% in 2020.
Furthermore, Wood has become something of a rock star in the investment world. He has frequently appeared in the media for the past two years. She is smart, clear, and articulate, and explains financial concepts in a way novice investors can understand.
Still, Wood has drawn detractors. On March 29, Morningstar analyst Robby Greengold issued a scathing review of Ark Innovation.
“ARKK shows few signs of improving its risk management or its ability to successfully navigate the challenging territory it explores,” he wrote.
Wood responded to Greengold’s points in an interview with Magnifi Media by Tifin. “I know there are companies like that [Morningstar] they don’t understand what we’re doing,” he said.
If Wood’s investment returns pick up, his true believers will say, “I told you so.” If not, it will be interesting to see how long investors are willing to stick with it.
