It’s been a tough 2022 for famed wealth manager Cathie Wood, chief executive of Ark Investment Management, as her exchange-traded funds plummet.
Wood’s flagship fund Ark Innovation ETF (ARKK) , plummeted 64% year-to-date through Oct. 14 to hit a five-year low. Ark Innovation is down 79% from its February 2021 record high.
Rising interest rates and sluggish economic growth have hurt young, “disruptive” (as she describes them) technology companies. Rising interest rates are hurting them because their income stream (if any) will be reduced while safe government bond yields are now rising.
Ark Innovation’s largest holding, electric vehicle titan Tesla (TSLA) , has lost 42% year to date. #2, video conferencing company Zoom Video Communications (ZM) , has plummeted by 61%. And #3, video streaming service Roku (ROKU) dived 78%.
Wood is calling this year’s tech stock crash a buying opportunity. And she defends her recent losses by noting that she has a five-year investment horizon.
Ark Innovation’s five-year track record might actually bring investors some solace through May 9. By then, the fund’s five-year return was outperforming that of the S&P 500.
But Ark Innovation’s five-year annualized return through Oct. 14 was a meager 1.07%, according to Morningstar, far behind the S&P 500’s 8.93% return.
Despite that underperformance, the $6.7 billion fund still saw $1.27 billion in net inflows through Oct. 13, according to VettaFi, an ETF research firm to date. Obviously, many investors are loyal to Mama Cathie, as some fans call her.
But the tide could be turning. In the five days ended October 13, Ark Innovation suffered an outflow of $204 million.
You might be wondering why so many investors have stuck with Wood despite its mediocre returns. The fact that she had a spectacular year certainly helps. The Ark Innovation ETF skyrocketed 153% in 2020.
Also, Wood has become something of a rock star in the investment world. She has appeared frequently in the media in recent years. Clearly intelligent and articulate, she explains financial concepts in a way that novice investors can understand.
Nonetheless, Wood has attracted critics. On March 29, Morningstar analyst Robby Greengold issued a scathing review of Ark Innovation.
“ARKK is showing little sign of improving its risk management or ability to successfully navigate the challenging territory it is exploring,” he wrote.
Wood countered Greengold’s points in an interview with Tifin’s Magnifi Media. “I know companies like this exist [Morningstar] who don’t understand what we’re doing,” she said.
If Wood’s investment performance recovers, her true believers will say, “I told you so.” If not, it will be interesting to see how long investors are willing to hold on to her.