Wood’s flagship ARK fund is in the red, but investors remain loyal


Cathie Wood, Founder and CEO of ARK Investment Management LLC, speaks at Skybridge Capital SALT New York 2021 in New York, USA on September 13, 2021. REUTERS / Brendan McDermid

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NEW YORK, December 22 (Reuters) – A year after her ETF Ark Innovation doubled and made her a household name, star stock picker Cathie Wood is set to join a small club no one aspires to to be a part of: portfolio managers who have seen their funds go from first to worst in the space of 12 months.

The $ 16.7 billion exchange-traded fund is set to end the year down nearly 24%, making it one of only two actively managed equity funds that Morningstar tracks at posting a decline of over 20% this year as the benchmark S&P 500 is up just over 21%.

These losses are a long way from 2020, when the fund which focuses on leaders in ‘disruptive’ innovation soared thanks to its heavy bets on so-called ‘home’ stocks that flourished during the early stages of the market. pandemic, helping the fund achieve the best performance of any US actively managed fund tracked by Morningstar.

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Rocky year

Only 14 of 6,190 equity funds in Morningstar’s database since 2004 have gone from such highs to such lows within a year, showing the risks inherent in Wood’s aggressive growth strategy. said Robby Greengold, analyst at Morningstar.

“There is a willingness on Cathie Wood’s part to embrace high-risk names with less caution than her peers,” he said.

Ark Invest did not respond to a request for comment for this story.

Wood, for his part, has said in recent webinars that his strategy has fallen into disuse due to temporary concerns about rising inflation, but that deflation will prove to be the number one concern in financial markets and the economy. economy in the coming year.

“Our confidence in our strategy has increased” despite the inventory losses for the year to date, said Wood. L1N2SZ25L

The losses in the ARK Innovation portfolio are significant, with 8 of the 10 largest positions in the fund down 8% or more in the past 12 months. The biggest drops were at Zoom Video Communications Inc (ZM.O) and Teladoc Health Inc (TDOC.N), both of which fell more than 50% for the year after last year’s rally, and streaming company Roku Inc (ROKU. O), which is down nearly 30%.

Tesla Inc (TSLA.O) and Intellia Therapeutics Inc (NTLA.O) are the only companies in the fund’s top 10 holdings to post positive returns for the year.

The fund rose 3.8% on Tuesday and is down 40.4% from its February high.

Despite the losses, investors appear to remain committed to Wood’s approach. The fund has brought in just over $ 5 billion in new money for the year to date, including nearly $ 229 million in the week ending December 15, according to Lipper data. .

ARK Innovation remains among the best performing mid-cap growth funds over the past 5 years, posting an annualized return of 38%.

“The fund’s tremendous success in 2020 was always going to be difficult to replicate, but a lot has piled up to start 2021 and have remained steadfast despite a disappointing 2021,” said Todd Rosenbluth, head of mutual fund research. at CFRA, based in New York. “This bodes well for 2022, as many people have regained the optimism that they cannot struggle in consecutive years.”

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Reporting by David Randall; Editing by Alden Bentley and Nick Zieminski

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