Ark’s flagship ETF is tanking, but Wood is doubling down, increasing his stake in his company and betting on tech teams like Tesla, Zoom and Coinbase to eventually recover.
CAthie Wood became a cult hero in 2020 for a generation of investors raised on the mantra that stocks only go up, but this year has been a quick and painful reality check for Ark Invest and its loyal disciples.
An early acolyte of Elon Musk and Tesla, Wood expertly steered Ark through the turbulent first few months of the pandemic, with his flagship Ark Innovation ETF soaring 157% in 2020. When Musk first became Once the world’s richest person in early 2021 after Tesla’s rise to more than eight times the previous year, Wood was riding high as an evangelist for “disruptive innovation,” with investors piling up their funds.
Ark’s problems started shortly after that. Big holdings like Zoom, Roku, and Teladoc Health struggled in 2021 after benefiting from the overexuberance toward stay-at-home stocks in 2020, with the Ark Innovation ETF down 23% last year, even as the S&P 500 gained a 27%.
This year’s bear market has been much worse, and Ark’s concentrated portfolio of tech stocks is bearing the brunt. The Ark Innovation ETF is down 60% this year, nearing its low point in March 2020, and the company’s assets under management across all of its ETFs are down from a peak of more than $60 billion in February 2020. 2021 at $16 billion at the end of April. Based on falling assets and declines in shares of publicly traded asset managers like T. Rowe Price and WisdomTree, Wood is falling Forbes‘ list of America’s richest self-made women this year.
His estimated net worth of $140 million is well below last year’s $400 million and well below the $215 million cutoff to be in the top 100 this year. Forbes He estimates that his majority ownership stake in his company is worth about $125 million. The rest comes from our estimates of her own cash invested in Ark funds and in separate investments in cryptocurrencies (she predicted the price of bitcoin will top $1 million by the end of the decade) and her personal real estate.
Wood’s public persona has not been punished by the reversal of fortunes. Last December, she predicted that Ark would return 40% annually for the next five years. As his losses deepened, he doubled down in April at a conference in Florida and said Ark would bounce back and make 50% a year. He set a $4,600 price target for Tesla stock by 2026, implying a valuation of almost $5 billion and a gain of 500% from its current price, and last week, wood said he even plans to start a “cross fund” that would invest in private companies.
None of the bravado has helped in the short term. When the S&P 500 entered a bear market on Monday, down 22% from its high, the Ark Innovation ETF also closed at a low. Coinbase, Robinhood and Roku have lost more than half of their value this year, and even Ark’s crown jewel Tesla is down 39%. Wood has been buying more of Zoom, down 44% this year and more than 80% since its fall 2020 peak, with the video communications firm now the largest holding in Ark Innovation ETF.
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Morningstar downgraded its rating on the Ark Innovation ETF to negative from neutral in late March, citing poor risk management, its increasingly concentrated portfolio, Wood’s reliance on his instincts and Wood’s apparent lack of succession planning. 66 years old. . Ark quietly promoted two analysts to associate portfolio managers in late May, though Wood still serves as CEO, chief investment officer and the clear face of the company.
She, for her part, is not backing down. “We have continued confidence in ARK’s long-term outlook and its ability to expand its strategies into additional geographies, markets and lines of business,” an Ark spokesperson said in a statement. “Importantly, Cathie Wood exemplifies this confidence by increasing her share ownership in ARK…Together with ARK’s founder and CEO, 97% of ARK employees recently increased their personal stake in the company, highlighting his conviction in our belief that ARK is on the right side of change and that we and our investors will be handsomely rewarded.”
In a roller coaster valley, Wood’s investors haven’t gotten off the ride either. The Ark Innovation ETF has seen more than $1 billion in inflows this year, though the other eight Ark ETFs have had outflows that largely offset that amount. The Ark Innovation ETF has spawned a host of products that extend or short its holdings, an ecosystem that Morningstar analyst Robby Greengold cites as a potential source of continued investment in the fund, and risk-taking investors have continued to try. to buy the fall. .
“This could be people doubling down, people not willing to insure their losses,” says Greengold. “And I think there’s probably something to be said for Cathie Wood’s charisma and her continued presence in publicly available webinars, YouTube videos and also in the media. It seems to inspire a lot of confidence in retail investors.”
That has been true for some time. Share value in the Ark Innovation ETF has declined since the end of 2019, but the fund’s $7.9 billion in assets as of last Friday is far more than the $1.9 billion it had at the time, according to YCharts. The additional assets come from investors who bought on a frenzy from 2020 and lost money all the way. Many are giving you the time and confidence to come back for them.
For now, he still has a big enough war chest to be patient in hoping for a change, with a fortune of nearly $150 million that is nothing to scoff at. His business generates a lot of revenue, charges modest annual fees of 0.75% on his assets, and also partners with foreign issuers like Japan’s Nikko Asset Management using Ark’s strategies for around $10 billion in additional assets classified as non-financial. discretionary.
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