Cathie Wood says Ark ‘paid the price’ with 68% profit

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Cathie Wood said her technology-focused Ark Stock Market Fund “paid the price” for a two-year plunge, but bounced back last year with the industry’s best performance.

Mr. Wood’s $8 billion Ark Innovation exchange-traded fund rose 68% last year, putting it in the top 1% of peer funds, according to Morningstar data.

The recovery comes after a 50% annualized loss in 2021-2022 as sentiment towards the high-growth companies it supported soured.

Ark Investment Management CEO Wood told the Financial Times: “You’re probably going to think I’m going to say this, but I think we met our obligations in 2021 and 2022. Now we are on the other side.”

Last year’s performance was the best since the ETF, widely known in the market by its ticker symbol ARKK, rose more than 150 percent in 2020 thanks to investments in electric car maker Tesla and others.

However, the highly concentrated portfolio lost 23% of its value in 2021 and lost 23% of its value in 2022 as the US Federal Reserve raised interest rates to the highest level in 40 years to curb soaring inflation. It lost an additional 67%.

Known to be bullish, Wood said he expects the Fed to cut interest rates in 2024, bringing inflation down to a deflationary point and creating an environment poised for growth for the innovation-based strategies he favors.

“To be honest, what happened to us in 2021 and 2022 was a decline worse than the Nasdaq during the collapse of the tech and telecom industries, but I don’t think that makes sense because innovation Because it’s here and it’s ready for prime time,” Wood said.

However, ARKK has fallen more than 10% since early January, dragged down by declines in major stocks such as Tesla.

Robbie Greengold, Morningstar strategist, said: [Ark’s] Research has suffered from overconfident predictions that often do not consider a sufficient range of scenarios. That bearish scenario turned out to be too optimistic. ”

According to Morningstar data, the fund has finished either at the top or absolute bottom of its peers over the past four years, and Morningstar continues to rate ARKK as a 1-star fund on a 5-point scale. ing.

The company’s five-year annualized return of 2.8% is lower than nearly all mid-cap growth stocks and technology funds over the same span.

Ark’s U.S. ETFs recorded more than $7.1 billion in net inflows from the beginning of 2021 to the end of 2023.

But nearly all of these inflows were sudden in early 2021, according to Morningstar Direct data. The company has had capital outflows of approximately $9 billion since March 2021, including outflows of approximately $470 million in 2023.