The exceptional gains made by Cathie Wood that turned her fund management firm into one of the most famous active funds are now evaporating quickly as some of her select stocks have tumbled.
Reasons for returns evaporating
Wood, who trounced the market over the years and her recent verbal attack on passive investing, recently saw her flagship fund ARK Innovation ETF set to lose the outperformance it once enjoyed compared to the S&P 500 index.
Woods’s innovative strategy of picking stocks bordered on market disruption faces the tech meltdown as investors exit high-priced stocks with high inflation and high-interest rates ruling the economy.
The NAV, or the net asset value of the fund, has grown from $20.12 at inception in October 2014 to $45.59 last Friday, giving a return of 127% as per the firm’s website data.
As per the data compiled by Bloomberg, the returns over the same period by S&P 500 were at 136%.
On Monday, the fund’s situation became worse when it slumped by nearly 10% compared to the S&P 500 index, which declined by 3%. Cathy Wood’s Company ARK did not respond to the request for comment after Monday’s business hours.
The shift in investors’ sentiment against technology stocks has caused a storm for Ark Investment Management LLC’s founder Cathy Wood. The rising interest rates have eaten into equity valuations, whereas economic growth and inflation have cooled the passion for speculation in tech stocks, particularly new companies.
Since the peak of last year, the value of the ARK Innovation portfolio has slumped by nearly 70%.
However, not all the funds under the ARK umbrella have given up their outperformance. Smaller funds such as ARK Next Generation Internet ETF have comprehensively beaten the S&P 500 since inception despite tumbling from a high as Bloomberg data.
Despite the recent losses, Wood remains committed to the technology sector. In her recent tweets, she has mentioned the potential for stocks like Microsoft Corp and Zoom Video Communications Inc. as the global economy undergoes a massive transformation in the history of technology.