It’s now been exactly one year since the flagship fund at Cathie Wood’s Ark Investment Management has peaked.
The investment star’s Ark Innovation ETF (ARKK) has slumped 51% since Feb. 16, 2021, and more losses may be forthcoming, as Bloomberg notes.
Among the negatives for the fund are rising bond yields and anticipation of interest-rate hikes by the Federal Reserve. Rising rates make the potential profits of the fund’s stocks -- many are unprofitable now -- look less appealing than safer investments such as Treasury bonds.
In addition, the resumption of economic activity has put the kibosh on some of the fund’s holdings that benefited from the work-from-home period of the Covid pandemic, Bloomberg points out.
That includes Ark Innovation’s No. 2 holding Roku, (ROKU) a video streaming platform; its No. 3 holding Teladoc Health (TDOC), an online health service; and its No. 4 holding Zoom Video Communications (ZM), a video meeting service. Roku has dropped 65% in the past year, Teladoc 74% and Zoom 68%.
To be sure, investors haven’t lost their faith in Wood. They have withdrawn only a net $465 million from Ark Innovation since it peaked a year ago, according to Bloomberg. And the fund actually has a net inflow so far this year, even though its share price has slid 23% during that period.
Meanwhile, Wood herself is unfazed by her funds’ flagging performance.
“The important thing to keep in mind is the long-term horizon that we invest in,” she told investors last month. “We have a five-year horizon. I’ve never seen innovation on sale like it is today.”
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