Cathie Wood, chief executive of Ark Investment Management, has developed a cult following among retail investors.
Apparently, many of them aren’t too worried about the underperformance of her funds.
Ark’s roster of nine exchange-traded funds saw assets decrease by 48% so far this year through June 1, to $15.3 billion, according to Bloomberg.
That’s the largest drop among the biggest 25 U.S. ETF issuers.
But the asset shrinkage stems largely from fund performance. The Ark funds as a whole have net inflow of $167 million so far this year.
$1.24 Billion Inflow For Ark Innovation
More than 100% of that total comes from Wood’s flagship Ark Innovation ETF (ARKK).
It enjoyed a net inflow of $1.24 billion in the six months through June 3, according to VettaFi, an ETF research firm.
That means the other funds may have had a combined outflow of more than $1 billion.
It’s not a certainty because the dates of the flow numbers above aren’t exactly the same.
In any case, at least in Ark Innovation, Wood, whose fans have taken to calling her Mamma Cathie, hasn’t lost her following.
Let’s have a look at Ark Innovation.
Its five biggest holdings are video-meeting service Zoom Video Communications (ZM), electric car giant Tesla (TSLA), video streaming platform Roku (ROKU), financial services conglomerate Block (SQ), and biotechnology company Crispr Therapeutics (CRSP).
Trailing the S&P 500
As Ark Innovation and the other Wood funds have tumbled in recent months, Wood has defended herself by noting that she has a five-year investment horizon.
And the five-year track record of Ark Innovation could indeed give investors comfort until May 9.
The fund’s five-year return beat that of the S&P 500 until then.
But the five-year annualized return of Ark Innovation totaled 9.81% through May 31, far behind the S&P 500’s 13.16% return.
Ark Innovation has sunk 54% so far this year, as Wood’s tech companies have hit the skids. And it’s down 73% from its February 2021 peak. Raging inflation and soaring interest rates have helped put the kibosh on tech stocks.
“Most [fund managers] would probably collapse if they had the same performance, but Cathie and Ark have a strong following,” Bloomberg Intelligence ETF analyst Athanasios Psarofagis told his company’s news service.
Former President Donald Trump once said he could shoot someone on Fifth Avenue, and he would still retain his popularity. Wood may draw similar devotion.
But Wood is also unfailingly civilized and polite, so you can’t run too far with that comparison.
But if Ark Innovation keeps dropping in value, it will be interesting to see how long the Mama Cathie worshippers stick around.
Morningstar’s View
On March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.
“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.
Wood countered Greengold’s points in an interview with Magnifi Media by Tifin.
“I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said.
