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Cathie Wood has said her tech-focused Ark stock market fund “paid its dues” with two years of steep declines, before roaring back last year with one of the industry’s best performances.
Wood’s $8bn Ark Innovation exchange traded fund recorded a 68 per cent gain last year, putting it within the top one per cent of its peers, according to data from Morningstar.
That rebound came after a 50 per cent annualised loss across 2021 and 2022, when sentiment soured against the high-growth companies it had backed.
“You would expect me to say this, but I think we did pay our dues in 2021 and 2022, and now we’re on the other side of that,” Wood, chief executive of Ark Investment Management, told the Financial Times.
Its performance last year was the best since the ETF — widely known in the market by its ticker symbol ARKK — chalked up a gain of more than 150 per cent in 2020 thanks to investments in the likes of Tesla, the electric-car maker.
But the highly concentrated portfolio lost 23 per cent of its value in 2021 and a further 67 per cent in 2022, hit hard when the US Federal Reserve raised interest rates to a 40-year high to curb soaring inflation.
Wood, who is known for her bullishness, said she expected the Fed to lower rates in 2024 and for inflation to decline to the point of deflation, creating a climate in which her favoured innovation-based strategies would be poised to thrive.
“Honestly, I think what happened to us in 2021 and 2022 — a worse downturn than the Nasdaq during the tech and telecom bust — that doesn’t make any sense, because innovation is here and ready for prime time,” Wood said.
ARKK has fallen more than 10 per cent since the start of January, however, dragged down by declines in major holdings such as Tesla.
Robby Greengold, a strategist at Morningstar, said: “I think that [Ark’s] research has suffered from overconfident forecasts that often fail to consider a sufficient range of scenarios. Its bear-case scenarios have shown themselves to be overly optimistic.”
The fund has finished at either the very top or the absolute bottom of its peers in each of the past four years, according to data from Morningstar, which continues to rate ARKK as a one-star fund on a scale of five.
Its five-year annualised return of 2.8 per cent trails almost all mid-cap growth and technology funds over the same span.
Ark’s US ETFs garnered net inflows of more than $7.1bn between the start of 2021 and the end of 2023.
But almost all of those inflows came in an early 2021 flurry, Morningstar Direct data shows. The firm has had about $9bn in outflows since March 2021, including about $470mn in outflows in 2023.