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Cathie Wood’s funds had a scorching start to the year and she wants investors to know it.
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In an interview with Bloomberg’s Carol Massar and Tim Stenovec, the founder and chief executive officer of ARK Investment Management said her flagship fund now gives investors better exposure to long-term innovation than most of the market’s most popular growth stock benchmarks.
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“We are the new Nasdaq,” Wood said. The claim is the just latest from the ARK Investment Management founder who is known for making bold predictions. She again reiterated a forecast that Bitcoin will top US$1 million per coin in the next decade.
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So how does Wood’s historical performance stack up? It depends on the time frame. While the ARK Innovation ETF (ARKK) has jumped 42 per cent this year — more than twice as much as the Nasdaq 100 — the Ark fund is still down 72 per cent from its peak two years ago, underperforming the index by about tenfold. The Ark fund has posted a five-year gain of just 12 per cent versus 89 per cent for the tech benchmark.
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The Nasdaq 100’s top holdings currently include the mega-cap technology stocks that have dominated the market over the last decade: Microsoft Corp., Apple Inc. and Amazon.com Inc. While ARK Innovation ETF’s largest holding — Tesla Inc. — is also a top stock in the Nasdaq, the fund’s other big positions are concentrated in smaller, newer companies like Zoom Video Communications Inc. and cancer-test maker Exact Sciences Corp.
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Wood said that while 2022 was a “horrific” year for her fund’s returns amid the rapid rise in interest rates, investors sold their positions in growth benchmarks like the Nasdaq and moved into ARKK. The ETF saw positive inflows of about US$1.3 billion last year, despite plunging 67 per cent in its worst annual performance on record.
“Innovation was one of the biggest victims of the massive interest rate increase we saw last year,” she said. “We felt it every time chairman Powell spoke.”
She added that last year’s plunge was driven by “exaggerated” fears of interest rates and angst that higher inflation would remain embedded in the economy as in the 1970’s. Now, she would not be surprised if the U.S. central bank cuts rates at some point in 2023.
— With assistance from Tim Stenovec.
