(Bloomberg) — The outsized gain that turned Cathie Wood into one of the world’s most-famous proponents of active fund management is quickly evaporating as some of her favorite stock picks tumble.
After years of trouncing the market and just days after Wood issued a broadside against passive investing, her flagship ARK Innovation ETF (ticker ARKK) has given up all the outperformance it once enjoyed against the S&P 500 Index. Wood’s strategy of picking stocks involved in “disruptive innovation” has fallen victim to the tech meltdown as investors flee high-priced growth shares in an environment of rising interest rates and high inflation.
ARKK’s almost 10% slump on Monday as the S&P 500 slid 3.2% means the fund’s total return since its 2014 debut has dropped to about 122%, according to data compiled by Bloomberg. The U.S. benchmark boasts a total return of around 128% over the same period.
Wood’s firm didn’t immediately respond to a request for comment sent after business hours.
Elon Musk, Cathie Wood Say Passive Funds Have Gone Too Far
The shift in sentiment against tech stocks has created a perfect storm for Wood, the founder of ARK Investment Management LLC. Rising interest rates eat into equity valuations while concerns about economic growth have cooled speculative ardor — putting the shares of companies betting on new technologies particularly at risk. ARKK has slumped more than 70% from last year’s peak.
Still, Wood enjoys remarkable investor loyalty. Despite retreating over 50% in 2022, the ETF has posted net inflows this year. Data overnight showed that it added another $41 million on Friday.
ARKK was about 2.8% higher in early trading in New York as the recent stock rout took a breather.
Meanwhile, not all of Wood’s funds have given up their outperformance. The smaller ARK Next Generation Internet ETF (ARKW) has handily beaten the S&P 500 since inception even after tumbling from its high, according to data compiled by Bloomberg.
Wood remains committed to the tech space despite recent losses. In recent tweets she suggested the global economy is undergoing the largest technological transformation in history and talked up the potential for Zoom Video Communications Inc. and Microsoft Corp.
(Updates with latest returns, flow data and premarket trading.)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
