Investors Are Bailing on Cathie Wood’s Popular ARK Fund
Cathie Wood’s flagship exchange-traded fund has rallied more than 50% this year. Investors are using that as an opportunity to get out.
They have pulled a net $717 million from the ARK Innovation ETF over the past 12 months, according to FactSet. That exodus marks a notable shift for a fund that had consistently drawn investor cash since its 2014 inception. Once the largest actively managed ETF with nearly $30 billion in assets under management, the fund has shrunk to roughly $9 billion, mostly due to investment losses.
They have pulled a net $717 million from the ARK Innovation ETF over the past 12 months, according to FactSet. That exodus marks a notable shift for a fund that had consistently drawn investor cash since its 2014 inception. Once the largest actively managed ETF with nearly $30 billion in assets under management, the fund has shrunk to roughly $9 billion, mostly due to investment losses.
Known by its ticker symbol $ARK Innovation ETF(ARKK.US$ , Wood’s fund became an investor darling shortly after the onset of the Covid-19 pandemic with hugely successful bets on unprofitable and “disruptive” technology companies. It took in huge amounts of investor money, culminating with a $6.5 billion inflow in the first quarter of 2021, when its share price peaked.
ARKK’s top five holdings are $Tesla(TSLA.US$ , $Coinbase(COIN.US$ , $Roku Inc(ROKU.US$ , $Zoom Video Communications(ZM.US$ and $Block(SQ.US$ . Only Tesla and Zoom were profitable last year. Tesla holds an 11% weight in the fund, helping power its advance this year. Shares of the electric-vehicle maker have more than doubled in 2023 but, like ARKK, are down sharply from their previous high.
Although technology stocks are strongly back in favor this year, the best performers have mostly been mature, profitable companies that generate significant cash, such as $Microsoft(MSFT.US$ and $Amazon(AMZN.US$ . Unlike two years ago, investors appear to have less interest and patience for companies that aren’t expected to turn a profit until years in the future. Higher interest rates have meant there is a much higher opportunity cost to wait for profitability.
Investors say the ARK brand lost its luster after the fund’s prodigious fall. It took another hit after missing out on the monster rally in shares of $NVIDIA(NVDA.US$ , the graphics-chip maker at the heart of the boom of interest in artificial-intelligence technology. ARKK sold the last of its Nvidia position in January, a stake that had long been one of its largest holdings. Nvidia has been the S&P 500’s best performer this year, more than tripling.
The outflows at ARK are coming while ETF investors appear eager to put money to work in other funds. June was the best month for equity ETF flows since October, according to State Street, while active funds attracted $10 billion of inflows for the month and more than $100 billion over the past 12 months.
The ARKK fund has an 11% annualized average return since inception, but the average ARKK investor has lost 21% on a dollar-weighted, annualized basis.
The fund remains a cash cow for Wood, who owns a majority stake in its parent company, ARK Investment Management. Its 0.75% annual fee is about double the average fee for active ETFs.
Although fee revenue is well off its 2021 peak, ARKK has generated more than $20 million of fees this year. ARK Investment Management currently has the third-highest daily revenue from active equity ETFs, of at least 145 different issuers, according to an analysis from FactSet.
Although fee revenue is well off its 2021 peak, ARKK has generated more than $20 million of fees this year. ARK Investment Management currently has the third-highest daily revenue from active equity ETFs, of at least 145 different issuers, according to an analysis from FactSet.
To be sure, the market comeback staged by many of ARKK’s tech-focused holdings surprised many, highlighting the perils of trying to forecast performance.
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ttttt123 : Her timing is definitely trash