Ark Investment Management, under the leadership of renowned investor Cathie Wood, is currently facing challenges in 2024. Despite the overall market reaching record highs, Ark’s actively managed funds are struggling to keep up, sparking concerns about their future sustainability. One investment advisor has even warned that Ark’s funds could potentially fail.
Ram Ahluwalia from Lumida Wealth highlighted Ark’s flagship ETF, Ark Innovation ETF (ARKK), which is currently trading over 70% below its peak, in stark contrast to the recent highs of the S&P 500. ARKK saw success during the pandemic as it held COVID-19 related stocks that benefited from lockdowns and remote work trends. However, it reached its peak in mid-February 2021.
Ark’s key ETFs have experienced mixed performance compared to the broader market this year, with some showing negative returns. Ahluwalia attributed Ark’s struggles to missed opportunities and a reliance on “vision” over fundamentals. He criticized Ark for selling Nvidia stock early and investing in companies like Ginkgo Bioworks Holdings and SoFi Technologies.
Ark’s focus on disruptive innovation, a core strategy for the firm, appears to be working against them in the current market. Despite Wood’s emphasis on long-term growth potential in areas like AI and robotics, many of Ark’s top holdings, including Tesla, have not delivered the expected returns.
Different perspectives on Ark’s challenges have been offered, with some suggesting a lack of forecasting talent and high portfolio correlation due to thematic investment approach. Wood’s Ark Invest, once managing $59 billion, has seen a significant decrease in assets to $11.1 billion, likely due to waning investor interest in long-term tech bets amidst rising interest rates.
In the premarket session, ARKK saw a slight increase in value. The current situation with Ark Investment Management serves as a reminder of the potential risks associated with investing in unproven companies and thematic strategies.