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Cathie Wood’s Popular ARK Funds Are Sinking Fast

Cathie Wood’s funds are concentrated in a handful of stocks, a strategy that has led to significant losses for her investors. Despite initially gaining popularity during the pandemic for her bold bets on disruptive technology stocks like Tesla, Zoom Video Communications, and Roku, Wood’s ARK Investment Management has seen a massive outflow of $2.2 billion from her actively managed exchange-traded funds this year. This withdrawal far surpasses the outflows seen in all of 2023, causing total assets in her funds to drop by 30% in less than four months.

Investors who were once loyal to Wood have become frustrated with the performance of her funds, which are heavily concentrated in just a few stocks. For example, seven stocks make up about half of the flagship ARK Innovation fund, with top holdings like Tesla, Roku, and Unity Software all experiencing significant losses this year. This has resulted in a 16% slump in the ARK Innovation fund’s shares, despite hopes that the Federal Reserve’s potential pivot to cutting interest rates and excitement over generative artificial intelligence technology would benefit ARK’s funds.

One investor, Mark Hadden, recently sold out of two ARK funds at a steep loss after initially being intrigued by Wood’s investment approach. Wood gained fame in 2020 for her eye-catching returns and bullish predictions, leading to a surge of new investor money into ARK’s funds. However, the risky nature of her bets became apparent when interest rates rose, causing many of the unprofitable stocks she favored to plummet in value.

Critics within the asset management industry have questioned Wood’s reliance on her intuition and thematic investing approach, especially after ARK sold off its position in Nvidia just before the stock’s significant rise. Despite these criticisms, Wood has stood by her decisions and continues to believe in her investment strategy.

Overall, while Wood still has believers in her approach, the recent performance of her funds has led many investors to question their investment in ARK. With losses mounting and criticisms growing, Wood faces a challenging road ahead in regaining the trust and confidence of her investors. The stock is currently 47% below its peak in 2021. ARK has seen success in attracting over $2.5 billion in inflows to its new ETF that tracks bitcoin prices passively, at a lower fee than its active stock funds. Despite a decrease in Cathie Wood’s popularity, there are still believers in her funds.

Eric Lovgren, a consultant in Milwaukee, invested in ARK funds a year ago due to the lower entry point. He is interested in innovative companies, particularly genetic-based medicine, which led him to the ARK Genomic Revolution ETF. Lovgren now holds shares in all six active ARK ETFs, comprising half of his equity portfolio.

He believes that innovation thrives in low interest rate environments and plans to hold onto these investments long term.

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