The loyalty of Cathie Wood’s legion of fans may finally be waning as the New Year’s carnage in speculative technology stocks gives the star money manager a miserable start to 2022.
Investors withdrew $ 352 million from Woods’ flagship ARK Innovation ETF (ticker ARKK) on Wednesday, according to data collected by Bloomberg. It was the largest outflow since March.
The payouts come as ARKK languishes at its lowest in about 18 months. ARK Investment Management’s main exchange-traded fund fell more than 15 percent since the beginning of the year through Thursday, when top stocks such as Roku Inc., Zoom Video Communications Inc. and Teledoc Health Inc. was caught in the technology stock route.
ARKK was on its way up to kl. 10.13 in New York as the sector managed to stabilize in Friday trading.
While Wednesday’s flow is small compared to ARK assets in general – its nine ETFs still boast about $ 25 billion – it marks a potential turning point for an investor base that has so far barely wavered in its support for Wood and the company she founded in 2014. ARKK’s outflow was its third largest ever; last time the fund lost over $ 300 million, it traded 44 percent higher.
Market conditions have become hostile to the disruptive technology companies that Wood loves. Violent inflation has spurred a hawkish turnaround from the Federal Reserve, meaning the end of stimulus from the pandemic and the ultra-low interest rates that helped pump up stock ratings. Investors are withdrawing from speculative bets and growth companies whose profit potential lies in the future – exactly the kind of stocks that ARK prefers.
“Heavy outflows from a fund, active or passive, may be a sign that investors’ belief in growth and momentum-style investing is declining,” said Russ Mold, chief investment officer at AJ Bell. “Coupled with weakness in cryptocurrencies, meme stocks like GameStop and AMC Entertainment and a strong recovery in energy and finance stocks, it feels like the market sentiment is changing.”
ARKK has now fallen about 50 percent from the highest level ever in February last year. Yet many of its investors – who poured billions in after the ETF gave more than 150 percent back in 2020 – have remained loyal, even though they lost money.
The fund’s assets have fallen by about $ 15 billion since the peak, but only about $ 1.1 billion of it was from net outflows – the rest of the decline is caused by results. The ETF is now trading well below an estimate of its average purchase price since its inception.
Woods’ repeated message is that the company’s investment horizon is at least five years, and that the potential for the innovative companies ARK is aiming for is enormous. It has regularly used withdrawals in its high-profile names to increase its position, even as some on Wall Street worry about the risk of concentration.
The company’s miserable run looks set to get even worse in 2022, and every single one of its US-listed ETFs is down so far. The worst performer is the ARK Genomic Revolution ETF (ARKG), which fell 17 percent through Thursday. The best is the ARK Israel Innovative Technology ETF (IZRL), which fell 5 percent.
Next to ARKK, the other eight funds lost nearly $ 50 million in total on Wednesday. The settlement plan for the products means that flow data arrives with a one day delay.
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