By Suzanne McGee
(Reuters) – Cathie Wood, founder and CEO of ARK Investment Management, defended the strategy of the company’s flagship money-losing fund, telling investors in a letter released late on Wednesday that its fortunes will reverse when interest rates fall.
The ARK Innovation ETF fund has taken investors on a rollercoaster ride in recent years. After a 67.6% gain in 2023, the ETF is down more than 12% this year. That compares to a 16.9% gain for the S&P 500 index so far in 2024, closing above 5,600 for the first time on Wednesday.
The ARK ETF, meanwhile, has seen net outflows of more than $1.8 billion over the past six months, according to data from VettaFi.
In a letter posted on ARK’s website, Wood wrote that he fully acknowledged that “the macro environment and some stock picks have challenged our recent performance.” However, she added, “our conviction and commitment to investing in disruptive innovation has not wavered.”
ARK’s top investments as of May 31 were Tesla, Coinbase and Roku, according to LSEG data.
Wood argued that many of the fund’s holdings were now in “rare and deep value territory” and poised to benefit disproportionately once interest rate cuts begin. She anticipated another blockbuster period for returns that would resemble the fund’s 152.8% gains during the early stages of the coronavirus pandemic.
“Exiting our strategies now would crystallize losses that lower interest rates and mean reversions should turn into significant profits over the next few years,” Wood wrote. “We are decided!”
ARK did not immediately respond to a request for additional comment on the letter.
Morningstar, a Chicago-based investment analysis firm, calculated earlier this year that ARK’s losses destroyed $14.3 billion in shareholder value over the 10 years ending Dec. 31, 2023. ARK and Wood did not responded to requests for comment on this report.
Wood believes the key to future returns will be in artificial intelligence-related investments – but not necessarily in market darling Nvidia and other megacaps.
In the letter, she said she hopes to see “a more diverse set of winners to which the current stock market concentration should give way.”
(Reporting by Suzanne McGee; Editing by Jamie Freed)
