The flood of growth experienced by Cathie Wood’s ARK Invest, from assets totaling $3.5 billion before the pandemic to $50 billion a year later, has “come back to bite her investors,” according to a recent article in The Wall Street Journal.
The damage isn’t obvious when looking at the fund’s longer-term performance, the article reports, but adds that the large number of recently added investors has rendered her actual wealth-creation record “unimpressive.” In fact, Bespoke Investment Group analysts reportedly calculated the weighted annualized return of Wood’s funds (since inception) to be 5.24% through May 10th—“far less than a steady investment in a plain vanilla S&P 500 index fund.”
ARK’s paper gains, the article notes, have depended on “some uncomfortably concentrated positions.”
The article concludes, “Ms. Wood’s ‘disruptive innovation’ jargon may be somewhat novel. What her investors are experiencing isn’t.” He cites examples of past fund managers who rode to stardom only to end up “doing poorly for clients who discovered them after they became hotshots. The culprit is unrealistic expectations and reversion to the mean for the bubbly sectors that got them there.”
