Cathie Wood’s belief that the high-risk, cheap ETFs traded by her ARK Investment firm will undoubtedly rise again is backed up by many loyal investors who are willing to go along for the ride, reports an article in The Wall Street Journal. Investors have recently poured about $168 million into ARK’s Innovation ETF, raising its net assets to $11.8 billion. For a fund that dropped 27% in January alone and lost half its value over the last 12 months, that’s a pretty big vote of confidence.
But ARK Innovation and its risky investments could well be one of the major storytellers of the 2022 market. The gains made during the pandemic are starting to erode as the Fed steps in to raise U.S. interest rates, and investors are shifting their behavior in accordance, pulling back from the riskiest positions. ARK’s ETFs are in the middle of the sell-off that’s also causing the S&P 500 to drop 7% and Nasdaq Composite 12% only a month into the year, with the technology and biotech stocks favored by Wood being been the hardest hit.
Wood, however, holds firm to her insistence that the fund’s holdings will rebound; “innovation stocks seem to have entered deep value territory,” she wrote in a recent blog post, the article quotes. And the fund still has a number of high-profile supporters, including Larry Carroll, financial advisor at Wealth Enhancement Group, who has $18 million client money in ARK Innovation and has considered buying more aside from his hesitation that disruption stocks will likely not do well in the current environment, according to the Journal.
ARK’s roller-coaster ride has been particularly volatile, with outflows at more than $8 billion over the last six months, after inflows of about $16 billion from the 2nd quarter of 2020 though the 1st quarter of 2021, when the fund peaked at $28 billion. Anyone buying in after that has lost money. But while some investors agree with Wood’s long-view approach and are buying more ARK Innovation shares, others are selling theirs off, having fallen out of enchantment from Wood’s initial popularity and wanting a return to solid ground after too much speculation.
