By Suzanne McGee
(Reuters) – ARK Investment Management founder and CEO Cathie Wood defended the strategy of her firm’s loss-making flagship fund, saying lower interest rates would improve its fortunes in an investor letter published late on Wednesday.
The ARK Innovation ETF fund has taken investors on a roller coaster ride in recent years. After rising 67.6% in 2023, the ETF is down more than 12% so far this year. Meanwhile, the S&P 500 is up 16.9% so far in 2024, closing above 5,600 for the first time on Wednesday.
Meanwhile, ARK ETFs saw net outflows of more than $1.8 billion over the past six months, according to VettaFi data.
In a letter posted on ARK’s website, Wood wrote that he fully acknowledged that “the macro environment and certain stock selections have negatively impacted our recent performance.” But he added that “our belief and commitment to investing in disruptive innovation remains unwavering.”
As of May 31, ARK’s top investments were Tesla, Coinbase and Roku, according to LSEG data.
Wood argued that many of the fund’s holdings are currently in “rare, highly valued territory” and are poised to disproportionately benefit when interest rates start to cut. He sees another round of blockbuster returns on par with the 152.8% gain the fund recorded during the early stages of the coronavirus pandemic.
“Exiting our strategy now would crystallize losses that falling interest rates and mean reversion would turn into big gains over the next few years,” Wood wrote. “We are determined!”
ARK did not immediately respond to a request for further comment on the letter.
Chicago-based investment analytics firm Morningstar calculated earlier this year that ARK’s losses had wiped out $14.3 billion in shareholder value over the 10 years ending Dec. 31, 2023. ARK and Wood did not respond to requests for comment on the report.
Wood believes the key to future profits lies in artificial intelligence investments, but not necessarily in market darling Nvidia or other giants.
In the letter, he said he expects “current equity market concentration will break down and more diverse winners will emerge.”
(Reporting by Suzanne McGehee and Jamie Freed Editing)
