The Wall Bourse stock market star has seen his fortunes decline over the past year, with his flagship tech innovation fund plummeting more than 50%, losing $13 billion in market value.
Yet investors continued to buy into his futuristic vision, according to data from industry watchdog Lipper: Not only did they stick with it, but they pumped more than $2 billion in additional net inflows into the fund. of his company ARK, a name inspired by the Ark of the Covenant, a biblical vessel of divine revelation.
“People like to bet on someone, look them in the face and see their conviction,” said Tom Lydon, a veteran asset manager. “It helped overcome any concerns that this fund was broken.”
Wood, one of the few prominent female Wall Exchange fund managers, faces one of the greatest challenges of her professional career: how to show the world that she is simply more than the face of what some call the pandemic bubble. .
While much has been written about the decline of its exchange-traded fund ARK Innovation, this story is the first to be based on a series of interviews, with a dozen ARK employees, investors and other people in Wood’s world, to show how she tries to keep her reputation intact as she navigates the underside of fame.
Wood told Lydon of a recent conversation she had with an angry client who had invested millions in her fund and was ready to withdraw it all. She listened to their concerns without interrupting them. Finally, it was his turn to speak.
“We have the same commitment to our strategy as at the top of the market, and if you liked it then, you should like it even more because valuations have become more attractive,” she said. to the client from her office high above the palm trees in St Petersburg, Florida, where she recently moved from New York.
by the end of the conversation, she had persuaded him not only to keep his money invested in her, but also to add more so that his overall allocation to his fund remained the same.
Producing the conviction of seasoned investors will perhaps never be more crucial for Wood.
In the space of three years, it has gone from relatively obscure status to one of America’s biggest stock market oracles in 2020, having made around 150% gains investing in stocks such as Tesla and Zoom Video Communications before they hit the stratosphere.
Yet inflation soon began to undermine the life of the highly valued tech disruptor stocks that made him famous. From there, gravity seemed to take over, dragging the fund lower and lower over the past year, despite the S&P 500 gaining more than 20%. losses, Wood’s flagship fund is now down nearly 63% from its peak in February 2021.
Although Ms Wood declined to be interviewed for this article, her relatives say she receives several calls a day from financial advisers and investors to convince them to stay with her.
At the same time, it is striving to appear in more public forums, such as television interviews and conferences, to boost the confidence of retail investors who make up a significant portion of its fund base.
SHORT CIRCUIT THE STAR
Her conviction does not waver in private, said Robby Greengold, an analyst at investment research firm Morningstar who speaks with her regularly. “She doesn’t look any different in person than she does in public,” he added.
Wood, one of bitcoin’s leading advocates, believes that the technology is advancing at a faster rate than many investors realize and will help dig a handful of winners out of a growing pile of trash. companies on the side of the losers of the disruption.
Not everyone has faith, however. Far from it.
In fact, a lack of confidence in Wood’s long-term prospects led Tuttle Capital to launch an ETF that only shorts its positions – the first known time that an ETF specifically shorts the strategy of a single active manager.
“We wanted to bypass speculative technology and luckily for us ARK had already designed this set,” said Matthew Tuttle, the director of Tuttle Management, whose fund has reached $350 million in assets and is rising. by around 90% since it began to be negotiated in November.
More generally, short sellers of ARK funds have gained $712 million this year through February 16, relative to market prices, a gain that puts them up 22.16% for the year versus a gain of 5.2% for the overdraft sale of the entire domestic ETF market, according to technology and data analytics firm S3 Partners.
On Reddit’s WallStreetBets forum, which has helped fuel the “same” stock trading frenzy, a recent thread is titled “What’s the Consensus on Cathie Wood”.
“She literally took all the stocks in the bubble, put them in an ETF and just expected the bubble to continue to soar,” one message read.
A DAY IN THE LIFE
Interviews with those close to Wood, 66, offer a window into a day in the life of the famous stock picker.
7 a.m. She starts working at her office in a 26-story tower a few blocks from the shimmering waters of Tampa Bay. She often listens to earnings calls from her portfolio companies and potential acquisitions.
8:45 a.m. She joins a call with her team of analysts. On Friday mornings, it also hosts a two-hour video meeting with its analysts and industry experts on how technology will drive societal change, which it occasionally opens to select investors.
The rest of the day is spent on client calls, trading decisions and increasingly frequent media appearances, whether in the form of a nearly 45-minute questioning of his positions on CNBC or company missions and webinars on YouTube.
“She is more than willing to speak with any client to explain what is happening in the market and reassure them of the opportunity at hand,” said Renato Leggi, Client Portfolio Manager at ARK.
Ms. Wood may not need to convince her team of some 45 people at ARK Invest, where faith in her remains as strong as the Florida sun.
“People follow her and are willing to give their lives or confide in her because of her humility,” said Alex Cahana, theme developer at ARK since 2014, helping identify industry trends that could shape ARK’s investment strategy. ‘ARK.
His conviction in the face of mounting losses seems to resonate with investors.
This year alone, they committed more than half a billion dollars in net inflows to its innovation fund, despite it having one of the worst performances of any fund tracked by Morningstar in the same period. period.
Despite its recent losses, the fund has posted an average annualized return of 27.5% over the past three years, placing it in the top 2% of 491 US mid-cap growth funds tracked by Morningstar. That said, many investors who weren’t there in the early days are now underwater.
The fund’s long-term track record is reason to believe in Wood once inflation subsides, said Jimmy Lee, director of the Las Vegas-based Wealth Consulting Group, which has $2 billion in assets under management.
He said his group had added its ARK investment in recent weeks: “A lot of their names bought in the past were way too rich in terms of valuation, but now we’re a good entry point.”
GO LO YOU MUST GO
Woods, who has a deep-seated Christian faith, rose to financial fame relatively late in life, having started his career in 1980 at New York-based investment advisory firm Jennison Associates. She founded ARK in 2014 after other stints at Tupelo Capital Services and AllianceBernstein.
While the kind of broad, thematic betting that characterizes ARK’s investment style has long been part of its strategy, its willingness to take large positions – around 30% of its flagship fund is invested in the stocks of five companies – was not always well received in previous companies where she worked.
While she was chief investment officer of thematic portfolios at AllianceBernstein, the firm began to put in place new constraints on how it could manage its fund after the market crash of 2008, adding limits on the size of positions and requiring greater sector diversification.
Frustrated, Wood floated the idea of a transparent, actively managed ETF AllianceBernstein in 2013, but it was turned down, Leggi said. She left the company and formed ARK Invest the following year.
“You can’t really manage a constrained portfolio through innovation. You have to be able to go where you need to go when you want to,” Leggi said.
AllianceBernstein declined to comment for this article.
Wood’s ability to retain investors despite steep losses could be a sign that his fund won’t become the pandemic version of the Munder NetNet fund, which grew to more than $11.5 billion in assets in the late 1990s thanks to bets on Internet stocks, before falling by more than 90% after the bursting of the Internet bubble. Its once-famous portfolio manager, Paul Cook, left the Wall Exchange and now works at a human resources software company.
Todd Rosenbluth, head of ETF research at CFRA, said he admired Wood’s and ARK’s ability to retain their appeal after a torrid year.
“Performance chasing is far more common than investors who show loyalty in the face of underperformance,” he added. “It is to the credit of the shareholder base that ARK has built.”