Why is Cathie Wood so fascinating?

Do you believe in Cathie Wood?

Stock market star Cathie Wood has seen her fortunes plummet over the past year, with her flagship fund ARK Innovation having fallen more than 60% since the start of 2021, losing $13bn in value. Marlet. Yet investors continued to buy into his futuristic vision, according to data from industry watchdog Lipper: Not only did they stick with them, but they injected more than $2 billion in additional net inflows into the market. 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 failing.”

Wood, one of the few prominent women fund managers on Wall Street, faces one of the biggest challenges of her professional career: how to show the world that she is much more than the face of what some call the pandemic bubble.

This dossier chronicles Cathie Wood’s philosophy, through a series of interviews with a dozen ARK employees, investors and others around Wood to show how she tries to keep her reputation intact. as she navigates the underside of glory.

Wood told Lydon about her recent exchange she had with an angry client who had invested millions in her fund and was ready to pull it all out. She listened to his concerns without interrupting him, to answer him: “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. tells the client from her office 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 home, but also to invest more of it so that his overall allocation to the fund remained the same. Driving conviction from seasoned investors may 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 dampen the stock advance of the highly valued disruptive tech stocks that made it famous. From there, economic reality seemed to take over, dragging the fund lower and lower over the past year, despite the S&P 500 gaining more than 20%. compounded the losses, Wood’s flagship fund is now down almost 63% from its peak in February 2021.

Although Ms Wood declined to be interviewed for this article, those close to her say she makes several calls a day with financial advisers and investors to convince them to stay with her. At the same time, she is striving to appear in more public forums, such as TV interviews and conferences, to build confidence among retail investors who make up a significant portion of her client base.

Shorter ARK Invest

Her conviction doesn’t waver privately, said Robby Greengold, an analyst at investment research firm Morningstar who speaks with her regularly. “She doesn’t present herself differently in person than she does in public,” he added.

Wood, one of bitcoin’s leading advocates, believes the technology is advancing at a faster rate than many investors realize and will help pick a handful of winners out of a growing pile of trash. companies on the losing side of the disruption. Not everyone has their 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 has specifically shorted a single active manager’s strategy. “We wanted to short speculative tech stocks and luckily for us ARK had already gathered those stocks,” said Matthew Tuttle, the head of Tuttle Management, whose fund has reached $350m in assets and is rising. around 90% since it began trading in November.

More generally, short sellers of ARK funds have gained $712m 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 short sale of the entire national ETF market, according to technology and data analysis firm S3 Partners.

On Reddit’s WallStreetBets forum, which has helped fuel the “meme” stock trading frenzy, a recent thread is titled “What’s the Consensus on Cathie Wood“. “She literally collected all the stocks in the bubble, put them in an ETF and just expected the bubble to keep going up,” one message read.

A day in the life of Cathie Wood

Interviews with those close to Wood, 66, offer insight into a day in the life of the famous stock picker:

7 am : She starts working at her office in a 26-story tower just 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 up 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 interrogation of his positions on CNBC or company shows and webinars on YouTube.

“She’s more than willing to speak with any client to explain what’s 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 ready to lay down 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 strategy. of ARK’s investment.

His belief in the mounting losses seems to resonate with investors. This year alone, they have 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 on the same 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 U.S. 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 performance 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 to their ARK investment over the past few weeks: “A lot of their names bought in the past were way too rich in terms of valuation, but now we’re at a good entry point.”

“Go where you need to go”

Woods, who has a deep-rooted 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 style of broad and thematic investments that characterize 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 the previous companies where she worked. While she was chief investment officer of thematic portfolios at AllianceBernstein, the company began to put in place new constraints on how it could manage its fund after the market crash in 2008, adding limits on the size positions and requiring greater sector diversification. Frustrated, Wood pitched the idea of ​​a transparent, actively managed ETF to AllianceBernstein in 2013, but 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 major losses could be a sign that his fund will not become the pandemic version of the Munder NetNet fund, which reached more than $11.5 billion in assets in the late 1990s thanks to 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 Wall Street and now works at a human resources software company.

Todd Rosenbluth, head of ETF research at CFRA, said he admired Wood and ARK’s ability to retain their appeal after a torrid year. “Investors who chase performance far outnumber investors who show loyalty in the face of underperformance,” he added. “It’s a credit to the shareholder base that ARK has built.”

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