Investors are ramping up their exits from Cathie Wood's ARK after an epic 72% decline in her flagship fund

Matthew Fox
Cathie Wood
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  • Investors are ramping up outflows from Cathie Wood's ARK funds after a three-year decline.

  • The suite of ARK ETFs has seen net outflows of $2.2 billion so far this year, triple the outflows in 2023.

  • A string of bad bets and missed opportunities have led to a 72% decline in ARK's flagship fund.

Investors in Cathie Wood's ARK ETFs are starting to increase the pace of outflows after a string of bad bets and a painful three-year decline.

The family of ARK ETFs has seen a net outflow of $2.2 billion this year, which is about triple the $760 million in outflows seen in all of 2023.

The ARK ETFs' combined assets under management stand at $11.1 billion, down 81% from its peak AUM of $59 billion in 2021.

The sharp decline in assets under management coincides with a painful three-year period for Wood's disruptive innovation investment strategy. The flagship ARK Innovation ETF is down 72% from its February 2021 peak, and some of its top bets are still floundering.

ARK has long counted Tesla among its top holdings, but the carmaker's more than 40% stock decline year-to-date has weighed heavily on the performance of the ARK Innovation ETF, which is down 16% year-to-date despite a positive return for the broader stock market.

This dynamic — the sharp decline in ARK funds while the broader stock market hits record highs — was highlighted by Morningstar earlier this year. The investment firm highlighted that the ARK ETFs have destroyed $14 billion in wealth over the past decade as investors piled into the fund right near its peak.

"These funds managed to lose value for shareholders even during a generally bullish market," Morningstar analyst Amy Arnott said.

Another source of pain for ARK investors is the fact that the funds have missed out on the hottest artificial intelligence trade in the market, with Wood selling most of her funds' Nvidia holdings right before the stock started to surge in late 2022.

Other top holdings of the ARK funds include Roku and Unity Software, which are both down more than 30% year-to-date, and Zoom Video, which is down 16% year-to-date.

Despite the sharp underperformance, Wood has largely defended her portfolio, recently arguing that Tesla could trade to $2,000 per share in the next five years.

Read the original article on Business Insider

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