Ark Innovation had attracted billions for its good returns
Wall Street’s rising star is shining less now. Catherine Woods , the manager of Ark Invests, has become in the last two years an investment benchmark, achieving a return of 152% with her exchange-traded fund (ETF) specialized in technology. His vehicles had attracted billions of dollars. However, since November profitability has been skewed, its star fund, Ark Innovation, loses 32% and money has started to run away.
At the beginning of 2020, the firm founded by ‘Cathy’ Woods managed 3.5 billion dollars. With the success of its funds, money came to the fore and at the beginning of 2021 it exceeded 60,000 million dollars of assets under management.
When gaining size, problems also came. Finding technology firms with great potential was no longer so obvious. The fund began to correct, some investors came out to realize the strong capital gains achieved with the ETF and the manager was forced to sell positions to return money to clients. What was the problem? That the easiest stocks to sell were the most liquid, the largest (like Apple or Google) which, at the same time, are the ones that have continued to perform the best. These forced sales have ended up unbalancing the portfolio.
From IG Markets they explain that they have seen in recent months “a rotation from the technology sector and growth companies to other more cyclical sectors and that the fall, especially in small and innovative companies, has particularly affected the investment fund ARK Investment, that it has been forced to sell part of its most liquid positions. “
Ark has ended up causing a self-destructive spiral, because poor results scare investors away, the departure of investors forces more forced sales and those sales plunge the prices of some companies in which Ark was heavily invested.
“The drops triggered by Ark triggered scheduled orders from the autorun programs, causing the execution of sell orders on Nasdaq derivatives worth $ 10.7 billion. The tech crash dragged the rest of the sectors down, giving beginning of a short-term corrective process in the markets, “they point out from IG, referring to yesterday’s session.
Ark Innovation had become a symbol for the most speculative investors and fervent defenders of the appreciation of technology companies. However, its shares are now trading at the level of November last year.
The number one position in the fund’s portfolio, electric car maker Tesla, has also lost 12.5% of its value so far this year. Catherine Wood has always defended the enormous potential of the company led by Elon Musk, as well as its investments in bitcoin.
The firm had also invested in biotech companies that have been underperforming in recent months.