Founded Ark Invest in 2014 to launch exchange traded funds and assets
Wall Street has a new star. This is Catherine Wood, a fund manager, who has achieved stratospheric results with the firm she founded in 2014, Ark Invest, betting on companies with cutting-edge and highly disruptive technology. Its flagship fund, the Ark Disruptive Innovation ETF, achieved a return in 2020 of 152% and Wood was named by Bloomberg as the best stock selector in the world. So far in 2021 the fund has risen another 24%.
Its success has been so colossal that it has attracted a lot of fresh money. If at the beginning of 2020 its fund manager only managed assets worth 3,500 million dollars, now it exceeds 60,000 million (50,000 million euros). Partly because of the revaluations, but mostly because of the arrival of new investors.
These good results and the great reception of its management have meant that the firm has launched new products in recent years, a fund dedicated to autonomous cars and robotics, another to new Internet companies, another on the genomics revolution and another on companies that combine finance with technological disruption (known in the jargon as ‘fintechs’).
One of the peculiarities of Catherine Wood’s management style is the chosen investment format: exchange-traded funds (ETFs). These types of assets are a hybrid between an investment fund and a share. Like funds, they can hold a wide variety of stocks or bonds. But, in addition, they can be bought and sold at any time, since they have the obligation to report a constant exchange value. On the other hand, to sell a participation in an investment fund you have to wait between one and two days for it to be executed.
Since their creation 40 years ago, ETFs have been used mainly to track the evolution of the main stock indices. It was cheaper and also more effective to replicate the S&P 500, than trying to beat it.
However, Wood has decided to use the ETF figure with an active management format, something very disruptive and which allows almost any small investor to access their investment vehicles.
“The success of Ark Invest proves two things. First, that active management is more alive than people thought. And second, that ETFs are a proven investment vehicle that can be used by active managers with full guarantees ”, explains Linda Zhang, director of the firm Pureview Investments.
The arrival of huge amounts of money to Ark Invest has already positioned the manager as the seventh largest global operator in the ETF market (controlled by giants such as BlackRock, Vanguard and StateStreet).
Catherine Wood has not only achieved good returns with her flagship ETF, the Ark Disruptive Innovation. Its genomics fund rented 180%, the autonomous cars, robotics and 3D printing fund 107% and the artificial intelligence, massive data storage and electronic commerce fund 157%.
Another peculiarity of Cahterine Wood’s funds is that they are highly concentrated. It has few values that in some cases weigh up to 10% of the portfolio.
One of its big bets was Tesla, which today is the first position of Akr Innovation, with a weight of almost 9% of the portfolio. He also has positions on Spotify, Shopify, or Baidu (the Chinese equivalent of Google).
Wood has explained in his conferences that he does not look so much in traditional accounting metrics but in the capacity for disruption that a company can have in an industry. If you consider that you can revolutionize a sector, you do not care that the company is still in losses.