Cathie Wood Investors Yank $2.2 Billion

Cathie Wood investors yank $2.2 Billion from ARKK as her flagship fund underperforms Nasdaq By -30% YTD. 

Cathie Wood appears to be doubling down on what she does best: buying the dip in what ends up being an overvalued market. 

Her strategy of buying the dip in perceived fast tech growth companies, which plunge far further than market indexes on sell-offs has rattled investors. 

Investors’ tolerance to losses in her dip-buying strategy could be waning as Cathie Wood investors yank $2.2 Billion from ARKK

Overall, Cathie Wood’s seven active ETFs have experienced $11.5 billion in outflows since early 2021, according to Strategas data. 

“The past few years have been a challenge. Ark has a history of high-conviction, concentrated investing via their ETFs, where there is a tendency for the team to use sharp market sell-offs as an opportunity to add long exposure to their strongest ideas,” said Todd Sohn, an ETF strategist at Strategas.

But the sixty-four million dollar question is whether the August flash crash from all-time highs is over, and we move up from here.

In other words, will the central bank pivot from tightening to more benign liquid conditions permit a bull market?

In late May, Quoth the Raven criticized Cathie Wood, blaming a Great Depression for her poor performance – all before the recent sell-off occurred. 

Post-Tesla’s 2020 surge, QTR argued that ARKK has been dead money: 

“Cathie Wood’s ARKK flagship fund has been dead money since then compared to its NASDAQ benchmark. One by one, investors have watched other investments that Wood has made alongside Tesla get decimated.

Don’t say I did not warn you. 

“So if you think Cathie Wood Stages AI vision is too Peter Pan like, there is always the SARK fund, which is a 100% bet against the ARK fund’s “AI investor mania,” we wrote in a piece Cathie Wood Stages AI in June 2023  

The visionary tech investor decided strategically to hold off and miss the surge in Nvidia — the hottest name in tech the last two years — while riding names like Invitae and Ginkgo Bioworks into bankruptcy and the toilet, respectively.”

“To compound her dreadful numbers, Wood has offered up bizarre, hallucinogenic price targets, unbridled optimism about her performance going forward that, in my opinion, has been very misleading, and bursts of macro-sounding non-sequiturs as excuses,” he wrote. 

In May, with the market sitting at all-time highs—Wood claimed markets were experiencing “a search for cash and safety.”

The moral of the story is that if Cathie Wood’s professional team of dedicated expert visionary tech investors fail to pick the winners, maybe it is wiser to stick to sector-dedicated and index ETFs.

Betting on all the horses appears to be a wiser long-term strategy to grow wealth long-term in a bull market.

A team of stock wizards who consistently pick winners and never miss opportunities may only exist in fairy tales.

Cathie Wood investors yank $2.2 Billion from ARKK as she noted investor sentiment is risk-off, which she believes will switch to risk on assets as investors’ appetite for risk soon returns

“In our view, the search for cash and safety in the equity markets today is as intense as during the Great Depression in the early 1930s. When fear dissipated, the market broadened out and rewarded risk-taking once again,” she posted on X May 23

Cathie Wood investors yank $2.2 Billion as they grow tired of waiting for the golden egg to hatch

In February, Morningstar listed her as one of the top 15 funds that have destroyed the most wealth over the past decade and said the ARK family of funds had wiped out $14.3 billion in shareholder value.

ARK, home of the flagship ARK Innovation ETF ARKK, tops the list for value destruction. After garnering sizable asset flows in 2020 and 2021 (totalling an estimated $29.2 billion), its funds lost significantly in the 2022 bear market, with losses ranging from 34.1% to 67.5% that year. Many of its funds enjoyed a strong rebound in 2023, but that was not enough to offset their previous losses. As a result, the ARK family wiped out an estimated $14.3 billion in shareholder value over ten years—more than twice as much as the second-worst fund family on the list. ARK Innovation alone accounts for about $7.1 billion of value destruction over the trailing 10-year period.

So Cathie Wood came top of the heap in wealth-destroying.

Will fortunes change for her just as Cathie Wood investors yank $2.2 Billion from ARKK? 

Many investors are concerned about inflation, but the Bloomberg Commodity Index says otherwise. Since the 08/09 crisis, commodity prices have steadily declined. Oil, which was $147, is now in the mid-70s, indicating a deflationary.

Moreover, the Fed has indicated it could be done with its tightening cycle, meaning a possible string of rate cuts comes next, which could help Woods fund out of a quagmire.