Cathie Wood, the founder and chief investment officer of asset management firm Ark Invest, never expected to be at the center of the spotlight like she has been in the past two years.
“[Our firm] did have a social strategy, but I was hoping to make the young people—analysts, portfolio managers, advisors—famous, not myself,” she told the Observer at an event in New York City Oct. 17.
Wood, 66, has worked in the investment industry for more than four decades, holding key executive roles at various hedge funds. In 2020, she rose to fame, seemingly overnight, after her firm’s flagship fund, Ark Innovation Fund, returned more than 152 percent that year, powered by its Tesla stake and wildly outperforming S&P 500’s 18.4 percent growth.
For much of 2021, the media tracked every stock Wood picked and dumped and helped spread her name beyond the professional finance world as the de-facto advisor to many retail investors. Wood is known for concentrating her bets on the so-called “disruptive technologies,” such as artificial intelligence, clean energy and blockchain.
But her stardom seems to have backfired this year, as the Federal Reserve’s tightening monetary policy spooked capital markets and resulting in heavy losses for her suite of Ark funds. The Ark Innovation Fund, an exchange-traded fund (ETF) consisting primarily of volatile tech stocks such as Tesla, Coinbase and Roku, has fallen 62 percent this year, lagging far behind S&P 500’s 24 percent loss.
“In early 2021, we could do no wrong. Everybody wanted to talk to us. Today, we can do nothing right, according to the media,” Wood said during an onstage interview at the Oct. 17 event, held to celebrate a new venture fund Ark launched in partnership with Titan, a financial technology platform.
Lately, Wood has been busy touting the idea there’s no better time to start an innovation-themed portfolio despite the steep drop in tech valuation. To that end, in September Ark launched a new fund called “Ark Venture Fund” in partnership with Titan that allows retail investors to invest as little as $500. Traditionally, access to venture capital funds is limited to accredited investors such as institutions and wealthy individuals. Platforms like Titan are set up to fulfill an unmet demand from amateur investors, said Joe Percoco, cofounder and co-CEO of Titan.
An investing environment that’s the opposite of the late 1990s
Wood, an economist by training, talks in a calm, knowledgeable manner that suggests a college professor and likes to draw historical comparisons with the current market environment. She believes we are “in the flip side of the late 1990s,” the height of the dotcom bubble, she told the Observer. “The technologies were not ready back then,” citing evidence that key breakthroughs in areas such as cloud computing, artificial intelligence and genomics sequencing didn’t take place until the late 2000s.
“Now we are in the prime time. These technologies are ready,” Wood added. “And unlike the late 90’s, where investors were running into technology, looking for exponential growth, now they are running for the hills for their benchmarks, scared to death.”
“This is a great time to invest in innovations. When you see something the consensus does not see, you usually make a lot of money,” she said onstage.
Critics, including the “Big Short” investor Michael Burry, say Ark funds are too risky and that Wood is a one-trick pony. Multiple prominent hedge fund managers hold short positions against the Ark Innovation Fund. There’s even an ETF set up specifically to bet against Ark (It’s up 70 percent year to date).
Asked by the panel host to respond to criticism that the Ark Venture Fund is just another way to accumulate assets under management during down times (the Ark Venture Fund charges a 2.75 percent management fee, which is higher than the industry standard of 2 percent), Wood said she is a long-term investor and is not swayed by temporary market fluctuations.
Wood told Observer she believes her contrarian views are what makes her an object of media fascination. “People are just interested in people who do things differently,” she said. Wood said she doesn’t read news articles or watch videos about her. “I try not to pay attention to those things. I don’t like the way I sound on camera,” she said.
