Is ARK Taking On Water? Cathie Wood's Firm Named Top 'Wealth Destroyer' By Morningstar Analyst

Cathie Wood’s status as a celebrity in the financial world precedes her. Over the course of her near-decade-leading ARK Invest, Wood has cemented her reputation as an innovator and maverick unafraid of making bold predictions or taking risky positions; she bought stock in Tesla Inc TSLA and NVIDIA Corporation NVDA as early as 2016.

Her belief that Bitcoin BTC/USD will top $1M by 2030 led her to spearhead the recent introduction of BTC Spot ETFs, making her a favorite of the crypto crowd as well.

All this fame, however, has earned her a healthy set of doubters and naysayers; they may have a point. In a recent analysis by Morningstar, the performance of Wood’s flagship fund, ARK Innovation ETF ARKK, and her firm as a whole, was brought to task. 

Morningstar analyst Amy C. Arnott, CFA rated the 15 funds that have depreciated, in dollar terms, the most over the last 10 years. ARKK ranks 3rd among them, losing $7.1 billion.

Worse yet, Wood’s firm as a whole comes in at #1 as the single fund that has destroyed the most wealth over 10 years, losing roughly $14.3 billion. That is more than twice the loss of the nearest fund.

As Wood’s star rose in 2020 and 2021, the firm saw massive inflows of cash while the funds performed well, extremely well. ARKK, for instance, more than tripled in value from 2020 to 2021, smashing the pace set by the S&P 500. These gains were largely wiped out, however, in the bear market of 2022. ARK’s funds lost anywhere from 34.1% to 67.5% on the year.

This is the boom-and-bust reality of Wood’s philosophy. ARK’s funds can garner eye-watering returns, but they can just as easily see hair-pulling, teeth-gnashing drops. 

For investors who believe the ARK may be sinking and can stomach the risk, a short position can provide a way to capitalize on ARKK’s downside. ETFs like the AXS Short Innovation Daily ETF SARK, which aims to return the inverse performance of ARKK, can be an attractive option.

For those who still believe in the promise of ARKK and want to maximize their view, leveraged funds can help. If you are bullish, the AXS 2X Innovation ETF TARK, is a solid option, aiming to return twice the daily return of ARKK.

Photo by Osman Rana on Unsplash