Cathie Wood, the founder and chief investment officer of Ark Investment Management, became a prominent figure in the financial world during the pandemic for her astute investment decisions in companies like Tesla, Zoom, and Roku. These well-timed bets not only garnered significant returns for her Ark funds but also propelled her to celebrity status on and off Wall Street.
However, the same investments that fueled the success of her Ark funds during the pandemic are now proving to be a double-edged sword, as they contribute to their recent underperformance. Investors have been withdrawing billions of dollars from Wood’s actively managed ETFs, signaling growing concerns and dissatisfaction with the fund’s performance.
According to reports, since January, investors have pulled out a staggering $2.2 billion from six of Ark’s actively managed ETFs, a substantial increase from the $760 million withdrawn in the previous year. Consequently, the total assets invested in these ETFs have plummeted by 30% since the beginning of the year, reaching $11.1 billion—a significant decline of 81% from their peak in 2021.
One of the main factors driving investor interest in Ark funds has been Cathie Wood’s personal popularity and reputation as a visionary investor. Her frequent appearances on television and active engagement on social media platforms have helped her cultivate a dedicated following among retail and institutional investors alike. However, some analysts argue that Wood’s heavy reliance on her instincts and convictions in constructing the portfolio may be a potential liability for the funds.
Despite the broader market’s positive performance, several of Wood’s key stock picks have experienced significant declines this year. Tesla, a cornerstone holding in Wood’s flagship Ark Innovation ETF, witnessed a sharp drop of over 50% following lackluster first-quarter earnings. Other notable holdings, such as Zoom and Roku, also recorded substantial declines of 11.5% and 31%, respectively, over the same period.
Wood has defended her investment decisions, including the decision to offload holdings in chipmaker Nvidia just before its shares rallied. She argued that Nvidia was facing increased competition from other tech giants like Tesla, Meta, and Apple, and thus, it was prudent to readjust the portfolio to explore new opportunities that have yet to be discovered by the market.
Despite the challenges, there have been some bright spots for Wood’s Ark funds. Coinbase, the largest holding in Ark Innovation ETFs, has seen its share price increase by approximately 47% since January. However, despite this success, Morningstar estimates that Ark Investment Management has destroyed over $14 billion in investor wealth over the past decade, more than any other asset manager during the same period.
While Ark Invest maintains that its flagship fund has generated a remarkable 109% return since its inception in 2014, the fund’s recent performance has been disappointing. It is down approximately 12% year-to-date, closing at $43.90 as of Wednesday afternoon.
Although Ark Invest did not immediately respond to Fortune’s request for comment, a spokeswoman emphasized the strong track record of its flagship fund as evidence of its value creation. Nonetheless, the recent challenges faced by Ark funds underscore the importance of active portfolio management and the need for investors to carefully evaluate investment strategies and fund managers’ track records before allocating capital.