Bloomberg reported Friday morning that Cathie Wood’s flagship fund, ARK is at crossroads…(Bloomberg)
- “Investors pulled $352 million from Wood’s flagship ARK Innovation ETF) on Wednesday, according to data compiled by Bloomberg. That was the biggest outflow since March. “
Why the large outflows? The end of 2021 and start of 2022 has not been very good for Wood. Bloomberg also reported that “ARKK is now down about 50% from its all-time high in February last year.” Bloomberg also notes that many investors have stayed loyal despite the losses.
When I saw that the fund was down 50% it immediately reminded me of that great exchange between Vinny Mattone and John Meriweather in Roger Lowenstein’s book “When Genius Failed” that documented the fall of Long-Term Capital Management…(WSJ)
“Where are you?” Mattone asked bluntly.
“We’re down by half,” Meriwether said.
“You’re finished,” Mattone replied, as if this conclusion needed no explanation.
For the first time, Meriwether sounded worried. “What are you talking about? We still have two billion. We have half — we have Soros.”
Mattone smiled sadly. “When you’re down by half, people figure you can go down all the way. They’re going to push the market against you. They’re not going to roll [refinance] your trades. You’re finished.”
Cathie Wood is down by half. Many of her investors have stood with her hoping to get back to those triple digit returns. However, the outflows have begun. Will her investors stay loyal or do they think now that she is down 50%, as Mattone said, “…people figure you can go down all the way.”
EXTRA CREDIT: Jason Zweig explains how Cathie Wood’s fund was a victim of its own success. “The ARK Innovation ETF posted big returns, and big money followed. Now it’s the latest example of what happens when a fund becomes too large for its own good.” (Wall Street Journal)