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Cathie Wood's Ark Funds Start 2022 in a Funk; Flagship ARKK Hits 52-Week Low

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What You Need to Know

  • In Thursday afternoon trading, all six active Ark ETFs were down more than the Nasdaq and S&P 500.
  • Ark ETFs are highly concentrated and reflect several themes of disruptive technologies.
  • Fund manager Ryan Jacob says portfolio managers can pick the wrong companies within the right themes.

Cathie Wood’s Ark Invest active ETFs, which performed poorly in 2021, are continuing to lose money in the first trading days of 2022.

Five of Ark’s six active ETFs posted double-digit losses in 2021 while the major market indexes including the Nasdaq and S&P 500 had double-digit gains, and all six active Ark ETFs as of midday Thursday are down more than those market indexes.

In early morning trading on Thursday, the firm’s flagship fund, the Ark Innovation ETF (ARKK), set a new 52-week low, down 10%, before recovering to an 8% loss. The ETF lost almost 24% in 2022.

Meanwhile, the anti-ARKK ETF, the Tuttle Capital Short Innovation ETF (SARK), which uses swap contracts to essentially short ARKK, is up almost 8% year-to-date through midday Thursday.

“Loyal investors to the Ark strategies hoped 2022 would be more like 2020 and not a repeat of 2021, but they are being reminded that past performance success is not indicative of future results,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

Those investors “are being forced to decide if the risk is worth the reward in a rising rate environment,” added Rosenbluth. “Highly concentrated thematic ETFs are likely to be volatile in 2022.”

More on this topic

Ark’s active ETFs are highly concentrated funds focused on disruptive technologies that founder and CEO Wood envisions will transform economies and daily life — artificial intelligence, robotics, energy storage, genome technology and blockchain. Their top holdings generally account for 30% or more of their assets, so a decline in one or more of those stocks can have a sizable effect on performance.

For example, four of ARKK’s top holdings — Roku, Teladoc Health, Zoom and Coinbase — are down year-to-date, generally more than the overall market.

“Having a very high conviction can get you in trouble at times,” said Ryan Jacob, the founder, chairman and CEO of Jacob Asset Management. His Jacob Internet Fund was all the rage during the tech boom, then suffered big losses during the bust, but survived.

Jacob, who agrees with the “whole idea of thematic investing” and recently launched a thematic ETF of his own, says portfolio managers like Wood can be right about the themes but wrong about companies that reflect those themes.

“All you hear from Wood is about the opportunities,” he said. “You rarely hear about the other side, the risks.”