Just days after Cathie Wood penned a controversial blog to strongly hint at the idea of potential annualized 40% returns over the next five years, ARK Invest's flagship fund, the ARKK Innovation ETF, has started 2022 with its largest drawdown in in fund history!
The contents of Wood's portfolio are now under the microscope if for no other reason than Wood has somehow found a way to torpedo her ETF despite its largest holding being (still) up 3.5% for 2022 (including Wednesday's wreck) and 49.9% for the previous 12 month period.
As shown below, ARKK has now discloated from its benchmark, the Nasdaq, by the biggest spread on record. But at least Cathie is getting paid for the massive underperformance to an index that anyone can buy for free.
Recall, back on December 21, Zero Hedge contributor Quoth the Raven noted that Wood had backtracked on estimates of returning 40% per year, for the next 5 years. She said in mid December that “innovation stocks” were in “deep value territory” and she estimated specifically that her “flagship strategy” could deliver "a 40% compound annual rate of return during the next five years”.
Then, she changed the language in her blog post and realigned her expectations from “40%” to “30-40%” and added a lot of qualifier language, not the least of which was directing the return expectation away from their “flagship strategy” and onto a vague benchmark of ARK Invest, in general.
"If the luster wears out for ARKK names or we see a tech wreck, as I have predicted might happen, there’s no doubt that Wood’s “Innovation Fund” will wind up facing more volatility, possibly disproportionately," we wrote in December. It looks like that is the case, at least for the start of 2022 thus far.
Also of note is the fact that ARKK's largest weighting, Tesla, has performed splendidly while the ARKK ETF has been in free fall.
Wood said back in early December 2021 that she was "soul searching" as a result of her flagship fund's underperformance. At least that's what she told Bloomberg last month:
Ark Investment Management is “going through soul-searching” as its growth-focused funds fall out of favor amid expectations of tighter Federal Reserve policy, said founder Cathie Wood.
In an interview with Bloomberg in December, Wood also said: “I’ve never been in a market that is up -- has appreciated -- and our strategies are down.”
She continued: “When we go through a period like this, of course we are going through soul-searching, saying ‘are we missing something?’”
Dear Cathie, perhaps a better question might be: "Are we missing everything?"