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Cathie Wood Readies New "Venture Fund" Targeting Illiquid Assets

Tyler Durden's Photo
by Tyler Durden
Monday, Feb 07, 2022 - 10:45 AM

With her company's flagship "Innovation Fund" off to a rough start in 2022, Cathie Wood is now looking to conveniently start a new fund that limits how quickly her investors can exit.

ARK Investment Management filed this week "for a closed-ended 'interval' fund that would expand her flagship strategy into harder-to-trade assets," like those in less liquid markets, Yahoo! Finance reported.

Called the ARK Venture Fund, her new fund will target “illiquid securities and securities in which no secondary market is readily available, including those of private companies.”

Just the type of strategy you have to have in your playbook with the market in its largest bubble in years and the Fed offering up a rate hike pin. 

The fund will have lock-up provisions that will allow Wood to keep "more control" over investor cash moving in and out of the fund. 

Eric Balchunas, a senior ETF analyst with Bloomberg Intelligence commented: “This makes a lot of sense as the structure will give Cathie and Co. the freedom to really explore the less liquid areas of the market without having to worry about capacity issues like they would in an ETF. It’s also smart because it is serving up something Vanguard doesn’t and so can be used to complement the increasingly passive core of a portfolio.”

The fund is going to offer redemptions of "between 5% and 25% of the fund’s shares just once a quarter", which will seemingly help to address concerns about illiquidity in Wood's investments, the report says. Liquidity became an issue when, after ARKK's rise in popularity, it "held stakes of 10% or more in about 30 names", the report says. 

Other names in the industry, including Brevan Howard Asset Management and Izzy Englander’s Millennium Management, have also started to ask clients for longer lock-up periods. 

Recall, we wrote last week that investors had still put another $168 million into ARKK despite the fund's poor performance to start the year. 

“After correcting for nearly 11 months, innovation stocks seem to have entered deep value territory, their valuations a fraction of peak levels,” Wood wrote last month, defending her "strategy" in the face of unrelenting red days. Meanwhile, a lot of the $16 billion that flowed into ARK Innovation from the second quarter of 2020 is at risk of now being underwater. 

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