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Cathie Wood’s ARK Fund Plunges on Coinbase Results

The fund outperformed all other actively managed US equities in 2020 on the strength of its portfolio of companies such as Zoom Video Communications and Teladoc Health


Cathie Wood
Cathie Wood, the founder of ARK Invest, became a household name with appearances on magazine covers and billions of dollars in inflows from retail investors, though some now consider her the poster child for the so-called pandemic bubble. Photo: YouTube screen grab.

 

Star stock picker Cathie Wood’s ARK Innovation ETF plunged towards its all-time low on Wednesday when crypto exchange Coinbase fell more than 28% after it missed first-quarter estimates.

The declines in Coinbase put ARK Innovation ETF within 10% of its depths touched in March 2020 at the start of the coronavirus pandemic. The crypto company is the fund’s second-largest holding at nearly 7% of assets.

The ARK Innovation ETF outperformed all other actively managed US equities in 2020 on the strength of its portfolio of companies such as Zoom Video Communications and Teladoc Health that rallied during the pandemic-induced economic lockdowns.

That strong performance made Wood a household name and led to appearances on magazine covers and billions of dollars in inflows from retail investors, though some now consider her the poster child for the so-called pandemic bubble.

 

ARK Down Nearly 60% This Year

ARK is down nearly 60% for the year to date, and nearly 76% below its high in February 2021. It traded at $37.98 at mid-afternoon, 8.6% above its low of $34.69 hit in March 2020.

That was before the Federal Reserve and Congress unleashed an unprecedented $5.2 trillion to support the economy and in a webinar Tuesday, Wood blamed much of the fund’s losses on the Fed taking a too-aggressive path of rate increases.

But other investors, such as Matthew Tuttle of the Tuttle Capital Short Innovation Fund, disagree.

“These companies make no money, in a zero interest rate environment they can, and do, command high multiples (but) in a rising rate environment they don’t,” Tuttle said of Wood’s investment picks.

Tuttle, whose $460 million fund shorts ARK’s portfolio, blamed Wood’s losses on “multiple compression”.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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