- A correction in technology stocks has taken its toll on the performance of Cathie Wood’s flagship fund.
- The ARK Disruptive Innovation ETF has tumbled 25% in just three weeks as a spike in interest rates helped spark a rotation out of high-growth sectors like tech and into cyclical stocks.
- The ETF continued its decline on Thursday, falling as much as 6% as top holdings Tesla and Square sold off.
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Investors in Cathie Wood’s Ark Invest ETFs have had a rough few weeks as a broad sell-off in technology stocks took a toll on performance.
Wood’s flagship fund, the ARK Disruptive Innovation ETF, has fallen 25% since its record close on February 12, based on Thursday’s low of $118. A bulk of the decline has been sparked by a rapid rise in interest rates and the subsequent rotation out of high-growth tech stocks and into more cyclical stocks in the energy and financials sector.
The ARK ETF has no exposure to the energy sector, and just 4% exposure in the financials sector as of December 31.
The decline in the Ark’s flagship ETF continued on Thursday, falling as much as 6% as its top holdings Tesla and Square saw declines that outpaced the broader market. Combined, the two holdings make up 16% of the fund, according to data from Bloomberg.
Tesla fell as much as 5% after billionaire investor Ron Baron told CNBC that he sold nearly 2 million shares for clients as the position became too concentrated in his mutual funds. Meanwhile, Square dropped as much as 6% after the company said it acquired music-streaming service Tidal for nearly $300 million.
But Wood is not concerned about the recent decline in her portfolio, evidenced by both the recent trading activity of the firm and recent comments she made about the market volatility.
Amid the tech decline, Ark has been selling more stable mega-cap tech names like Apple, Amazon and Alphabet, and has been using the proceeds to buy more shares in less profitable and more volatile stocks like Tesla and Palantir.
In a video posted to Ark’s YouTube channel last week, Wood said she views the recent rotation out of technology stocks and into cyclical stocks as a broadening of the bull market, which is bullish for the long-term. If the market rally were to continue to be solely driven by a narrow rise in technology stocks, similar to what happened during the dot-com bubble, Wood would be more worried.
Whether investors will be able to hold on to Ark’s ETFs amid the heightened volatility is the ultimate question, and fund flow data will provide the answer. Ark Invest has seen its assets under management balloon to more than $60 billion as of mid-February.