By David Randall
NEW YORK (Reuters) - One year after her Ark Innovation ETF than doubled and made her a household name, star stock picker Cathie Wood is poised to join a small club that no one aspires to be a part of: portfolio managers who have seen their funds go from first to worst in the span of 12 months.
The $16.7 billion exchange-traded fund is on pace to end the year down nearly 24%, leaving it one of just 2 actively-managed equity funds tracked by Morningstar to post more than a 20% decline this year at a time when the benchmark S&P 500 is up slightly more than 21%.
Those losses are a far cry from 2020, when the fund that focuses on leaders in "disruptive" innovation soared thanks to its heavy bets on so-called stay at home stocks that thrived during the early stages of the pandemic, helping the fund notch the best performance of any U.S. actively managed fund tracked by Morningstar.
Only 14 out of the 6,190 equity funds in Morningstar's database going back to 2004 have gone from such highs to such lows within a year's time frame, showing the risks inherent in Wood's aggressive growth strategy, said Robby Greengold, an analyst at Morningstar.
"There is a willingness on the part of Cathie Wood to embrace high-risk names with less caution than her peers," he said.
Ark Invest did not respond to a request to comment for this story.
Wood, for her part, has said in recent webinars that her strategy has fallen out of favor due to temporary concerns about rising inflation, but that deflation will prove to be the largest concern for financial markets and the economy in the year ahead.
"Our confidence in our strategy has increased" despite the stock losses for the year to date, Wood said. [L1N2SZ25L]
The losses in the ARK Innovation portfolio are broad, with 8 of the fund's 10 largest holdings down 8% or more over the last 12 months. The largest declines have come in Zoom Video Communications (NASDAQ:ZM) Inc and Teladoc (NYSE:TDOC) Health Inc, both of which have fallen more than 50% for the year after rallying last year, and streaming company Roku (NASDAQ:ROKU) Inc, which is down nearly 30%.
Tesla (NASDAQ:TSLA) Inc and Intellia Therapeutics (NASDAQ:NTLA) Inc are the only companies in the fund's 10 top holdings to post positive returns for the year.
The fund rose 3.8% on Tuesday and is down 40.4% from its February high.
Despite the losses, investors appear to remain committed to Wood's approach. The fund has brought in slightly more than $5 billion in new money for the year to date, including nearly $229 million during the week that ended December 15, according to Lipper data.
ARK Innovation remains among the top-performing mid-cap growth funds over the last 5 years, posting an 38% annualized return.
The fund's "tremendous success in 2020 was always going to be hard to duplicate, but many piled in to start 2021 and have stayed loyal despite a disappointing 2021," said Todd Rosenbluth, head of mutual fund research at New York-based CFRA. "This bodes well for 2022 when many people have renewed optimism that they can’t struggle in back to back years."