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Wall Street star loses some of his luster | Funds and plans

The queen of the bag in 2020, Cathie Wood lost some of her magic last year. The CEO founded Ark Invest from scratch, in 2014, with a vocation that focused heavily on technology companies. Two years ago, it still had only $ 3.5 billion under management, but its huge investment results attracted a lot of money and at the beginning of 2021, it had over $ 60 billion in assets. Last year, however, the divorce did not follow, and The fund’s valuation decreased by almost 40% from the highest levels.

In fact, it was hardly impossible to maintain the return achieved in 2020. Its star fund, Ark Disruptive Innovation, had returned almost 150%. Theoretical research has shown that in such cases there is always an “arrangement of the average” and that the fund that has performed well in one year tends to perform worse than the market later.

In addition to Ark Disruptive Innovation (with strong bets on Tesla, Zoom – the video call company -, as well as virtual currency service providers …), Cathie Wood has launched funds specializing in space exploration companies, funds in fine technology companies, funds specializing in 3D printing companies.

Things started to go wrong in November 2020. After reaching the stratospheric return, some of his bets began to decline and in just six months, the flagship fund lost 32% of its value. Exactly at the time when more money came.

The most recent entries in your portfolio

  • Currency base. The securities brokerage and custody service for digital assets (mainly cryptocurrencies) first hit the stock market in April and soon became one of Cathie Wood’s favorite stocks. It is now the fourth largest position in his Ark Disruptive Innovation Fund. In first place is still Tesla, a manufacturer of electric cars.
  • Year. Ark Invest has also been very committed to this company, dedicated to the production of content playing videos from content systems (they connect to the TV to watch content from Netflix, HBO, Prime Video, Disney). It is currently the third largest position in the flagship management fund, with 5.6% of its portfolio. Shares have fallen by 50% since this summer.

As it grew, so did the problems. It was harder to find tech companies with great potential. When the fund reached its peak, some investors stopped realizing the huge profits made and the CEO was forced to sell positions to return the money to customers. The easiest stocks to sell were floating, the largest (like Apple or Google) at the same time performing best. These forced sales have ended up upsetting the portfolio.

AlsoWood became the mouse of the cattle market, where many technology companies trade at very high prices. This set it as a target for bearish investors. Michael Burry, the CEO who was inspired by the film The Big Short (for his successful investment against mortgages subtext, in 2007), went so far as to place a bet against the main position of the Woods Fund. Although he later withdrew these bets, he set the manager as the best example of an overheated market.

Even the company Tuttle Capital created a special vehicle to bet against the world of disruptive companies (the fund is called SARK, in a clear reference to the director of Cathie Wood). This fund, established three months ago, has already achieved a 15% return.

Not only Ark Disruptive Innovation closed 2021 with big drops. Also, his car of new network companies lost about 20% of its value. Others, such as robotics, managed to end the year on a positive note, but with minimal reassessment.

Despite a bad financial year, a large outflow of investors ended in April. Since then, the number of shareholders in his ETF has remained stable and Wood has continued to defend the value of investing in disruptive technology.

One of Wall Street’s latest technology bets has been the whole world of cryptocurrencies and all markets and suppliers serving this new industry. In his opinion, virtual currencies such as Ethereum are “grossly undervalued”

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