ARKK's Cathie Wood: Investors' nightmare & Wealth destroyer?
I abandon my morning routine of scrolling through the reading list, making mental note of “potential” article/s to read when I came across this article (refer to above title).
It better be insightful….
I think it is fair to say that no funds manager wants to be known as the largest wealth destroyer especially, not when the S&P 500 Index is rising and breaking new heights, week in week out.
Morningstar’s observations.
Unfortunately, this is exactly what Morningstar is calling Cathie Wood's ARK Family of funds.
ARK ETF Trust, which runs the popular $ARK Innovation ETF(ARKK)$, has wiped out $14.3 Billion in investors' wealth over the past 10 years, based on latest analysis from Morningstar.
That ranks ARK ETF Trust, the No. 1 wealth destroying fund family.
ARK has vaporized twice the value of No. 2, KraneShares.
Losing this kind of money on an ETF sting like hell. This is because, comparatively speaking — other mutual funds and ETFs minted $11.1 Trillion in wealth (profits) for the same period. Ouch!
History: 2021 - 2024.
Between 2020 and 2021, ARK funds garnered huge asset inflows, totaling an estimated $29.2 Billion.
Based on Morningstar's Amy Arnott:
In 2022, ARK funds were decimated in the bear market, with losses ranging from 34.1% to 67.5% for the year.
Many of its funds enjoyed a strong rebound in 2023, but that was not enough to offset the 2022 losses."
This year (2024) is not off to a good start for ARK, either.
ARKK funds - 2024 movements in GREEN
ARK Destroyer
What is hurting the ARK family's performance?
It is mainly the flagship ARK Innovation Fund (ARKK).
Morningstar found out that the $9.3 Billion-in-assets ETF single-handedly destroyed -$7.1 Billion in investors' wealth in the past 10 years through December 2023.
This ranks ARK Innovation as the 3rd worst destroyer of value.
What makes it even more preposterous is that investors actually paid a 0.75% annual fee for the “privilege” to have their wealth destroyed.
This is not the only struggling ARK fund. $ARK Genomic Revolution Multi-Sector ETF(ARKG)$ lost a whooping -$4.2 Billion in wealth in 10 years; making it the 5th worst fund.
As said, ARK Innovation has been off to a rough start in 2024. (see below)
ARKK vs ARKG vs S&P 500 Index.
YTD, the popular ARKK ETF is down - 7.52%. making it the 2nd worst US diversified ETF in 2024 (so far).
YTD, the genomic ARKG ETF is down -9.14%.
YTD, the S&P 500 Index is up +4.46%.
Meanwhile, other mega cap-growth and momentum stocks are pulling ahead eg.
$NVIDIA Corp(NVDA)$. YTD, up +41.64%.
$Meta Platforms, Inc.(META)$. YTD, up +31.31%.
$Amazon.com(AMZN)$. YTD, up +12.82%.
Top Wealth Destroyers
Lesson learnt.
"The biggest value destroyers in the fund industry illustrate that there is no guarantee of success, even during a generally favourable market environment".
Equally important, they also provide a valuable case study in how not to invest.
ARKK: Just for the record.
Cathie Wood's ARKK ETF holds $7.5 Billion in assets.
Its track record: (at a glance)
In the past 12 months (1 year), it has generated a return of just +5.0%.
In the past 36 months (3 years), it has generated a return of -32%.
In the past 60 months (5 years), it has generated a return of +2.0%.
Cathie Wood’s ARKK fund did have a “freak” return of +153% in 2020, the year where US market was awashed with excessive liquidity due to the central bank’s quantitative easing (QE) strategy in a bid to keep the US market from crashing.
This is not impressive, compared to the S&P 500 index:
In the past 12 months (1 year), it has posted +21%.
In the past 36 months (3 years), it has posted +11%.
In the past 60 months (5 years), it has posted +15%.
In true Cathie Wood’s style, she has defended herself from the criticism:
“I do know there are companies like that one (Morningstar) that do not understand what we are doing”.
“We do not fit into their style boxes. And I think style boxes will become a thing of the past as technology blurs the lines between and among sectors”.
My viewpoints: (mine & mine only)
I confessed. When I started dabbling in US stocks in mid-2020, I took to Youtube vloggers and “learnt” from them, day in day out watching their videos.
I listened to Cathie Wood too and her buckets full of mambo jambo.
“Willingly and stupidly”, I had bought into Bionano Genomics, Inc. (BNGO) & Nano Dimension (NNDM) and stuck with paper losses.
Thank goodness I did not listen hard enough to buy into her “highly recommended, highly disruptive” Teladoc Health, Inc. (TDOC). If I did, I would not have survived the trauma when it crashed big time in early 2021.
Thankfully that my commonsense prevailed, after listening to all these vloggers for a while, things just don’t seem to add up.
One by one, I unsubscribed them and go back to basics, started learning from the very beginning.
It is true, there is clarity in silence.
As for Cathie, she is still making her rounds in all sorts of media; just to get herself heard and visibility.
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