(Bloomberg) - Years after Cathie Wood became the face of pandemic-era investing euphoria, her flagship fund is marking a difficult milestone.
The ARK Innovation ETF (ticker ARKK) completed a 10-day losing streak earlier this month, its longest on record. Over the past half decade — a period that spans the latter part of the pandemic, the surge in interest rates and the market’s subsequent rebound — ARKK is down more than 50%, even as the Nasdaq 100 has seen gains of 80%.
Returns can look very different depending on where the clock starts. Over the broader post-pandemic cycle, however, the gap with major benchmarks has been pronounced.
Investors who bought into her vision of disruptive innovation that made her a household name — electric vehicles, genomics and financial technology — have watched those bets falter as interest rates rose and the market grew more selective about speculative growth stocks.
Assets swelled to about $28 billion in February 2021, at the height of Covid-era enthusiasm. They now stand at roughly $6 billion, a decline of about 80% from that peak. The fund is down 9% so far this year and has recorded roughly $120 million in net outflows year to date, data compiled by Bloomberg show.
Together, the figures illustrate how quickly market leadership can rotate — and how punishing that shift can be for investors who arrive late. Those who bought at inception and held through every swing have done well. But the flow data tells another story: the bulk of capital arrived near the peak.
“It’s exceptionally rare for an active manager to be ‘right’ for a long period of time,” said Dave Nadig, president and director of research at ETF.com. “The overwhelming math of active management is that the average investor will underperform the market.”
Comparisons with technology benchmarks are common, though ARKK’s portfolio differs meaningfully from traditional sector indexes. The fund has significant exposure to genomics and digital assets, areas that are not heavily represented in the Nasdaq 100.
Wood also emphasizes the critical role that timing plays. Her flagship fund ARKK has gained more than 18% a year over the past three years, ranking in the top 8th percentile of mid-cap growth funds tracked by Morningstar. While its five-year performance places it near the bottom of its peer group, over a 10-year horizon the fund has delivered an annual return of more than 17%, putting it in the top 5th percentile, according to Morningstar.
“Our process isn’t defined by style boxes, but long-term results are clear: ARKK, ARKQ, and ARKW rank in the top decile relative to Morningstar peers over their full histories, with ARKQ and ARKW in the top percentile,” Wood said in a statement. “Cherry-picking shorter periods can distort the picture; since-inception annualized returns remain the fairest industry standard.”
Morningstar has assigned a negative rating to Wood’s strategy, saying the fund is likely to underperform its benchmark and most peers on a risk-adjusted basis. While the fund’s returns over the past decade outpaced those of most of its peers, they did so with volatility roughly twice as high.
Wood’s focused bets worked spectacularly during the stimulus-fueled boom. As monetary policy tightened and leadership narrowed to a handful of mega-cap stocks, those same positions became a drag.
Investors continue to crowd into tech companies big and small. But the broad enthusiasm for speculative, long-duration growth stocks that defined the low-rate era has faded. ARKK remains concentrated in companies whose valuations depend heavily on future earnings expectations, making them particularly sensitive to higher borrowing costs. That exposure has amplified the swings. Tesla Inc., which accounts for about 11% of the portfolio, is down this year, as are Tempus AI Inc. and Roku Inc., among others.
Price performance alone does not capture how shareholders actually fared.
Since inception, ARKK has attracted nearly $12 billion in net inflows, data compiled by Bloomberg show. Yet as of late January, the fund held about $6.2 billion in assets — roughly $6 billion less than investors have contributed over time. The shortfall reflects capital that entered during periods of strong performance and was exposed to the subsequent decline. By that measure, ARKK represents one of the largest divergences between investor inflows and remaining assets in the roughly $14 trillion US exchange-traded fund market, a sign of wealth erosion.
Wood has long argued that ARKK is intended to complement broad market indexes rather than mirror them, and that its role within a diversified portfolio depends on disciplined rebalancing — trimming exposure after rallies and adding during drawdowns.
For investors who bought during the boom and held through the bust, that strategy worked as designed — just with the wrong kind of volatility.
“While some of her predictions have not panned out, Cathie has always been very truthful about what the ETFs will invest in and she’s never wavered from that,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “The ‘tourists’ have left and the true fans remain, which is probably a good thing for her type of strategies.”
By Isabelle Lee and Ye Xie
With assistance from Sam Potter
