Cathie Wood’s ARK Innovation ETF Sinks During Selloff

Cathie Wood’s ARK Innovation ETF Sinks During Selloff

Cathie Wood’s $17 billion fund has fallen in five of the past six trading sessions, on pace for its biggest weekly loss since February.

Photo:

BRENDAN MCDERMID/REUTERS

A broad selloff in technology shares is punishing fund manager

Cathie Wood’s

flagship ARK Innovation exchange-traded fund.

The popular ETF, which goes by the ticker ARKK and targets fast-growing, “disruptive” companies, fell 5.5% Friday, as technology stocks staged a sharp pullback. Concerns about inflation and the possible economic impact of the new Omicron variant of the coronavirus knocked down shares of holdings including

Tesla Inc.

and

Robinhood Markets Inc.,


HOOD -10.95%

while DocuSign Inc. dropped sharply after a disappointing quarterly earnings forecast.

Ms. Wood’s $17 billion fund has fallen in five of the past six trading sessions, on pace for its biggest weekly loss since February. Tesla, ARK’s biggest holding, fell 6.4% Friday.

Coinbase Global Inc.


COIN -6.69%

and Square Inc. each have fallen more than 12% over the past week.

DocuSign shares tumbled 42% Friday, making it by far the biggest drag on ARK’s portfolio. Biotech company

Ginkgo Bioworks,

which disclosed last month it is facing an informal inquiry from the Justice Department, dropped 15%.

Those losses, on top of the year’s earlier declines, have pulled ARK’s Innovation ETF down 25% for the year, Ms. Wood’s biggest annual loss since the fund’s launch in 2014. The S&P 500, in comparison, is up 21%.

Ms. Wood’s big bets on fast-growing, speculative companies paid off last year. But the strategy has been a loser in 2021, as investors question the valuations of many of those stocks. Valuation concerns were magnified this week after the Federal Reserve suggested it could raise interest rates sooner than expected, which would likely hurt many of the growth stocks ARK favors.

A spokeswoman said Ms. Wood wasn’t available for comment. She has loaded up on more shares of some of her holdings, including buying more than two million shares of Ginkgo over the past week. In a CNBC interview this week, she reiterated her conviction that growth stocks will bounce back.

“We are not in a bubble,” Ms. Wood said in the interview. “I think we have not begun rewarding innovation on what’s about to happen.”

Investors have largely stuck with ARKK. The fund has gained $4.9 billion in fresh capital so far this year, and had outflows of $7.7 million over the past week, according to FactSet.

Some, sensing a shift in the stock market, have piled into wagers against Ms. Wood’s

ARK Innovation ETF.

About 15% of the ETFs shares were recently being shorted, nearing the highest level ever, according to data from S3 Partners.

Various Wall Street strategists and other portfolio managers have pulled away from pricey growth stocks in favor of cyclical stocks. The latest jobs report, which missed employment projections, deepened that view for some.

“The Fed is raising interest rates, there’s higher inflation. That thesis doesn’t bode well for unprofitable technology companies,” said

Matthew Tuttle,

chief executive of Tuttle Capital Management, which last month launched an ETF designed to track the inverse of ARKK’s performance. “And you’re seeing that play out.”

Tuttle’s Capital’s Short Innovation ETF uses swap contracts to essentially short ARKK. Going by the ticker SARK, the fund has added $29 million in net flows since launching last month. It rose 5.2% Friday and is up 27% since Nov. 9.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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Appeared in the December 4, 2021, print edition as ‘Wood’s ARK Innovation ETF Sinks Amid Selloff.’

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