• Cathie Wood’s ARK Invest fund with big losses
• According to Wood, the turnaround in interest rates has triggered “earthquakes”.
• According to Wood, billions in losses also have a good side
For star investor Cathie Wood, the last year was very mixed. The gloomy market mood and the numerous rate hikes by the US Federal Reserve associated with the high inflation rates have led to heavy discounts on the ARK Invest theme ETFs. The funds specializing in innovative technologies, which primarily focus on stocks from the tech and crypto scene, were avoided by investors in an environment of increasing uncertainty. The flagship fund ARK Innovation ETF 2022 lost a total of 67 percent in value. Although the entire market had to take a beating last year, compared to the market-wide US index S&P 500 (-19.4 percent), the minus for Cathie Wood was particularly large.
But not only the ETFs themselves lost value, ARK Invest also sold numerous stocks during the market downturn and made additional losses in the process. In an interview with Bloomberg TV, the ARK founder revealed that she lost two billion US dollars by selling shares during the market downturn. The ARK Innovation ETF has fallen steadily since its high in February 2021 and the stocks it contains have been reduced from 50 to 28 shares.
Fed rate policy led to ‘earthquakes’
“The rating slump […] was so heavy on our strategy […] and it was all related to the Fed raising interest rates 19x in less than a year. Like never before,” said the tech enthusiast in an interview with CNBC. Wood compares the effects of the Fed interest rate hike with an “earthquake”: “It’s like an earthquake, actually not just for our strategy. We now believe that the earthquake is shifting from our strategy to other and cyclical strategies.” She believes that this pressure on the very stocks that are sensitive to interest rate changes is likely to continue for another six to nine months. It is not the first time that The investment expert criticized the interest rate policy of the US Federal Reserve. Wood had warned in the past that the significant rise in interest rates could lead to deflation. In her opinion, the institution should have seen the banking crisis coming sooner, as it was “visible to everyone ” been.
Still, Wood can still see something good in her ETFs’ billion-dollar losses, as she revealed to Bloomberg Technology. This could be offset against the tax on future capital gains: “Right now it’s over $2 billion against which we can take future profits and then focus on our most compelling names.”
Year-to-date, the flagship fund ARK Innovation ETF has already recovered around 38 percent (as of March 30, 2023). It remains to be seen whether the positive trend will continue in the longer term.
Editorial office finanzen.net
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