Cathie Wood is Sticking With Innovation and Inflows Keep Coming

Last week was one of the most dramatic for markets in recent history. Turmoil across stocks and crypto dealt more of a wallop to most traders’ minds than a half marathon would’ve done to their desk-wedded lungs.

One big Wall Street name, however, is still breathing easy. ARK CEO Cathie Wood, one of the most prominent investors in innovation and tech through her high-profile ARK ETF, is still buying what’s going down. And backers are still pouring in.

What Goes Down Might Come Up

Wood founded ARK to focus solely on “disruptive innovation,” aka tech-focused firms with high growth potential. That’s led to sparkling returns in the past, such as when the ETF surged 152% in 2020, but results have been less spectacular since the pile-on of global economic uncertainty. ARK, however, is keeping a steely resolve and doubling down on stories it believes in.

The latest example of such a narrative is Coinbase. America’s largest cryptocurrency exchange had a brutal week after its results fell short of expectations and the company got swept up in a global rout of digital-currency assets. As Coinbase’s stock plunged 26%, what did ARK’s $7.8 billion ETF do? It used the opportunity to boost its holdings by 860,000 shares. Wood’s unyielding commitment to her playbook has earned her a loyal fan base:

• “That’s attractive to a certain segment of investors,” Nate Geraci, president of The ETF Store, told Bloomberg. “The benefit of Cathie Wood not wavering from her strategy during this brutal downturn is that I think it will help the longer-term viability of ARK.”
• Despite a 10% drop on Wednesday, its third-worst ever, ARK posted positive inflows of $45 million. The ETF’s net inflows are over $1.5 billion this year, despite the fund being down 61% — a sign that investors still see long-term value in a portfolio of disruptive companies, as curated by Wood.

Trading app Robinhood, one of ARK’s most high-profile bets, surged 25% Friday after another long-term optimist, cryptocurrency billionaire Sam Bankman-Fried, revealed a major stake. ARK jumped 12% Friday, a day after it went up 5%.

Backup Chorus: Other big names share ARK’s long-term optimism. “We know that company managements all over the world are going to continue to invest in innovation just to survive and also to take market share,” Katie Koch, chief investment officer for public equities at Goldman Sachs Asset Management, told Bloomberg. Koch cited Microsoft CEO Satya Nadella, who reminded investors last month that, when it comes to tech, he doesn’t especially concern himself with the short term because “as a percentage of GDP tech spend is on a secular basis by the end of the decade going to double.”