Ark Empire Hemorrhages Investors as Exodus Deepens, Faithfuls Aghast

Cathie Wood's Ark Invest faces substantial challenges as investor outflows intensify. Assets under management have plummeted by 80%, with outflows reaching $2.24 billion in April 2024. Ark's flagship fund, ARKK, has seen outflows exceeding $1.3 billion this year. The underperformance of Ark's funds, attributed to high interest rates and disillusioned investors, has led to concerns regarding the concentration of funds in underperforming companies. Despite promising growth prospects, loyal shareholders express frustration with the firm's performance.

Cathie Wood's Ark Empire Suffers as Investor Exodus Deepens: 'Loyal Shareholders Express Dismay'

Once hailed as a visionary in the realm of disruptive technology investing, Cathie Wood's Ark Invest has encountered a tumultuous downturn, marked by a massive exodus of investors.

In the halcyon days of early 2021, Ark Invest commanded an impressive $59 billion in assets under management (AUM) across its six funds, making it the world's largest active ETF manager. However, a mere three years later, that figure has plummeted by a staggering 80%, leaving the firm with a mere $11.1 billion under its purview.

This precipitous decline can be attributed to a confluence of factors, including the dampening effect of rising interest rates on Wood's long-term speculative technology bets, coupled with a subsequent wave of disenchantment that has spurred investors to withdraw their funds.

As a testament to the magnitude of the outflows, investors had divested a remarkable $2.24 billion from Wood's actively managed funds by the end of April 2024, almost tripling the outflows recorded throughout the entirety of 2023.

Ark's flagship fund, the ARK Innovation ETF (NYSE:ARKK), has been particularly hard-hit, experiencing outflows exceeding $1.3 billion in less than four months of this year, far eclipsing the $578 million lost in all of 2023.

The following table provides a comprehensive overview of fund flows for Ark's actively managed ETFs in 2024 compared to 2023:

Source: VettaFi

"Loyal shareholders have become frustrated," lamented Todd Rosenbluth, head of research at data provider VettaFi, in an interview with The Wall Street Journal.

Despite Ark's promising prospects and Wood's disruptive investment philosophy, Rosenbluth expressed concern over the fund's heavy concentration in underperforming companies. With the sole exception of Coinbase Global Inc. (NASDAQ:COIN) and Robinhood Markets Inc. (NASDAQ:HOOD), all other top 10 holdings in the Ark Innovation ETF have failed to deliver positive returns in 2024.

Underperformers in the Ark Innovation ETF

Data as of April 23, 2024

Short Strategies Emerge for Cathie Wood's Ark Funds

The underperformance of Cathie Wood's actively managed funds has spawned a new strategy among ETF issuers: shorting Ark ETFs.

AXS Investments introduced the AXS Short Innovation Daily ETF (NASDAQ:SARK) in late 2021, which shorts Wood's flagship ARKK fund and has since gained 40%. In contrast, the ARKK Innovation ETF has lost more than 60% over the same period.

AXS Investments expanded its offerings in May 2022 with the launch of the AXS 2X Innovation ETF (NASDAQ:TARK), which shorts ARKK with 2x leverage.

Shorting Cathie Wood's Flagship Fund Delivers Robust Returns

Greg Bassuk, CEO of AXS Investments, recently highlighted a substantial surge in inflows into these two funds during an appearance on CNBC, stating, "With thousands of startups and small, fast-growing companies driving innovation and having received funding from Silicon Valley Bank and similar banks, this could really foreshadow concerns about the ability of these types of innovation-driven companies to obtain financing in the future."

In the wake of the Silicon Valley Bank collapse, the AXS Short Innovation Daily ETF and the AXS 2X Innovation ETF witnessed a remarkable spike in trading activity, surging by 80% and 50%, respectively, within a seven-day period.

Despite the challenges that Ark Invest has faced, Cathie Wood remains unwavering in her belief in the long-term potential of disruptive technology and the transformative power of innovation. "SECRET WEAPON OF ACTIVE INVESTORS" Boost your stock market game with the #1 trading tool for "news & everything else": Benzinga Pro - Click here to start your 14-day trial now!