During their scorching run this year, individual investors have shunned Cathie Wood’s ARK Innovation Fund, but some market observers think that could change if their tolerance for risk keeps increasing.
The $8 billion fund, which topped all U.S. equities funds during the pandemic surge of 2020 but saw a precipitous decline last year, has increased by almost 37% year to date, surpassing broader markets.
Despite these increases, the fund has had net outflows of more than $250 million since the year’s beginning, per Lipper statistics. This tendency has continued throughout the most recent upswing in the market: approximately $157 million has left the fund in the last eight weeks, during which time its price increased by almost 15%. Comparatively, the tech-heavy Nasdaq 100
The fund’s parent business, ARK Invest, declined to comment when contacted.
Despite the stock market’s recovery, investors have generally turned away from equities funds in 2023, in part because the fixed income market is offering attractive alternatives with high returns,
In the case of ARK, the lack of inflows may also be due to the actions of individual investors, who account for a substantial portion of the fund’s owners and have been reluctant to return after many suffered severe losses when it fell by as much as 60% last year.
“Following the problems of the previous era, many investors have lost interest in the ARK ETFs and have switched to alternative methods, he added. Those who remained faithful “don’t seem willing to add more exposure,”
However, Virag Shah, portfolio strategist at Van Leeuwen & Company, predicted that investors may eventually give Cathie Wood’s flagship fund another look given the recent expansion of the equities market’s surge this year outside a select group of megacap stocks.
In contrast, Morgan Stanley analysts said this week that sentiment among institutional and retail investors has risen to its highest point in more than two years and has registered readings in the top quintile during the past few decades.The more than 100% rise in ARK’s top investment, Tesla Inc. (TSLA.O), which accounts for about 12% of its assets, has substantially driven the company’s 2023 boom. On Wednesday, the company’s shares plummeted by about 5% as growth stocks suffered from worries about rising interest rates.