Cathie Wood is among the most famous – or perhaps infamous – investors. Her funds, labeled under the Ark Investment umbrella, have attracted huge attention over the past several years. However, many of her funds have significantly underperformed relative to investors’ expectations and the broader market.

Ark Invest attracted massive investments due to its strong emphasis on technology stocks and companies with high growth potential. Despite some early success, ARK funds have recently underperformed the broader market, with some even showing negative returns. 

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For a clearer picture of the funds’ performance, the Ark Innovation ETF (ARKK) is down around 13.5% YTD, and the Ark Next Generation internet ETF (ARKW) is up only 3% YTD as of the time of writing. In comparison, the Invesco QQQ ETF (QQQ) is up over 18% YTD. Additionally, while the ARKK ETF has gained around 124% since its inception in 2014, it has dropped over 70% from its highs in 2021. 

Much of the portfolio’s losses can be attributed to large bets on single-name stocks that have not performed as ARK would have hoped. Stocks such as Teladoc, Roku, and Block, Inc. posted negative returns in 2024, making up a sizable portion of ARK’s portfolio. Only two out of the top 10 holdings – Coinbase Global, Inc. and Robinhood Markets – have generated positive returns this year. 

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Wood’s recent sale of Tesla in the ARKK portfolio is a prime example of this underperformance. In early July 2024, Wood unloaded Tesla shares in the ARKK portfolio, selling over 56,000 shares for an estimated value of around $13 million. Later in July, Wood sold an additional $8 million of Tesla shares. 

Additionally, the ARK funds make several trades daily within the portfolio and strongly emphasize active management. While this is not necessarily bad, it leads to a higher expense ratio, resulting in lower net returns for investors. The largest ARK ETFs have expense ratios of 0.75% or higher, which can be costly and are well above the average for all ETFs. 

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All of this combined has led to massive investment outflows for ARK. From January to April 2024, investors withdrew $2.24 billion from ARK funds, most of which came from ARKK. However, many loyal investors have decided to stick it out with Cathie Wood and have not yet pulled their investment. These investors remain optimistic about the long-term vision that Wood and her team have for disruptive innovation, believing that ARK’s focus on cutting-edge technologies will ultimately pay off. Despite short-term volatility and underperformance, some still believe ARK’s high-conviction bets will deliver substantial returns over time.

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