Cathie Wood’s flagship Ark fund tops $300mn in fees despite losses
Cathie Wood’s Ark Investment Management has earned more than $300mn in fees on its flagship exchange traded fund since its inception nine years ago, while wiping out almost $10bn of investors’ cash in the same period.
Standing as one of many low-interest rate phenomenons, there was once a time when investors praised the fund’s forward-thinking investments in disruptive technology. Investors paid little attention to the fund’s 0.75% fee being twice the average for actively managed ETFs. Why would they? The Fed was printing money, the share price of $ARK Innovation ETF(ARKK.US$ continued to climb, and capital was sloshing around like petrol in the tank of an offroad dirtbike. But then the final bell at the bar began to ring and as is typical of market cycles, investors remained illusioned; thinking the music was still playing in the background. Denial would follow, and then later illusioned would turn into disillusionment. Tech stocks got well and truly romped. From the point of ARKK’s high in February 2021, the Nasdaq 100 has fallen ~17%, which is a bad stretch of performance by anyone’s standards. Not our Cathie though, she is built different. Her flagship fund has fallen ~75% over the same period and today still holds many of the fallen angels that marked the end of the 2020 bubble.
A list of ARKK’s current holdings, data accurate as of March 9th 2023
Some of ARKK’s largest inflows came right before the top. In the first two weeks of February 2021, ARKK recorded more than $3 billion of inflows; a period when the fund was up more than 700% since inception. Assets at this point in time were just shy of $28 billion and have since dwindled to $7.6 billion. Since its inception nine years ago the ARKK fund has collected ~$310 million in fees. I know what you must be thinking; “it must be hard to earn a comfortable living now that the music has stopped”. Surprisingly not. Ark has earned more than 70% of those fees since it peaked in February 2021; more than $220 million while the share price plummeted by 75%, not bad. Just this year Factset reports that it has brought in an average of $230,000 in fees per day.
“There is a category of investor that is trapped. They’re anchored to the price at which they purchased it, and hoping it gets back there someway, somehow”.
It’s true that ARKK inflows remain peculiarly robust. Over the last three years (since the outbreak of the pandemic) the fund has recorded net inflows of more than $15 billion. Over the trailing 12 months inflows are a little over $650 million.
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