ARK Investment, one of the fastest growing fund managers in 2020, has just seen its flagship company enter a bear market, highlighting a strong selloff in growing tech-related stocks amid a persistent rise in Interest rates.
Headed by the CEO and founder of the company, Cathie Wood, the publicly traded fund ARK Innovation ARKK,
It fell 6.3% on Wednesday, leaving it 20% below its high of $ 156.58 on Feb. 12, meeting the definition of a bear market commonly used by market technicians.
The ARK Innovation ETF has assets of $ 24.6 billion, but its focus on fashion companies such as Tesla Inc. TSLA,
Square Inc. SQ,
Teladoc Health Inc. TDOC,
Zillow Group Z,
and Roku Inc. ROKU,
They have proven to be a blessing and, lately, a nightmare for the fund.
The bottom fall occurs when the Nasdaq Composite COMP,
fell 2.7% to post the worst two-day streak for the tech-laden index since Sept. 8, according to Dow Jones Market Data.
Investors have been shunning the technology in favor of so-called value stocks, those that are considered undervalued, versus growth stocks, which have records or prospects of outperforming their peers.
An increase in the yield of the 10-year Treasury notes TMUBMUSD10Y,
to around 1.47% on Wednesday has propped up the rotation of tech and tech-related companies to energy and finance, which are expected to perform better as the economy recovers from the COVID-pandemic. 19.
Tech names are more vulnerable to a pullback to a higher interest rate regime because those stocks tend not to deliver a return and operate in areas considered overvalued by some measures.
Wood is known for targeting investments in growing names and disruptive innovations. Over the past year, ARK has seen the assets of its seven exchange-traded funds explode more than tenfold.
But now investors are wondering how the high-yield fund manager will respond to higher returns and a shift toward underrated companies as vaccine launches and the expectation of COVID aid packages help drive bets to less-loved sectors of the market. .
Wood recently told CNBC that she is not fazed by returns and is anticipating a pullback, promising to double down on some bets, even as rates remain high, providing a “reality check” for her strategies. It reportedly increased its stake in Zoom Video Communications ZM,
You’ve been benefiting from the work-from-home trend lately.
Watch: Analysts Say Zoom Video May Continue To Thrive In A Vaccinated World
Reports also indicated that it had bought more Tesla as the electric vehicle maker’s shares plunged.
Ark Innovation shares are down 8.6% so far this week, clinging to a gain of less than 1% so far this year. By comparison, the Dow Jones Industrial Average DJIA,
is up 2.2% so far in 2021, the S&P 500 SPX Index,
is up 1.7% and the Nasdaq Composite Index COMP,
it’s up 0.8% after being hit in the last few sessions.