Cathie Wood is standing by her firm’s ARK Genomic Revolution ETF (ARKG) after a first-to-worst year that has left the the healthcare-focused strategy down about 35%.
The ETF’s performance is one of the worst of all active funds so far this year and a stark reversal from 2020, when it was up more than 180%, one of the best showings of any fund, in a banner year for Wood’s ARK Investment Management.
In a recent panel with the economist Arthur Laffer, Wood acknowledged that her genomics ETF has been slammed in 2021 but said she remained bullish about its prospects.
‘We’re probably more excited about that opportunity in terms of how it’s going to transform lives than any of our others,’ Wood told Laffer, her mentor and friend, during a virtual discussion hosted by the Economic Club of New York.
The $5.3bn ETF has about 46% of its assets in its top 10 holdings, all of which had been in the portfolio for at least a year as of Tuesday, per Morningstar data. Only three of them have generated positive returns this year, led by Intellia Therapeutics at a whopping 128% and followed by Pacific Biosciences of California (6%) and Beam Therapeutics (3.6%)
But that performance has not outweighed the hits from other top holdings, such as Teladoc Health (7.5% of the porfolio and down 53% over the past year), Exact Sciences Corp. (6.67%, down about 38%) and Ionis Therapeutics (4% of ARKG and down 40%).
‘The platform that has been hit the hardest in this correction is genomic revolution,’ Wood said. ‘And the reason is many of these companies are losing money. This is a movement in its infancy.’
Wood is an evangelist for the revolution her ETF is based on, citing the potential of DNA sequencing and gene editing technologies. During the panel she wondered aloud whether companies in this sector could one day help nip cancers in the bud with regularity.
Laffer also brought up recent criticism of Wood in the Financial Times from Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management and formerly Wood’s boss when the pair worked at AllianceBernstein, that the ARK leader’s ‘biggest blind spot is managing risk and volatility.’
Wood said her funds’ returns and lack of correlation with other strategies would serve to lower risk.
‘Over a five-year period, ARK’s strategy would increase returns and lower risk because the correlation of our returns with other strategies is very, very low,’ Wood said.