“We thought the era of the rockstar manager was over,” said analyst Eric Balchunas, an exchange-traded funds expert at Bloomberg Intelligence. Indeed, in recent years money has flooded into cheap index funds and ETFs, many of which robotically track a benchmark rather than trying to beat the overall market. So-called active fund managers have often struggled to beat them.
Then came Cathie Wood, the CEO and founder of ARK Invest, whose actively managed ETFs have done just that. ARK’s Innovation ETF has rallied more than 170% during the past 12 months, blowing away the 17% gain for the S&P 500 Index of large US stocks. Her bold investing calls have inspired legions of fans on social media—and now, apparently, a line of ARK merchandise on Dasnooze, a website that sells stuff based on Wall Street themes and memes, including a $22 Pershing Square mug and $115 GameStop shorts.
“I was wrong,” Balchunas said of his call about the end of rockstar managers. “People love her. There’s not a lot of ETF TikToks, but there are a lot on ARK.”
Wood’s fans include the person behind Dasnooze, who declined to divulge their name but claims Wood-themed merch outsells everything else on the site, evidently beating out items like the JPOW (Federal Reserve chair Jerome Powell) mug and a bull-and-bear beanie.
“Just a huge fan of ARK and Cathie Wood,” Dasnooze’s proprietor told Quartz via a direct message on Twitter. “My top seller. You should buy one.”
The incredible rise of ARK Invest
As fans multiply, money is flooding into ARK’s funds, which have nearly $50 billion in ETF assets, according to Bloomberg Intelligence. That’s up from $6.6 billion in January 2019.
The question for ARK is how well the team’s picks hold up if and when the stock market has another downturn. Wood has championed the buzziest assets that seem the least connected to anything resembling economic reality, from Tesla stock to bitcoin. The firm says it’s focused on “technological innovations centered around DNA sequencing, robotics, artificial intelligence, energy storage, and blockchain”—a series of promising but ultra-hyped technologies. It has more than a whiff of the “new era” thinking that tends to come with technology bubbles. ARK didn’t reply to a request for comment.
Balchunas says Wood, who was previously the chief investment officer of global thematic strategies at AllianceBernstein, is more than just a recent sensation. Her call for Tesla stock to climb to $4,000 when it was trading at $300 in 2018, and making the prediction on the big news networks, was shockingly bold. (Tesla shares are now trading at around $4,400, after accounting for a five-to-one share split in August.) “She made the Tesla call and that was mocked for a year,” Balchunas said. “It’s sort of like taking all chips at the table and just putting them in the middle.”
In a recent interview with Goldman Sachs, Wood said part of her edge is that her team is organized by “innovation platforms,” like artificial intelligence and DNA sequencing, instead of industry sectors, and she has said they use social media to test and crowdsource ideas. Wood says ARK has assembled a group of young engineers, computer scientists, and mathematicians to come up with new investment ideas, and diversity is part of her team’s “secret sauce.”
Better to be lucky and good
It remains to be seen whether Wood can sustain her incredible record. Some investors get known for a great idea and then struggle to replicate it. Meredith Whitney became a star analyst after correctly foreseeing in 2007 that Citigroup would face a shortfall in capital, but her later predictions about widespread municipal defaults appeared to fizzle. Balchunas says Bloomberg’s quantitative research suggests Wood is both lucky and good—her firm is investing in sectors that are nuclear hot, but that only explains about half of her outperformance.
“They aim to look 10, 20 years in the future, and then figure what companies will be there, what companies are making that future,” Balchunas said. “That’s not a terribly new concept, but they do it really well, and they caught a wave perfectly.”