- The rotation away from growth and into value stocks has dinged Cathie Wood's Ark Invest.
- ARK's flagship ETF has seen its assets under management fall 50% from its February peak.
- The decline in AUM has been mostly driven by price declines rather than outflows from investors.
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The poor performance seen in Ark Invest's flagship fund over the past year has led to its assets under management falling by 50% from its peak last February.
That's a big hit to Ark Invest's revenue. Based on the fund's 0.75% expense ratio, the $14 billion decline in AUM represents a $105 million loss in annual revenue for Ark Invest.
The decline comes amid a violent rotation out of speculative high-growth tech stocks and into safer value stocks, which has been exacerbated by a Federal Reserve that is on the verge of raising interest rates and reducing its balance sheet.
Since the peak in ARK's AUM last February, the ETF's price has fallen by about 43%, suggesting that the decline in assets was driven mostly by the decline in its underlying stock holdings, but also in part by investors selling out of the fund.
That selling by investors seems to have accelerated into November and December, as investors likely sold for tax loss harvesting purposes.
But ARK's weakness last year has spilled over into 2022, with the ETF falling as much as 11% in the first two weeks of the year. Only four of the ETF's 45 holdings have generated a positive return so far this year, with some of its holdings down as much as 42% year-to-date.
Cathie Wood is feeling the pain along with her investors, as she revealed in a recent market update that the ARK ETFs make up more than half of her retirement account, and a considerable amount of her net worth.
"I do want you to know that, of course, we've been through a very difficult time since the significant rotation from growth into value started nearly a year ago in mid-February, and I want you to know that we're in there with you," Wood said.