ARK Investment, one of the fastest-growing fund managers in 2020, has just seen its flagship company enter a bear market, highlighting a rapid sale of technology-related growing stocks amid a persistent rise in interest rates. of interest.
Led by CEO and founder of the firm, Cathie Wood, the ARK Innovation ARKK listed fund,
it fell 6.3% on Wednesday, leaving it 20% below its peak at $ 156.58 on Feb. 12, meeting the bearish market definition typically used by market technicians.
The ARK Innovation ETF has $ 24.6 billion in assets, but focuses on animated companies like Tesla Inc.
Square Inc. SQ,
Teladoc Health Inc. TDOC,
Zillow Group Z,
and Roku Inc. COURSE,
they have proven to be a fortune – and, ultimately, a disaster – for the bottom line.
The bottom drop is due to the Nasdaq Composite COMP,
fell 2.7% to record the worst two-day decline for the technology-laden index since Sept. 8, according to Dow Jones market data.
Investors have been shunning technology in favor of so-called value stocks, those that are considered undervalued, as opposed to growth stocks, which have higher pair records or prospects.
An increase in the yield on the 10-year Treasury note TMUBMUSD10Y,
on Wednesday, around 1.47%, it has supported the rotation of technology-related and technology-related companies towards energy and finance, which are expected to perform better as the economy recover from the COVID-19 pandemic.
Technical names are more vulnerable to a setback in a higher interest rate regime because these shares do not usually offer a return and operate in areas considered overvalued by some measures.
Wood is known to guide investments in growing names and disruptive innovations. Over the past year, ARK has seen the assets of its seven publicly traded funds explode more than tenfold.
But now investors are wondering how the high-yield fund manager will respond to richer returns and a shift to undervalued companies, as the deployment of vaccines and the expectation of COVID aid packages help drive bets on sectors. least beloved of the market.
Wood recently told CNBC that he is not bothered by returns and that he expects a setback, promising to double in some bets, even though rates remain high, providing “reality check” for his strategies. According to reports, it increased its stake in Zoom Video Communications ZM,
who has been a beneficiary of the trend of working from home lately.
See: Analysts say Zoom Video may continue to thrive in a vaccinated world
Reports also indicated that he had bought more Tesla as the shares of the electric vehicle manufacturer collapsed.
Shares of Ark Innovation have fallen 8.6% so far this week, to less than 1% year-on-year. In comparison, the Dow Jones Industrial Average DJIA,
has risen 2.2% so far in 2021, the S&P 500 SPX index,
has risen 1.7% and the Nasdaq Composite Index COMP,
has increased by 0.8% after being attacked in recent sessions.