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Who is Cathie Wood & What is Ark Invest?
The financial markets are made up of various market participants. These entities form the overall market ecosystem and range from small retail traders to large asset management companies, prop trading desks, and fund houses. In this article, we are going to talk about Cathie Wood and her investment management firm “Ark Invest”. Ark Invest is an investment management firm that manages several exchange-traded funds and has been delivering stellar returns on a consistent basis. Based out of New York City, Ark Invest was founded by Cathie Wood in 2014, and since then, it has amassed over $52 billion in combined assets under management. The Ark Innovation ETF is one of their best performing funds and has been outperforming the markets for quite some time.
Cathie Wood and her investment management firm focus solely on disruptive innovations and aim to capture long-term trends that result in huge wealth creation. With several innovative and effective investment strategies, this investment management firm has mastered the art of creating long-term wealth in the financial markets. Now, if you would like to learn more about Cathie Wood and how she founded Ark Invest, then we’ve got you covered! In this write-up, we will explore the life and career of Cathie Wood and go in-depth on her investment management firm. So let’s get started!
Who is Cathie Wood?
Catherine Duddy Wood or better known as Cathie Wood is the founder, CEO, and CIO of Ark Invest. Named as the best stock picker of 2020 by Bloomberg News, Cathie Wood is a prominent name in the world of finance. In March of 2021, two of Cathie Wood’s funds were featured on the list of the ten largest female-run funds. Her investment management firm also boasts of managing the largest actively traded fund; the ARK Innovation ETF.
Cathie Wood was born in Los Angeles on the 26th of November, 1955. Her parents were immigrants from Ireland where her father served in the Irish Army and later in the United States Air Force. Cathie’s father was a radar system engineer and his detail-oriented nature inspired Cathie to discover connections between things. She attended school at the Notre Dame Academy in Los Angeles and graduated in 1974. Soon, Cathie went on to pursue her higher education from the University of Southern California and graduated in 1981 with a Bachelor of Science degree in finance and economics.
Early Career of Cathie Wood
The beginning of Cathie Wood’s career was rather humble and she started working as an assistant economist at “Capital Group”. Cathie secured this job with the help of her college professor and mentor, Arthur Laffer. After working for 3 years at Capital Group, she moved to New York City and started working at “Jennison Associates” as chief economist, portfolio manager, analyst, and managing director. Cathie worked at Jennison Associates for 18 years before she left and co-founded “Tupelo Capital Management” with Lulu C. Wang.
Throughout her career, Cathie kept on honing her skills while increasing knowledge and experience simultaneously. Soon after in 2001, she joined “AllianceBernstein” as their chief investment officer of global thematic strategies. Cathie worked at AllianceBernstein for nearly 12 years and managed around $5 billion. But, working at AllianceBernstein, Cathie wasn’t able to spread her wings and reach her true potential. Cathie’s idea of an actively managed exchange-traded fund based on disruptive innovations was deemed too risky by AllianceBernstein. This is when she left the company and ventured on to create her own investment management firm.
In 2014, Cathie finally founded Ark Invest, which is named after the “Ark of The Covenant”. Through her years of experience and extensive knowledge of the financial markets, Cathie has been able to take Ark Invest to incredible heights where as of now, Ark Invest manages an astonishing $52 billion. Ark Invest’s Ark Innovation ETF is also the largest actively managed ETF.
Cathie Wood’s Ark Invest
ARK Investment Management LLC is an investment management firm that was founded by Cathie Wood in 2014. Based in New York City, Ark Invest manages several exchange-traded funds and has over $52 billion in combined assets under management. This investment management firm delivered a staggering 170% return on investment in the year 2020. Ark Invest manages several ETFs which include the largest actively managed ETF, ARK Innovation ETF. This ETF has amassed over $17 billion in assets under management. Since its inception, the Ark Innovation ETF has been delivering a consistent 39% return on investment to its investors while outperforming the markets in general.
Cathie Wood founded Ark Invest with the sole purpose of investing in disruptive technologies. This investment management firm focuses on sectors such as DNA sequencing, artificial intelligence, gene editing, electric vehicles, robotics, energy storage, fintech, blockchain technology, and 3D printing amongst others. Ark Invest also invests in cryptocurrencies when high potential opportunities present themselves. Cathie Wood’s organization believes in being transparent about its investments and strategies, therefore, ARK regularly publishes its transactions, portfolios, and current analysis while it also opens its research and views to the public. The unique thing about ARK is that apart from hiring finance professionals, they also employ scientists and computer specialists to help explore and assess the coming impact of disruptive technologies in various sectors.
ARK’s Investment & Research Process
Ark Invest believes in innovation and disruptive technology while it aims to generate long-term wealth for its investors by applying its research and strategies in the financial markets. With their “Open Research Ecosystem”, ARK seeks to capitalize on rapid changes and transitions in our modern day-environment. With a combination of top-down and bottom-up research, they look for high-potential companies that are best positioned to benefit financially from disruptive innovations. Applying technological concepts and external inputs to already existing traditional investment approaches, ARK aims to create a creative yet transparent interdisciplinary investment process that yields better returns for its investors. ARK has several interesting and unique ways when it comes to investing in the financial markets, so let’s explore a few of them.
- Thematic Investing
ARK utilizes several investment approaches which includes thematic investing. Thematic investing is a form of investing that focuses on identifying macro-level and long-term trends in specific market sectors. This allows the investor to capitalize on any opportunity that these trends present over time. Identifying these macro-level trends in the disruptive technologies sector allows ARK to invest in companies that stand to benefit from the materialization of these trends. Researching across various market sectors and industries, ARK looks to gain a deeper understanding of the convergence and market potential of disruptive innovations and therefore make appropriate investments that yield higher returns.
- Diversification Across Several Market Sectors & Categories
Another aspect that ARK focuses on is diversifying its investments across all market sectors from small-cap companies all the way to blue-chip stocks. ARK believes that disruptive innovation cannot be constrained by market capitalization, sectors, or geographic boundaries. This means that their investments range from small-caps to mega-caps that work in the rapidly changing environment of disruptive innovations. This also benefits ARK in maintaining a steady performance and delivering a consistent return on investments as diversifying their investments balances the entire portfolio. If one sector underperforms, the other components of their portfolio make up for that particular drawdown. ARK’s portfolio is a perfect combination of highly volatile yet high-potential small & mid-cap companies along with stable and secure large-cap companies.
- Cross-Sector Investment Process
Another aspect of ARK’s funds and portfolios is that they aim to discover and find disruptive innovations that impact several industries and sectors simultaneously. This is unlike traditional funds where their focus is primarily maintained on a single sector. Finding and investing in cross-sector disruptive technologies allows ARK to generate huge returns as the trend continues. However, Cathie Wood is the Chief Investment Officer of Ark Invest and she has the final accountability for any investments and selection of assets and gives all the approvals for any investment decision. So, the remarkable performance of Ark Invest’s ARK Innovation ETF is largely due to Cathie Wood’s ability to identify long-term trends in the disruptive innovation sector.
Why Does Cathie Wood Believe in Innovation?
Cathie Wood’s Ark Invest believes that innovation should be a part of every investor’s portfolio. This is because the future lies in innovation and technologies that have the potential to change the way we live today. Things like electric vehicles, blockchain, DNA sequencing and robotics are some of the areas that hold immense potential to become huge sectors in the coming future. Therefore, ARK believes that innovation should be a part of your portfolio so that you can capitalize on these long-term trends. ARK has three reasons for its investors to incorporate innovation in their portfolios –
- Invest in The Future Today
ARK believes that there are five prominent sectors that are the future. Therefore, ARK offers its investors an opportunity to invest in the future today. While they may not be your conventional investment options, these sectors hold tremendous potential. The five sectors that ARK believes are the future are the following –
- Artificial Intelligence
- Energy Storage
- DNA Sequencing
- Blockchain Technology
- Taking Advantage of Market Inefficiencies
ARK believes in taking advantage of four main market inefficiencies that can allow arbitrage and generate huge returns. These market inefficiencies are usually ignored by traditional fund managers and investors, however, these opportunities hold great potential and must be capitalized. The four market inefficiencies that ARK focuses on are –
- The Market’s Short-Term Time Horizon
Renato Leggi, who is a client portfolio manager at ARK Invest explains how the market’s short-term time horizon presents arbitrage opportunities. “The market easily can be distracted by short-term price movements, losing focus on the long-term effect of disruptive technologies. We believe there is a time arbitrage to take advantage of. ARK seeks opportunities that offer growth over 3-5 years that the market ignores or underestimates”.
As shown in the graph below, ARK aims to be “Early Adopters” in the markets and seeks to capitalize long term trends in the innovative technologies sector.
- The Silo-ization of Wall Street
ARK believes that innovations cannot be constrained into a single market sector, geography, or area. However, the majority of funds and market participants focus only on mainstream investment areas or sectors. That is why ARK constantly searches for opportunities across several areas and applies cross-sector investing methods to benefit from changes all across the horizon.
- The Passive Public Markets
According to ARK, inventors primarily focus on the private markets, while at the same time, public markets have increasingly gone passive. Therefore, ARK believes that innovative public companies that are currently the primary investment choice of investors are the most inefficiently priced area of the market.
- The Closed-Off Research and Investment Mentality
ARK believes that finding opportunities in the innovative technologies sector needs an open approach and a deeper understanding of the markets. This allows proper understanding of the convergence across technologies and therefore, they reach their full market potential. Using their Open Research Ecosystem that combines top-down and bottom-up research, ARK is able to identify and monetize on these opportunities.
Now, after reading this article, we hope that you have a clear picture about Cathie Wood and ARK Invest. While the financial markets are a vast ocean with several market participants, people like Cathie Wood and her investment management firm, Ark Invest, are amongst the best in this industry. As Cathie Wood shares “We’re all about finding the next big thing. Those hewing to the benchmarks, which are backwards looking, are not about the future. They are about what has worked. We’re all about what is going to work”. We hope that this article provided you with value. If you’re interested in learning more about the stock market and finance, then make sure to visit Jeremy’s YouTube Channel “Financial Education” for more such interesting content. Happy investing!