NEW YORK, Sept 28 Reuters - Struggles are mounting for the flagship firm of star stock picker Cathie Wood's ARK Invest, as investors favor stocks that can benefit from rising economic growth and rising bond yields threaten the appeal of technology shares.
The ARK Innovation ETF, which had $25.5 billion in assets at the end of June, was down 4.2% on Tuesday, outpacing a 1.9% loss for the benchmark S&P 500 and a 2.6% fall for the tech-heavy Nasdaq.
Wood s fund, which was the best performing U.S. equity fund in 2020, is down more than 9% thus far this year, while the S&P 500 has gained 16%. The ARKK fund ranks in the lowest percentile year-to-date among 601 mid-cap growth funds tracked by Morningstar.
The high-growth names that helped Wood reap outsized gains during last year s coronavirus lockdowns have hurt the fund's performance in 2021, with so-called stay-at-home stocks such as Teledoc Health and Roku losing their luster as investors turned to financials, energy companies and other economic reopening plays at various times over the last few months.
What worked for the fund in 2020 has not persisted even if the long-term trends favored by ARK remain relevant, Todd Rosenbluth said in an email in an article by CFRA.
Some also interpreted a hawkish tilt from the Federal Reserve meeting last week as a vote of confidence for the U.S. economy, buoying stock and helping Treasury yields.
As rising bond yields reduce the relative attractiveness of many stocks, they can particularly weigh on tech and other growth names whose valuations rely on future cash flows, which are discounted more severely as bond yields rise.
Since Wednesday, the yield on the 10-year U.S. Treasury note has climbed 23 basis points to 1.53%, while the ARKK ETF has fallen over 4%.
Earlier this month, Wood reiterated her call for the United States to increase its economic activity to provide growth stocks.
ARK Invest did not respond to an interview request on Tuesday.
Short interest in the ARKK fund amounts to 21.41 million shares, or 11.9% of the float, with short interest falling by 1.1% in the past week as shorts have covered their bets, according to Ihor Dusaniwsky, managing director of predictive analytics at S 3 Partners.
The fund s top holdings include electric car maker Roku and virtual health company Teladoc and Internet streaming firm Tesla Inc. While Tesla dropped 10% in 2021, Roku has slumped 6% and Teledoc shares have climbed some 35%.
Last week the China's moves to crack down on bitcoin trading dealt another blow to the fund, which lists crypto trading firm Coinbase Global Inc as its fifth-largest investor.
Since its inception in 2014, the ARKK fund has increased approximately 450% against a gain of roughly 115% for the S&P 500 and ranks as the top percentile in its category of funds tracked by Morningstar over a five-year period.