ARK Investment, one of the fastest growing fund managers in 2020, has just seen its flagship business enter a bear market, highlighting a rapid sell-off in growing, technology-related stocks amid a sustained rise in interest rates.
Led by the CEO and founder of the firm, Cathie Wood, the exchange-traded fund ARK Innovation ARKK,
fell 6.3% on Wednesday, dropping 20% from its high of $ 156.58 on Feb. 12, meeting the definition of a bear market commonly used by market technicians.
The ARK Innovation ETF boasts assets of $ 24.6 billion, but its focus is on busy companies, including Tesla Inc. TSLA,
Square Inc. SQ,
Teladoc Health Inc. TDOC,
Zillow Group Z,
and Roku Inc. ROKU,
proved a blessing to the fund – and previously a fine.
The drop for the fund comes as the Nasdaq Composite COMP,
According to Dow Jones Market Data, it dropped 2.7% to register the worst two-day slides for the technology-laden index since September 8th.
Investors have evaded techniques in favor of so-called value stocks, which are considered undervalued, versus growth stocks, which have records or prospects for growing peers.
An increase in the 10-year treasury yield TMUBMUSD10Y,
to about 1.47% on Wednesday supported the exchange of technology and technology-related businesses and energy and finance, which is expected to perform better as the economy recovers from the COVID-19 pandemic.
Technical names are more vulnerable to a setback in a higher interest rate regime because the stocks do not tend to yield returns and work in areas that are considered overvalued by some measures.
Wood is known for directing investments in growing names and disruptive innovations. Over the past year, ARK has seen its assets explode more than tenfold in its seven exchange traded funds.
Now investors are questioning how the high-flying fund manager will respond to richer returns and a shift to undervalued companies, as the rollout of vaccines and the expectation of COVID aid packages help promote bets to less beloved sectors of the market.
Wood recently told CNBC that she is not bothered by the returns, and that she expects a setback, and will promise to double some bets, even if rates are still high, which is a “reality check” for offers her strategies. She has reportedly increased her stake in Zoom Video Communications ZM,
who was a beneficiary of the work-from-home trend, from late on.
See: Analysts say Zoom Video can continue to thrive in a vaccinated world
Reports also indicated that she bought more Tesla as the shares of the electric vehicle manufacturer fell.
Ark Innovation’s shares have fallen 8.6% so far this week, depending on a less than 1% year-on-year gain. For comparison, the Dow Jones Industrial Average DJIA,
rises by 2.2% so far in 2021, the S&P 500 index SPX,
is 1.7% higher and the Nasdaq Composite Index COMP,
rises 0.8% after being hammered over the past few sessions.