Secret Sauce Behind Ark Success Is
Cathie Wood’s Diverse Team
Cathie Wood’s Diverse Team
By Claire Ballentine
September 26, 2020, 9:00 AM EDT
Firm runs three of
the top 10 performing ETFs this year
the top 10 performing ETFs this year
Cathie Wood’s Ark Investment Management is well known for
its wildly optimistic price target for Tesla Inc., its money-spinning bet on
Bitcoin and the 81% return of its main
fund this year. It’s less well known that almost none of its analysts has a
finance background.
its wildly optimistic price target for Tesla Inc., its money-spinning bet on
Bitcoin and the 81% return of its main
fund this year. It’s less well known that almost none of its analysts has a
finance background.
Instead, their previous careers include cancer researcher,
artificial intelligence expert, gaming engineer -- even sailboat captain.
artificial intelligence expert, gaming engineer -- even sailboat captain.
The 27-person team
-- one-quarter people of color, 30% women and most in their 20s -- has built
funds around companies with the potential to shape the future, including
fintech, space and imaging. Wood attributes many of her firm’s successes to her
analysts’ wide range of experiences.
-- one-quarter people of color, 30% women and most in their 20s -- has built
funds around companies with the potential to shape the future, including
fintech, space and imaging. Wood attributes many of her firm’s successes to her
analysts’ wide range of experiences.
“You’re probably not going to find a more diversified group
of people,” Wood said. “They already have one foot in the new world, and they
are extremely creative in terms of figuring out how the world is going to
work.”
of people,” Wood said. “They already have one foot in the new world, and they
are extremely creative in terms of figuring out how the world is going to
work.”
Sam Korus, the former sailboat captain, is an analyst for
autonomous technology and robotics. Other Ark analysts’ areas of focus include
gaming, AI in health care and genetic technologies.
autonomous technology and robotics. Other Ark analysts’ areas of focus include
gaming, AI in health care and genetic technologies.
Wood, who is 64, said that if Ark hadn’t hired analysts
who’d experimented with CRISPR gene editing technology, “I wouldn’t even know
what it was.”
who’d experimented with CRISPR gene editing technology, “I wouldn’t even know
what it was.”
Ark analyst James Wang focuses on AI and the next wave of the
Internet. He previously worked for Nvidia and wrote tech columns for an
Australian magazine. He joined the firm in 2015 after he heard Wood speaking on
Bloomberg Radio, guessed her email address and reached out.
Internet. He previously worked for Nvidia and wrote tech columns for an
Australian magazine. He joined the firm in 2015 after he heard Wood speaking on
Bloomberg Radio, guessed her email address and reached out.
“If we all came from a financial background, we would
inevitability have views that are much more similar and more aligned with the
current price expectations set by the market,” Wang said.
inevitability have views that are much more similar and more aligned with the
current price expectations set by the market,” Wang said.
Different Experiences
While Ark’s gender distribution is about average for the
securities industry, according to U.S. Bureau of Labor Statistics data, the
firm’s racial diversity is far from the norm. Out of more than 80 members of
executive teams at the nation’s top banks, only one is Black. Numbers for the
ETF industry aren’t available, but anecdotal evidence suggests it’s also
lacking.
securities industry, according to U.S. Bureau of Labor Statistics data, the
firm’s racial diversity is far from the norm. Out of more than 80 members of
executive teams at the nation’s top banks, only one is Black. Numbers for the
ETF industry aren’t available, but anecdotal evidence suggests it’s also
lacking.
Chief Compliance Officer Kellen Carter, who is African
American, joined Ark in 2016 in part because of the inclusive environment that
Wood created.
American, joined Ark in 2016 in part because of the inclusive environment that
Wood created.
“It’s an example of how diversity can make companies more
efficient and productive because of the diversity of experience that we all
bring to the table,” he said.
efficient and productive because of the diversity of experience that we all
bring to the table,” he said.
Studies back this up. McKinsey & Co. found that businesses
in the top quartile for ethnic diversity outperformed those in the bottom
quartile by 36%.
in the top quartile for ethnic diversity outperformed those in the bottom
quartile by 36%.
Ark has consistently racked up strong returns since first
betting on Bitcoin in 2015. Over five years, Ark has three of the top 15 U.S. equity funds in terms of performance in
the past five years. In that period, her Ark Next Generation Internet ETF
(ARKW) has annualized returns of more than 41%, compared to 22% for tech
darling Invesco QQQ Trust Series 1 (QQQ).
betting on Bitcoin in 2015. Over five years, Ark has three of the top 15 U.S. equity funds in terms of performance in
the past five years. In that period, her Ark Next Generation Internet ETF
(ARKW) has annualized returns of more than 41%, compared to 22% for tech
darling Invesco QQQ Trust Series 1 (QQQ).
More Than Tesla
Wood has gotten plenty of headlines for her bullish calls
for Tesla -- her current price target for the stock is $7,000 by 2024. Yet she
pushes back on skeptics who say the 81% gains in the ARK Innovation ETF this
year were due to a lucky bet on the electric carmaker. According to Wood’s
calculation, if ARKK’s Tesla stake was in cash, the fund would still be up
43% year-to-date through Sept. 17 thanks to her team’s other bets. Compare
this with the Nasdaq gain in the same period of 26.9%.
for Tesla -- her current price target for the stock is $7,000 by 2024. Yet she
pushes back on skeptics who say the 81% gains in the ARK Innovation ETF this
year were due to a lucky bet on the electric carmaker. According to Wood’s
calculation, if ARKK’s Tesla stake was in cash, the fund would still be up
43% year-to-date through Sept. 17 thanks to her team’s other bets. Compare
this with the Nasdaq gain in the same period of 26.9%.
And she’s still a believer. After Tesla plunged 21% earlier
this month, Wood boosted ARKK’s Tesla position to 10.7% from 9.9%. She said
that she still thinks Tesla will see “surprising growth.”
this month, Wood boosted ARKK’s Tesla position to 10.7% from 9.9%. She said
that she still thinks Tesla will see “surprising growth.”
ARKK has taken in
more than $4 billion this year
more than $4 billion this year
“There’s always some luck involved when you have active
management, that’s part of it,” said Nate Geraci, president of the ETF
Store. “But what you want in an active manager is somebody who has conviction,
and they’ve put their money where their mouth is.”
management, that’s part of it,” said Nate Geraci, president of the ETF
Store. “But what you want in an active manager is somebody who has conviction,
and they’ve put their money where their mouth is.”
Tossing the Playbook
Ark also sets itself apart from other firms through its open research ecosystem that Wood
devised to promote ideas on social media.
devised to promote ideas on social media.
Unlike other fund managers who closely guard their tactics,
Wood’s strategies are all available on Ark’s website, along with articles,
podcasts, videos, white papers and newsletters.
Wood’s strategies are all available on Ark’s website, along with articles,
podcasts, videos, white papers and newsletters.
Giving away trade secrets seems counterintuitive, but Wood
says it sparks wide-ranging discussions that add to Ark’s strategies. For
instance, Venkat Viswanathan, an associate engineering professor at Carnegie
Mellon University who focuses on energy conversion and storage, now frequently
shares his latest work with Ark analysts.
says it sparks wide-ranging discussions that add to Ark’s strategies. For
instance, Venkat Viswanathan, an associate engineering professor at Carnegie
Mellon University who focuses on energy conversion and storage, now frequently
shares his latest work with Ark analysts.
“Business questions are cross disciplinary in nature, so you
need expertise from different angles,” Viswanathan said. “Having a diverse and
close-knit team of analysts positions them very, very nicely.”
need expertise from different angles,” Viswanathan said. “Having a diverse and
close-knit team of analysts positions them very, very nicely.”
Next Generation
Wood said that her parents, who immigrated to the U.S. from
Ireland, had always encouraged her to pursue any career she wanted. She used
their name in founding the Duddy Innovation Institute at her alma mater, Notre
Dame Academy High School in Los Angeles, in 2018.
Ireland, had always encouraged her to pursue any career she wanted. She used
their name in founding the Duddy Innovation Institute at her alma mater, Notre
Dame Academy High School in Los Angeles, in 2018.
The students begin the program studying a Wood hallmark --
disruptive innovation -- before diving into areas like genomics and robotics.
Wood said she’s already received questions from them that made her rethink a
few positions. Some of these teenagers might even end up at Ark.
disruptive innovation -- before diving into areas like genomics and robotics.
Wood said she’s already received questions from them that made her rethink a
few positions. Some of these teenagers might even end up at Ark.
“I would love to bring some of these young people, get them
through college and give them a shot,” Wood said.
through college and give them a shot,” Wood said.
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