It’s hard to talk about the topic of women in investing without mentioning Cathie Wood. The founder, CEO and chief investment officer of Ark Investment Management was the first woman to claim the title of manager of the largest actively managed fund.
Yet, when Wood reflects on her career, she said she attributes any professional marginalization to her contrarian views rather than her gender. On any given day, she is rarely reminded that she is a woman, Wood told CNBC in a recent interview.
Her exchange-traded funds, which focus on “disruptive innovation,” have suffered year to date. Still, Wood remains among the largest active managers, with more than $21 billion invested in her funds.
By being unwavering and publicly vocal about her conviction in investing in the future, Wood gives her critics ample opportunity to take aim at her unique strategies.
“Other people say that I am attacked in the media because I’m a woman. I don’t think that is [the case] … I really think it’s because we’re disrupting the financial world and we’re unsettling people,” said Wood. “It’s the ideas and the research. They’re pretty provocative.”
Wood, 66, founded Ark Invest in 2014 after a long tenure running AllianceBernstein’s Global Thematic Growth Fund, which she navigated through the tech and telecom bust. Wood was 57 years old when she started the research-centric investment group because she found herself frustrated by how little investors were focused on innovation and technology.
“There was nowhere I was going to fit in and I didn’t want to fit in anywhere,” said Wood. “I wanted to blaze a trail.”
Through her mystical conviction in provocative growth strategies in the US equity market, Ark’s ETFs were created. Her strategies focus on five disruptive technologies: DNA sequencing, robotics, artificial intelligence, energy storage and blockchain technology. However, Wood is often criticized for the expensive, high-multiple and sometimes illiquid stocks in her funds.
Ark’s flagship fund, Ark Innovation, made popular high-growth names like Tesla, Zoom Video, Roku and Teladoc Health.
“I’ve seen people put her down and I’ve seen people praise her but neither of those descriptions of Cathie have focused on her gender,” said economist Arthur Laffer, one of Wood’s former teachers and longstanding mentors.
‘Can’t take the numbers from you’
Ark Innovation — which trades under ticker ARKK — was largely put on the map after Ark Innovation’s banner year in 2020. The fund was full of equities that thrived during the coronavirus pandemic — a group that became known as stay-at-home stocks — and it rallied nearly 150%. Last year, during a rotation to value as the economy recovered, the fund lost 25%.
2022 has been a dismal year so far for Wood’s funds as growth pockets of the market are punished by surging interest rates. Ark Innovation is down more than 30% and sits more than 50% from its 52-week high in June 2021.
The depreciation in Wood’s stocks from mid-February of 2021 has not changed Ark’s forecast. Wood said she is just getting her highest-conviction stocks at lower prices. This should result in a 30% to 40% compound annual rate of return for Ark’s strategies over the next five years, she has said.
Wood, who focuses on a five-year investing time horizon, said attaching yourself to numbers is a great way to set yourself apart in the financial industry.
“Politics can’t take the numbers from you, they are what they are,” she said. “Those are going to be good numbers and bad numbers and you hope over time that the average is pretty good.”
To be sure, Wood’s loyal following has not abandoned her or her vision. Ark Innovation is net positive in inflows for the year at more than $1 billion of incoming cash.
Raised as a ‘first-born son’
Wood is the first child of Gerald and Mary Duddy, first-generation immigrants from Ireland. She said she was raised as her parents’ “first-born son.” Her parents encouraged her to pursue avenues regardless of gender.
Raising his children in Los Angeles, Gerald Duddy placed an emphasis on education and research, something Wood still values today. In 2018, she launched the Duddy Innovation Center for Excellence at her alma mater, Notre Dame Academy, in Los Angeles.
In 1977, Wood found herself in Laffer’s class at the University of Southern California. Wood recalls not even knowing what business was at the time, but she quickly became enamored by economics and research.
Laffer, a former member of President Ronald Reagan’s Economic Policy Advisory Board, accepted Wood into his graduate-level class when she was an undergraduate student. Laffer recommended Wood for her first job and has stayed a close friend and confidant.
“There isn’t anyone who has done what she has done,” said Laffer. “That’s why her returns are unbelievably abnormal. It also works the other direction of course, but her returns over her career have been amazing because of her hard work.”
Wood started in the industry as an assistant economist on the West Coast at The Capital Group. She said she often was the only woman in the room.
“Many guests thought I was the secretary and would ask for coffee and I was happy to give it to them. … I was happy to be in that room,” she said.
As Wood’s career progressed, she was accompanied and mentored by many supportive women like Lulu Wang, with whom she started hedge fund Tupelo Capital Management.
Still, other female colleagues suffered from so-called queen bee syndrome, she said, using a term that is used to describe a situation when women fail to support other women.
“There have been women who didn’t make it easy for me,” Wood recalled.
‘Innovation levels the playing field’
Wood said she sees a future with diminishing sexism, and the future-proof companies she invests in are helping to pave the way. Companies like Zoom Video are providing tools for more flexible workplaces, which allow families to balance careers and child care more easily. Stocks in Wood’s genomics fund are working to address illnesses that disproportionately affect women.
“Innovation levels the playing field,” said Wood. “These technologies are going to transform how we live and work and play and enhance the quality of life.”
Plus, stocks that focus on cryptocurrencies and blockchain technology, like Coinbase Global, are attempting to level the playing field in personal finance.
“The more we see these technologies converge, the more we have to strip away the silos that the traditional financial world has been built on,” said Wood. “It’s a DNA change for the industry.”
Wood attributed much of her success to her loyal band of followers — who are often Gen Z and millennials.
“It’s the younger population that stuck with us,” she said.
Wood has garnered much attention from the millennials who were a part of the massive wave of retail investors that hopped into the market during the Covid-19 pandemic. Day traders in online chatrooms will follow Wood’s trades and post slogans like “In Cathie We Trust” or call her “Cathie BAE” (before anyone else).
While many investors chided these investors as “dumb money” trading in speculative stocks, Wood always defended the group.
Ark has an unconventional social strategy where it shares its research, puts its analysts on social media, and sells “Ark Invest” swag, like sweatshirts and baseball caps.
She said her younger fanbase appreciates that Ark is willing to be the closest vehicle to a venture capital firm in the public equity market. That is, an ETF that invests in companies’ long-term growth prospects.
“The younger people have a more innate understanding of these nascent technologies, how volatile they are but also how promising they are,” she said.
And her amateur following has proved to be anything but fickle, as investors double down on her funds despite this year’s troubling performance.
“They always believed it would come back and we are rebounding a bit now. Truth wins out,” Wood said.