Morningstar has dubbed Cathie Wood’s ARK Family of funds as the worst “wealth destroyer,” a title no investor wants, especially amid a rising S&P 500.
According to Morningstar’s analysis, the ARK ETF Trust, responsible for the popular ARK Innovation ETF (ARKK), has erased a staggering $14.3 billion in investors’ wealth over the past decade, making it the top wealth destroyer among fund families during this period. This loss dwarfs that of the next-ranked fund family, KraneShares, by double the amount, as stated by Morningstar.
The ARK Innovation Fund, ARKK’s flagship, bears the brunt of this wealth destruction, accounting for $7.1 billion in losses over the past decade until December 2023. Despite charging investors a 0.75% annual fee, ARKK ranks as the third worst wealth destroyer. Comparatively, the ProShares UltraPro Short QQQ (SQQQ) tops the list as the biggest individual fund wealth destroyer, but its leverage strategy against the Nasdaq 100 discourages long-term holding.
Notably, other ARK funds also struggle, with the ARK Genomic Revolution ETF (ARKG) shedding $4.2 billion in wealth over the same period, placing it as the fifth worst fund.
Unfortunately, 2024 hasn’t started well for ARK Innovation, with the ETF down 12.1% while the S&P 500 records nearly 3% growth, positioning it as the second-worst U.S. diversified ETF this year.
Amidst the underperformance, large-cap growth and momentum stocks are outperforming, signaling a challenging period for ARK funds.
Morningstar’s Amy Arnott underscores the lesson from these value destruction instances, highlighting the lack of guaranteed success in investing, even in favorable market conditions, and the importance of learning from such experiences.
In conclusion, Morningstar’s assessment of Cathie Wood’s ARK Family of funds serves as a cautionary tale, emphasizing the need for careful investment strategies and diversification to mitigate risks in volatile markets.
