Cathie Wood, the renowned innovation investor, has seen her struggling funds receive a much-needed boost following Donald Trump’s reelection. However, this surge in performance has not translated into significant investor inflows.
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| Brendan McDermid | Reuters |
Wood’s flagship fund, the Ark Innovation ETF (ARKK), has jumped by more than 30% since Election Day on November 5, bringing its year-to-date return to nearly 18%.
A significant portion of this rally came from Tesla, the fund’s largest holding with a 16.3% weighting. Tesla’s stock has soared approximately 70% since Trump secured victory.
Despite these gains, ARKK experienced $49 million in outflows during November, followed by another $24 million in the first week of December, as reported by FactSet. These outflows contribute to a staggering $3 billion that investors have pulled from the fund in 2024.
This occurs against the backdrop of a record-setting year for the ETF industry, which has attracted an impressive $1 trillion in new investments.
“Investors continue to redeem shares. ARKK has lost its luster as the leading actively managed ETF,” remarked Todd Rosenbluth, head of research at TMX VettaFi.
Cathie Wood rose to prominence during the Covid-19 pandemic with bold investment decisions, particularly on Tesla and other pandemic-related growth stocks such as Zoom Video. However, the post-pandemic period has not been as favorable. ARKK has shed about 60% of its value since reaching its peak in 2021.
Wood now places her bets on potential deregulation under Trump, predicting that it could pave the way for groundbreaking innovation after years of policy obstacles. She anticipates these technological advancements could revitalize the U.S. economy even more dramatically than the economic growth seen during the Reagan era.
Tesla and Trump’s Impact
Tesla has been one of the biggest beneficiaries in ARKK’s portfolio during this Trump-era resurgence. Much of this success can be attributed to CEO Elon Musk, who contributed $277 million to a pro-Trump campaign.
Musk has also been given a prominent role in Trump’s administration, heading the so-called Department of Government Efficiency.
Following the sharp postelection rally, Wood opted to reduce her Tesla exposure slightly. She sold 51,335 shares of Tesla on Wednesday, generating approximately $21.8 million, as noted in her daily update.
Crypto and Coinbase Gains
Another standout performer in ARKK’s portfolio has been Coinbase, its second-largest holding. Shares of the cryptocurrency exchange have climbed over 80% this year, driven by Bitcoin surpassing the critical $100,000 mark.
Optimism has been building around the possibility of a Trump-led “golden age of crypto,” which could include regulatory frameworks favorable to the industry and even a potential national strategic Bitcoin reserve.
This positive sentiment has also propelled Robinhood, the sixth-largest holding in ARKK, to a remarkable 213% gain in 2024.
Persistent Struggles for Some Holdings
Despite the rally for key holdings like Tesla and Coinbase, some of ARKK’s portfolio companies have yet to recover their pandemic-era highs. For example, Roku is down 9% this year, while Pinterest has dropped 16%, even as the tech-heavy Nasdaq Composite continues to reach new record highs.
While Cathie Wood’s vision for innovation-driven growth remains steadfast, her funds face a challenging road to regaining the widespread investor enthusiasm they once commanded.
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