NEW YORK, March 14 (Reuters) – Do you believe in Cathie Wood?

The star Wall Street stock picker has seen her fortunes decline over the past year as her flagship tech innovation fund plummeted more than 50%, losing $13 billion in market value.

Still, investors continued to buy into his futuristic vision, according to data from industry tracker Lipper: Not just holding on, but plowing more than $2 billion in additional net inflows into his company ARK’s fund. , an inspired name for the Ark of the Covenant, a biblical vessel of divine revelation.

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“People like to bet on someone and look someone in the face and see their conviction,” said Tom Lydon, a veteran asset manager. “It helped to override any fears that this fund would break.”

Wood, one of the few top female fund managers on Wall Street, faces one of the biggest challenges of her professional career: how to show the world that she is simply more than the face of what some call it the pandemic bubble.

While much has been written about the decline of its ARK Innovation exchange-traded fund, this story is the first to be based on a series of interviews, with a dozen employees, investors and other people from around the world. ‘ARK in Wood’s world, to show how she’s trying to keep her reputation intact as she navigates the flip side of fame.

Wood told Lydon of a recent conversation she had with an angry client who had invested millions with her fund and was ready to pull it all out. She listened to their concerns without interrupting them. Finally, it was his turn to speak.

“We have the same commitment to our strategy that we had at the top of the market, and if you liked it then, you should like it even more as valuations have become more attractive,” she said. to the client from his office above the palm trees. from St. Petersburg, Florida, where she recently moved from New York.

By the end of the conversation, she had persuaded him not only to keep his money invested with her, but to add more so that his overall allocation to his fund remained the same.

Driving conviction from seasoned investors may never be more critical for Wood.

In the space of three years, it has gone from relative obscurity to being hailed as one of America’s biggest stock market oracles of 2020 after making around 150% gains piling up in stocks such as Tesla and Zoom Video Communications before they hit the stratosphere.

Yet inflation quickly began to undermine the life of the highly regarded tech disruptive stocks for which it is famous. From there, gravity seemed to take over, dragging the fund lower and lower over the past year despite gaining more than 20% across the S&P 500. With the Russian invasion of Ukraine which compounded the losses, Wood’s flagship fund is now down nearly 63% from its February 2021 peak.

Although Wood declined to be interviewed for this article, those close to her say she receives several calls a day from financial advisors and investors convincing them to stay with her.

At the same time, it consciously strives to appear in more public forums, such as TV interviews and conferences, in order to boost the confidence of retail investors who make up a significant portion of its fund base.

SHORT-CIRCUIT THE STAR

Her conviction does not fade in private, said Robby Greengold, an analyst at investment research firm Morningstar who speaks with her regularly. “She doesn’t present herself differently in person than she does in public,” he added.

Wood, a major backer of bitcoin, believes the technology is advancing at a faster rate than many investors realize and will drive a handful of winners out of a growing waste pile of companies on the losing side. of the disturbance.

However, not everyone has faith. Not by far.

In fact, a lack of confidence in Wood’s long-term outlook led Tuttle Capital to launch an ETF that only sells its positions – the first known time an ETF has specifically shorted a single active manager’s strategy. .

“We wanted to bypass speculative technology and, luckily for us, ARK had already designed this package,” said Matthew Tuttle, the head of Tuttle Management, whose fund has ballooned to $350 million in assets and grown. around 90% since he started trading. in November.

More broadly, short sellers of ARK funds are up $712 million this year through Feb. 16, relative to market prices, a gain that pushes them up 22.16% for the year versus a gain 5.2% for the short sale of the entire national ETF market, according to technology and data analysis company S3 Partners.

On Reddit’s WallStreetBets forum, which has helped fuel the pandemic retail frenzy of “meme” stocks, a recent thread is titled “What’s the Consensus on Cathie Wood.”

“She literally took all the stocks in the bubble, put them in an ETF, and expected the bubble to continue to soar,” one post read.

A DAY IN THE LIFE

Interviews with those close to Wood, 66, offer a window into a day in the life of the famous stock picker.

7 a.m.: She begins working in her office in a 26-story tower a few blocks from the sparkling waters of Tampa Bay, often listening to earnings calls from companies in her portfolio and potential acquisitions.

8:45 am: She joins a call with her team of analysts. On Friday mornings, it also hosts a two-hour video meeting with its analysts and industry experts on how technology will drive societal change that it occasionally opens up to select investors.

The rest of the day is spent on client calls, business decisions and increasingly frequent media appearances, whether in the form of a nearly 45-minute toast of his positions on CNBC or company YouTube shows and webinars.

“She is more than willing to speak with any client who is there to review what is happening in the market and just reassure them that this is an opportunity,” said Renato Leggi, client portfolio manager at ARK.

Wood may not need to convince her staff of about 45 people at ARK Invest, where belief in her remains as powerful as the Florida sun.

“People follow her and are willing to give their lives or trust her because of her humility,” said Alex Cahana, theme developer at ARK since 2014, helping identify industry trends that could shape the ARK’s investment strategy.

His belief in the mounting losses seems to resonate with investors.

This year alone, they have committed more than half a billion dollars in net inflows to its innovation fund, despite it having one of the worst performances of any fund tracked by Morningstar over the same period.

Despite its recent losses, the fund has returned an annualized average of 27.5% over the past three years, placing it in the top 2% of 491 U.S. mid-cap growth funds tracked by Morningstar. That said, many investors who weren’t around for the early days are now underwater.

The fund’s long-term track record is one reason to believe in Wood once inflation subsides, said Jimmy Lee, the head of the Las Vegas-based Wealth Consulting Group, which has $2 billion in assets under management.

He said his group had increased their investment in ARK in recent weeks: “A lot of their names bought in the past were way too high in valuation, but now we’re at a good entry point.”

‘GO WHERE YOU NEED TO GO’

Woods, who has a deep-seated Christian faith, shot to financial stardom relatively late in life after starting her career in 1980 at New York-based investment advisory firm Jennison Associates. She founded ARK in 2014 after other stints at Tupelo Capital Services and AllianceBernstein.

While the kind of broad, thematic bets that characterize ARK’s investment style have long been part of its strategy, its willingness to take large positions – around 30% of its flagship fund is invested in the stocks of five companies – was not always well received in previous companies where she worked.

While she was chief investment officer of thematic portfolios at AllianceBernstein, the firm began to put in place new constraints on how it could manage its fund after the market crash in 2008, adding limits on the size of positions and requiring greater sector diversification.

Frustrated, Wood pitched the idea of ​​a transparent, actively managed ETF to AllianceBernstein in 2013, but was turned down, Leggi said. She left the firm and founded ARK Invest the following year.

“You can’t really manage a limited portfolio in innovation. You have to be able to go where you need to go when you want to,” Leggi said.

AllianceBernstein declined to comment for this article.

Wood’s ability to retain investors despite heavy losses could be a sign his fund won’t become the pandemic version of the Munder NetNet fund, which soared to more than $11.5 billion in assets by the end of the years. 1990 thanks to betting on Internet stocks, before falling more than 90% once the Internet bubble burst. Its once famous portfolio manager, Paul Cook, left Wall Street and now works at a human resources software company.

Todd Rosenbluth, head of ETF research at CFRA, said he admired Wood and ARK’s ability to retain their appeal after a torrid year.

“Chasing performance is much more common than investors showing loyalty in the face of underperformance,” he added. “It’s a credit to the shareholder base that ARK has built.”

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Reporting by David Randall; Additional reporting by Hannah Lang; Assembly Pravin Char

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