It’s been two years since Cathie Wood’s ARK Invest’s breakout during the pandemic, and in the time since, the fund has hit a major rough patch.
In 2021, the fund’s holdings in Roku, Teladoc, and Zoom sank the ETF’s value. However, the latest market implosion crushed the reeling firm. Ark was down more than 60% through August, fifty percentage points worse than the S&P 500.
Market rout proves too much for concentrated positions
Many believe that, in 2021, the money manager was far too overexposed to its concentrated positions in science and tech growth stocks. As meme stocks went “to the moon,” the lack of diversification left Wood’s firm decimated.
In the latest market downturn, critics say the firm hadn’t learned its lesson. As of August, the hedge fund was still concentrated in tech growth positions. According to Ark’s latest 13F filing, tech stocks still made up 34% of its portfolio.
Billionaires survive following this basic investing rule of thumb
Prior to Ark’s decline, Wood had received backlash due to her contrarian viewpoints on the markets. Insiders are speculating that Ark’s persistent lack of diversification was another key factor in the fund’s performance.
Many alternative assets can prevent investors from a similar fate, particularly, tangible assets with low correlation to traditional equities. Real estate provides a hedge for many, but currently experts are forecasting a housing recession, dependent on inflation and Fed interest rate hikes.
It may sound unconventional. Companies make profits. Rental properties collect rent. But what can fine art deliver?
Well, it can potentially provide the one thing that matters most to investors: growth.
Contemporary art prices outperformed the S&P 500 returns by a commanding 164% over the past 25 years, according to Citi. And investing in art is becoming a popular way to diversify because it’s a real, physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and stocks was just -.04 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to potentially outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Fine art has long been the asset class of choice for the financial elite, and more recently been unlocked by tech entrepreneurs via companies like Masterworks.
Masterworks' mission is to democratize the art investing world and help people tap into an investment previously exclusive to the ultra wealthy. We are the only platform that lets you invest in multi-million dollar works of art by artists like Basquiat, Picasso, Banksy, and more.
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