Cathie Wood's flagship fund has taken in over $600 million since mid-June
Investors are pouring millions of dollars into Cathie Wood’s flagship ARK Innovation ETF (ARKK), despite its free-fall from pandemic highs.
Even as the strategy comes off of its worst drawdown since inception, the ARK Innovation fund has accumulated inflows for eight consecutive days through Monday, its longest streak since March 2021, according to Bloomberg data.
ARKK took in about $639 million in new investor cash during this period.
This streak of inflows comes as Wood said in a televised interview with CNBC Tuesday morning the U.S. economy is already in recession, while Wood conceded to being incorrect about the severity of inflation, which she had previously downplayed.
“We were wrong on one thing, and that was inflation being as sustained as it has been,” Wood said. “Supply chain — I can’t believe it’s taken more than two years, and Russia’s invasion of Ukraine, of course we couldn’t have seen that. So inflation has been a bigger problem. But I think that it has set us up for deflation.”
The flagship fund has recovered some recent losses but remains down 50% year-to-date and is 70% below its all-time high from February 2021.
Earlier this month, ARKK shares traded as low as $36.58 per share, just a few percentage points above its pandemic low of $34.69.
Still, the underperformance has not been enough to sway investors’ conviction in Wood and her investment management firm, and some analysts see the ARK Invest founder and CEO’s commitment to staying the course as a key component of ARK Invest’s appeal.
“There is something to be said about the effectiveness of Cathie Wood’s continuous messaging to the public via her webinars and her YouTube videos, in which she can keep investors inspired by her optimism surrounding her expectations of the strategies' future performance,” Morningstar strategist Robby Greengold told Yahoo Finance in a recent interview.
Earlier this quarter, Morningstar downgraded its rating on ARKK to Negative from Neutral, citing issues with the fund's risk management and ability to navigate the space it aims to explore.
“Cathie and the team have been thick-skinned and unapologetic about their conviction in innovative stocks in the future,” VettaFi vice chairman Tom Lyndon, an expert on ETFs, said in a conversation with Yahoo Finance. "Investors probably think: ‘If she can be vocal and take all these hits on social media, I can add another 5%.'"
Further underscoring Wood's conviction are plans from ARK to launch a new investment vehicle focused on innovation in private markets. ARK filed paperwork with the SEC on February 3 for a closed-ended interval fund, with the filing specifying the vehicle will be suitable “only for long-term investors who can bear the risks” associated with limited liquidity.
Greengold suggested another reason ARK continues to attract inflows is investors “buying the dip” during drawdowns, while some may have stayed committed because they refuse to lock in losses.
“You can read investors complaining on message boards about putting thousands of dollars into ARK's strategy, only to see that money dwindle,” Greengold said. “You will read them venting about how much money they have lost, but saying they cannot stomach those losses. Investors are not able to tolerate the discomfort of realizing those losses and so some might even say that they are doubling down – potentially that explains some of the inflows.”
Zoom (ZM), TSLA (TSLA), and Roku (ROKU), the three largest positions in ARKK, are down about 39%, 42% and 62%, respectively this year. Another top holding in the ETF, Coinbase (COIN), is down by 80%.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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