Better 'Namu' than Donnamu

Cathie Wood's Ark Innovation ETF
Stumbles Due to Fund Outflows and Poor Returns
Surging Commodity Prices Also Pose a Threat

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Junho Hwang] The flagship Ark Innovation Exchange-Traded Fund (ETF) managed by 'Money Tree Sister (Cathie Wood)' is staggering due to capital outflows and declining returns. There are concerns that the overheated investment trend in tech stocks, which began last year, is actually becoming a detriment.

According to Daishin Securities on the 10th, the Ark Innovation ETF has seen a net outflow of $1.55 billion since the 15th of last month, with funds flowing out for seven consecutive trading days since the 28th of last month.

The top 10 companies by holding proportion in the Ark Innovation ETF have fallen an average of 16.0% based on closing prices as of the 15th of last month. Compared to the Nasdaq index, which fell only 2.0% during the same period, the decline is relatively large.

If returns continue to be poor, the possibility of further capital outflows is expected to increase. Since last year, this ETF has seen a net inflow of $16.22 billion. Among this, approximately $10 billion entered when stock prices were higher than they are now. Funds poured in after discovering growth stocks such as Tesla, the U.S. electric vehicle manufacturer that surged last year, achieving an astonishing return of 152.7%. This ETF also gained fame among domestic investors, earning Cathie Wood the nickname 'Money Tree Sister.'

The sharp rise in commodity prices due to economic recovery is also lowering investors' interest in growth stocks. Following the shock from the U.S. employment data announced on the 7th, the dollar sharply declined, and with the easing of concerns about an early monetary policy shift by the Federal Reserve, copper prices hit an all-time high. Due to the economic recovery driven by COVID-19 vaccinations, lumber prices have soared by 93.1% so far this year.

Seungbin Cho, a researcher at Daishin Securities Research Center, analyzed, "Despite the decline in real interest rates since March, growth stocks have not gained strength, with the Nasdaq falling for three consecutive weeks recently," adding, "We believe that the recent weakness in growth stocks is significantly influenced by capital outflows from ETFs managed by Ark Invest."