Hedge Funds, Tech Stock Sell-Off... The Humiliation of 'Donnamu Unni'

Hedge Funds Sell Largest Volume of Tech Stocks in 10 Years
Ark Asset Management Plummets 48% from Peak

[Asia Economy New York=Correspondent Baek Jong-min] As U.S. Treasury yields surged, hedge funds were confirmed to have sold off technology stocks they held. Ark Asset Management, led by 'Money Tree Sister' Cathie Wood, who mainly invests in growth stocks, was also unable to avoid the sharp decline.

On the 6th (local time), CNBC reported, citing Goldman Sachs, that hedge funds engaged in the largest technology stock sell-off in the past decade over four trading days from December 30 last year to January 5.

The rise in Treasury yields is a negative factor for growth stocks, which are centered on technology stocks. U.S. Treasury yields began rising from the 30th of last month and on the 5th soared above 1.7% as the Federal Reserve (Fed) hinted at a rate hike in March and the possibility of quantitative tightening in the first half of the year. Treasury yields rose further to 1.732% that day.

Amid the hedge funds' selling pressure, the Nasdaq index plunged 3.3%, showing a more pronounced decline compared to the Dow Jones and S&P 500 indices.

Goldman Sachs judged that the hedge funds' selling at the turn of the year was not short selling mainly seen in the last two months of the previous year but rather the sale of long-held stocks. The stocks sold were mainly software and semiconductor shares. This was the background behind the consecutive plunges of key big tech stocks such as Netflix, Alphabet, and Microsoft.

Cathie Wood's Ark Innovation Exchange-Traded Fund (ETF), which mainly invests in growth stocks, has also not escaped the plunge. On this day, the Ark Innovation ETF price had fallen more than 48% from its all-time high in February 2021. The price decline last year reached 24%. The ETF's decline this week reached 9%.

John Brown, CEO of Reholtz Wealth Management, explained, "Ark's situation is worse than in March 2020 when the COVID-19 pandemic began." It was also reported that investment outflows from the Ark Innovation ETF reached $280 million just this week.

There are also analyses that Cathie Wood's decline is not over yet. Steven Weiss, partner at Short Hills Capital Partners, forecasted, "It cannot be said that Ark's stock price has hit bottom. Further declines are expected."

Meanwhile, the Nasdaq index is slightly rising as a rebound buying wave flows in after the previous day's plunge. As of 3:22 p.m., the Nasdaq index is up 0.23%.