When Cathie Wood talks about her investment company, she doesn’t talk about money, profits or financial reports. When the 67-year-old stands in front of an audience, she primarily talks about God. “The Holy Spirit popped an idea into my head,” says Wood, whose gray hair frames a gray blazer. Far too many people on the stock market forget the divine creation, the new, the creative. Instead of investing in the past, Wood’s financial credo is that she wants to invest in the future. “I literally walk on water,” the investor told a Christian congregation in 2016. “And then I stretched out my hand and asked Jesus to take it.”
God, as Wood sees it, was merciful to her. Especially with the start of the corona pandemic, the curve of their flagship fund shot up steeply. “It was really Mount Everest-like,” says Jürgen Sälzle from the analysis firm Fondsconsult. Wood is now betting more than $14 billion on companies that seem particularly innovative to her – robotics, electric cars, computer chips, digital currencies. In the USA, fans put on T-shirts with her likeness, and in South Korea she is nicknamed “Money Tree”. Now Wood is venturing to Europe with her supposed money tree and wants to get involved in the continental money business in the future. She has bought the specialized ETF provider Rize and is likely to soon bring her strategy to Europe with her own company. Do local investors now also have to follow the Wall Street icon?
Wood has often been called crazy in her financial career: when she left the giant asset manager Alliance Bernstein in 2014 to start her own investment firm. When she, the 67-year-old, dared to assess the profit potential of tech stocks. As a woman in the male-dominated stock market world anyway. “A lot of my friends thought I would fail,” Wood once said. “I never believed that myself.”
She always believed in her shares all the more strongly. If artificial intelligence can suddenly paint pictures, Wood is there. If electric cars drive themselves, the investor won’t miss it. And as computer chips become more intelligent, she’ll buy in. “I’m always looking for disruptive innovation,” says Wood. Instead of relying on established tech stocks like Apple or Microsoft, she raves about the prospects for car manufacturers like Tesla, video conferencing companies like Zoom or the telemedicine provider Teladoc. And Wood regularly makes a name for himself with bold predictions: The cryptocurrency Bitcoin will rise to $500,000 by 2030, she repeats again and again.
Wood became known when she gave the then controversial Tesla a weight of more than ten percent in her fund in 2018. The Tesla people are more than four years ahead of the competition when it comes to technical details. And anyway: If in a few years only robotaxis drive through the cities, Tesla will have a superior position with its database. Wood’s price target? 2000 dollars. “If I’m right,” Wood said on the financial channel CNBC, pausing for art, “this stock has only just gotten started.” Then another artistic pause to give weight to the statement. However, Tesla shares are currently trading at $267.
This concentration on a few stocks and everything new has brought Wood incredible returns in places; between March 2020 and February 2021, her flagship “Ark Innovation ETF” increased by 250 percent. However, after the Corona boom for virtually all digital stocks, the fund’s price collapsed just as quickly – minus 80 percent. “The problem is that many private investors only jump on the bandwagon with such funds relatively late,” says expert Ali Masarwah from the Envestor fund service. In plain language: Many people probably hardly noticed the incredible growth, but the crash was all the more painful.
“Ordinary investors should think about this very, very carefully.”
The fact is that in recent years Wood has set up a fund company with six ETFs and a total of $14 billion in assets under management. Strictly speaking, she used a trick: Although she selects the stocks for her funds herself and checks them with her team, she sells her fund as an ETF. These vehicles are popular with millions of investors in this country and are actually known for following a stock index like the MSCI World with thousands of stocks from all over the world at every turn. However, Wood’s ETFs work differently and only rely on a handful of stocks, which the fund manager sometimes swaps regularly. Wood markets its securities as an “active” ETF, shaking up the asset management industry.
Wood has always had a mind of her own. At the age of 25, she joined the investment firm Jennisson Associates and from then on observed data companies that were too complicated for her colleagues. Companies like Reuters and Telerate, with their mountains of data, quickly became forerunners of the modern Internet, and Wood had found her life’s focus. “For Americans, optimism is simply in their genes,” says fund expert Barbara Claus from the rating agency Scope about Wood.
But it’s also about good marketing when Wood speaks to her followers. The fund company supposedly distributes its research results free of charge, but it also regularly uses the publicly disseminated findings to drive up the prices of its companies. “Wood certainly has deep convictions,” says fund expert Sälzle, “but she always combines them with her marketing.”
Local investors should be cautious when it comes to funds. Many of the companies in Wood’s products are still in the red, and the increased interest rates are causing them problems. “It can quickly wipe out companies,” says Barbara Claus. Wood’s strategy can currently only be traded in Germany through a fund from the investment company Nikko (WKN: A2PG6K). Now she is coming to Europe with her newly purchased ETF provider Rize and soon with her own established funds. “Normal investors should think about this very, very carefully,” says fund expert Rüdiger Sälzle. “Wood just has extreme bets going on that make me dizzy.”
For some, Wood’s biblical inspiration has made her a joke. Investment manager Matthew Tuttle brought a “Tuttle Capital Short Innovation ETF” onto the market a few years ago. The professional financier uses the product to bet that the prices of Wood’s companies will all fall. In the end it’s like Wood’s fund. It is above all a question of faith.