Cathie Wood

3/22/2021 ARK’s Cathie Wood Disrupted Investment Management.
She’s Not Done Yet | Barron's
ETFS WOMEN IN FINANCE
ARK’s Cathie Wood Disrupted Investment

Management. She’s Not Done Yet.
By Evie Liu and Leslie P. Norton
Updated March 8, 2021 / Original March 5, 2021
Cathie Wood, founder, CEO, and CIO of ARK Investment Management

Photograph by Will Crooks
Listen to this article

16 minutes
Andrew Michel, a 65-year-old product-marketing engineer, made a bold—many

would say an imprudent—move last June. The longtime, typically conservative
investor sold two-thirds of his retirement savings, which had been invested in
broad-market index funds, and put the money into two red-hot ARK exchange-
traded funds. Within a few months, he made enough for a down payment on a
second home, in sunny Tampa, Fla. “I looked her up, and it all sounded really
good,” he tells Barron’s. “I started investing with ARK just three days later.”
https://www.barrons.com/articles/arks-cathie-wood-disrupted-investment-management-shes-not-done-yet-51614992508 1/10
3/22/2021 ARK’s Cathie Wood Disrupted Investment Management. She’s Not Done Yet | Barron's
The “her” is Cathie Wood, who founded ARK Investment Management seven years
ago, and joins our list of the 100 Most Influential Women in U.S. Finance this year.
Michel’s is the sort of investor fanaticism that has made ARK a household name and
Wood an unlikely celebrity. Her success seems very of-the-moment, but she has
been laying the groundwork for years. She was early on many themes—she
embraced active management when investing seemed inexorably tied to indexing;
she implemented her stock-picking in active ETFs while the largest asset managers
said it couldn’t be done; and she bought companies that others thought were
overpriced, a joke, or both.
It isn’t just that ARK’s actively managed funds have done well, although they have
—phenomenally so: Last year, five of its seven ETFs returned an average of 141%;
three were the top performers among all U.S. funds. Wood’s rise to star-manager
status is reflective of today’s zeitgeist. Some of the biggest investing stories
recently— Tesla (ticker: TSLA), Robinhood, Reddit, GameStop (GME), and Bitcoin—
are about outsiders upsetting the status quo.
“ARK is an outsider, too,” says John Rekenthaler, vice president of research for
Morningstar. “Cathie Wood has been around, but this is a new company. There is a
sense of outsmarting Wall Street, outsmarting convention.” Wood has a following
on social media, which has fostered a sense of community and fandom akin to the
Bogleheads or Buffett mania. The firm even acquiesced to demand for ARK
merchandise (all sale proceeds go to a Covid-relief charity).
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ARK has taken in $37 billion in new money since the beginning of 2020, the third-
highest inflow among money managers, behind only Vanguard Group and
BlackRock’s iShares, each of which has hundreds of funds. The firm’s flagship ETF,
ARK Innovation (ARKK), has grown more than tenfold within a year; it now has $22
billion in assets. ARK has $47 billion in all of its ETFs combined.
Wood’s focus on innovative companies with technology to disrupt the way we live
means that her portfolios are loaded with stocks that have skyrocketed—Tesla is a
big holding in three of her funds. Other ARK holdings include Square (SQ), Teladoc
Health (TDOC), Roku (ROKU), and Shopify (SHOP). Many have compared Wood to
the star managers of the 1990s, who rode high as the tech-stock bubble inflated,
and vanished after it burst.
When stocks soar, there’s always the risk of them flying too close to the sun, and
ARK Innovation is getting singed: It has dropped 23% in the past two weeks. “ARK
funds are bull-market stories; they’re obviously going to do bad in a bear market.
There’s nothing controversial about that,” says Rekenthaler. “These are highly
aggressive, high-beta stocks.”
Wood isn’t focused on short-term fluctuations.

“I felt that the move She takes a long, and bold, view—a year ago, she
toward said that Tesla could reach a split-adjusted
benchmark $1,400 a share in five years—and says we aren’t
investing had in a bubble today. The big ideas blossoming now
gone too far, and were planted 30 years ago, she says: “We are
there was a void ready for prime time now.”
evolving in the
marketplace
having to do with Wood, 65, bears none of Icarus’ hubris. Her
innovation. ” parents immigrated to the U.S. from Ireland and
— Cathie Wood settled in Los Angeles. Like many immigrant
families, Wood grew up with education and
career at the forefront. “I was raised as a firstborn son,” says Wood. “I was going to
blaze the trail for my family.”
Wood’s father served in the Irish army and the U.S. Air Force, and became a
successful radar system engineer, who, according to Wood, was extremely detail-
oriented and always sought to “peel the onion” in his work. He pushed Wood to
discover connections between things. Wood’s mother, she says, was “very
supportive” and “full of laughter and life.”
100 MOST INFLUENTIAL WOMEN IN U.S. Wood graduated from the

FINANCE University of Southern California
with a degree in economics and
100 Women Making Their Mark in the finance. She landed her first job at
World of Finance Capital Group through her mentor,
celebrated supply-side economist
See All 100 Profiles
Arthur Laffer. She spent three years
there as an assistant economist. In 1980, growth shop Jennison Associates was
looking for someone to crunch economic data; Wood moved to New York and
became its chief economist—at age 25.
It was those days that truly shaped her skill for argument, Wood says. In the early
1980s, interest rates and inflation were in the double digits, and productivity and
growth were collapsing. While most of the best-known economists of the time—
including Henry Kaufman, known as “Dr. Doom,” and Milton Friedman—believed
that inflation was embedded in the system, Wood thought interest rates had
peaked.
Spiros “Sig” Segalas, co-founder of Jennison and Wood’s boss and mentor, often
brought in these economic luminaries to share their forecasts, and challenged
Wood to debate them. “For four years, nobody believed us,” she recalls. “I would
have to go up against Henry Kaufman one-on-one. I knew my numbers; I knew
what I was talking about, but I had to convince them I did because of my youth.”
Segalas calls her a “lady with unbelievable, unwavering conviction.” He installed

Wood in a nearby office so he could pick her brain and tasked her with writing the
firm’s quarterly letter. “She was by far the sharpest,” Segalas says. “She always
made me look good.”
Wood spent 18 years at Jennison, while raising three children. Interest rates began
to decline in the 1980s, allowing tech companies more runway for growth, and
setting the stage for a new era of innovation—featuring personal computers,
semiconductors, and wireless capability. Wood decided that she wanted to
become an equity analyst and portfolio manager.
Wood looked at places that other analysts were ignoring. “I was like a little dog
looking for scraps under the table,” she says. She found stocks that sat at the
intersection of multiple industries, and weren’t followed by analysts from any side.
This, she realized, is where innovation happens. Reuters, for example, was this
mystifying “database publishing” company that collected data from financial
companies and then sold it back to them in aggregate. Nobody understood this
business model, so Wood took it up: “I just felt it was something big, and, of course,
it was the precursor of the internet.”
Volatile Rides
ARK ETFs had phenomenal returns last year, but 2021 is presenting a tough start.
One- One-
AUM Year Month Expense
ETF / Ticker Type (mil) Return Return Ratio Description
ARK Active $23,040 139.9% -14.4% 0.75% Flagship

Innovation / fund; 10%
ARKK weight in
Tesla
ARK Genomic Active 10,194 159.8 -15.8 0.75 Healthcare-

Revolution / focused;
ARKG best-
perfoming
ETF in 2020
ARK Next Active 7,849 149.6 -8.6 0.79 Tech-

Generation focused; 5%
Internet / weight in
ARKW Bitcoin
ARK Fintech Active 4,391 124.1 -2.1 0.75 Launched

Innovation / in 2019,
ARKF with
shortest
track record
ARK Active 3,537 124.1 -10.5 0.75 A third of

Autonomous the
Technology & holdings
Robotics / are non-U.S.
ARKQ companies
The 3D Index 584 92.5 -10.2 0.66 Best-

Printing / performing
PRNT ARK fund
year-to-date
ARK Israel Index 355 52.9 -3.0 0.49 The only

Innovative foreign-
Technology / focused
IZRL fund
Note: Data as of March 3
Sources: Morningstar; Ark Investment Management
After leaving Jennison in 1998, Wood co-founded Tupelo Capital, a hedge fund;
she joined AllianceBernstein as a portfolio manager and thematic research
strategist in 2001, managing more than $5 billion. She continued to invest with
strong conviction in high-growth, high-risk, smaller-cap stocks.
Wood researched stocks with the same dogged determination she applied to
economics. “Cathie is insatiably curious; she was a voracious consumer of research
from all over the Street. She read everything from everyone,” says Lisa Shalett,
Wood’s boss at the time, now chief investment officer for Morgan Stanley Wealth
Management. “She was tireless; she works 24/7 to make sure the team has the
most thorough research and differentiated view.”
Wood’s portfolios performed very well in the bull market of the early 2000s, but
they fell harder than the market during the 2008-09 financial crisis. “It goes without
saying that Cathie’s strategies are vulnerable to going out of favor,” says Shalett.
“When you have a liquidity crisis in the market or big changes in interest rates, all
the holdings could move together. That doesn’t provide a lot of diversification for
your clients.”
Indeed, Wood’s high-octane style was putting off some institutions, and
AllianceBernstein wanted guardrails on the funds. Her portfolios were often
deemed too volatile, says Wood, and she was asked to make adjustments by
owning indexes like the S&P 500. She disagreed: “I felt that the move toward
benchmark investing had gone too far, and there was a void evolving in the
marketplace having to do with innovation.” She saw that investors in private
companies were willing to assign higher valuations to companies than stock
investors who were wary of volatility. “We saw companies in the public market
sometimes selling for just 10% of what private markets were willing to pay [for
similar companies],” she says. “I thought there was a huge opportunity there.”
Then came another sort of awakening. Wood was raised Catholic and considers
herself a person of faith. She reads devotional literature and attends church. In
2006, when the housing bubble was not yet at its peak, Wood thought it was about
to burst. She dramatically reduced the risk in her portfolios, and lagged behind the
market. “A thousand basis points of underperformance was embarrassing,” she
recalls.
When she spoke to her spiritual advisers, however, it came to her: “You cannot
worship any idol, and the benchmark has become an idol.” The next year, she
made back much of the loss. But in prayer and meditation, she had the following
revelation: “Benchmarks are all about successes in the past. God doesn’t want us to
be stuck in the past. He wants us to move into the new creation.” That’s when she
knew she had to start her own company: “I felt that a start-up could go out there
and spread that message very loudly,” she says, “We were putting all our chips on
the table.” In 2014, Wood left Alliance Bernstein and launched her firm.
Cathie Wood on Space, Tesla, and Following Up

Her 152% Return
The world-beating stock-picker says pricey growth stocks have plenty of
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Wood named it for the Ark of the Covenant, a chest that in Jewish and Christian
tradition holds the tablets bearing the Ten Commandments, although she told
clients later that it was an acronym for Active Research Knowledge. She was on a
mission to allocate capital to its best use—transformative technologies.
For the first three years, ARK had no outside investors, so Wood personally
supported the entire firm, paying for operating costs such as salaries and product-
registration expenses. The firm had no office; everyone worked out of a public
working space on their own computer. “There were a lot of people who doubted
her, and a lot of friends were concerned, yet her confidence never wavered,” says
Tom Staudt, one of the first employees of ARK and now its chief operating officer.
“Cathie risked her personal wealth because she had that degree of conviction. I
joined ARK purely because of Cathie; I was blown away by her vision.”
ARK has remained lean. It has about 30 employees, and most are millennials. Wood
wants to make sure that the staff has one foot in the new world, Staudt says. She
also hired people with less experience in finance: Most employees on ARK’s
investing side don’t have a Wall Street background or an M.B.A. Instead, they are
experts in different industries, who are encouraged to “think differently, think long
term, and think exponentially in a world that often falls hostage to short-term and
linear thinking,” says Staudt.
Before the pandemic, Wood would sit at her desk in the center of ARK’s Manhattan
office, an open-floor space located on East 28th street. There are no cubicles, and
Wood doesn’t have an office. Her desk has a tall chair—like those you’d see in a bar
—and all other desks are arranged in a circle, so she could see and talk to anybody
by simply turning her head. “She wants to create an investment process and
culture where ideas can come from any and all people within the firm,” says Staudt.
Wood’s belief in transparency is another reason she decided to start her own
company. Most financial firms don’t allow portfolio managers and analysts to use
social media to share their research or even gather information. At ARK, Wood
created an open-source ecosystem, where the team can share research and
collaborate with scientists, engineers, doctors, and other experts. “Most
compliance teams would not be comfortable with that,” Wood says. “From the
beginning, we said we are going to actively share the knowledge we’re
generating,” says Brett Winton, who has worked with Wood since 2007, when they
were both at AllianceBernstein. Winton was a thematic research analyst then; now
he is the director of research at ARK. “Information attracts information. By providing
our research to the world, we’ll get this reflection back on areas of disagreement or
misunderstandings. It will make us better at understanding what’s happened.”
Investors and peers like this open approach. “Most funds hide their investments;
she doesn’t,” says Emma Vinarsky, a healthcare portfolio manager at Aleph Capital.
“She’s very gutsy. She’s not afraid to take chances.”
Michel, an investor for more than 30 years, tells Barron’s that he opened a Twitter
account for the first time last year because of Wood: “It has been very informative
learning about ARK through the stocks tweets out there.” ARK’s weekly
brainstorming sessions are open for anyone to join, including industry experts and
rival investors. Angela Dalton, an outside advisor of ARK and CEO of Signum
Growth Capital, has been attending those meetings every Friday—both in-office
and online—for the past four years. “She is the only person I’ve ever met to open
this up,” says Dalton.
Michel still has two-thirds of his retirement money in the two ARK funds, minus that
down payment. He’s still working, owns some real estate, and will have a pension
when he retires, so he’s ready to see where Wood’s vision takes his portfolio over
the next two or three decades. But as interest rates creep higher and inflation
concerns set in, investors begin to discount future value of these highflying stocks
a bit more, which has caused share prices to fall. That, in turn, can prompt more
selling.
Wood isn’t concerned about ARK Innovation’s sharp pullback. Investors yanked
nearly $700 million out from Feb. 24 to March 1; it recouped most of those flows in
the next two days before turning negative again. Other ARK ETFs are seeing
outflows, as well. ARK’s Winton says he suspects that most outflows are attributable
to options strategies based on the funds. “Equities are more predictable over
longer periods,” says Winton. “I don’t think it’s wise to try to anticipate what our
strategies are going to do over the next two weeks, but a lot of people are placing
implicit bets on exactly that.”
Critics warn that the firm could end up a victim of its own success—it has attracted
a lot of “hot” money that Wood must invest, potentially in areas she’s less excited
about. Wood says capacity isn’t a challenge; ARK owns companies that Wood
expects to return at least 15% annually, which means their shares will double in five
years. “If we’re right, if these techs are truly on exponential trajectories, then our
capacity should grow exponentially, as well,” says Wood. She notes that the
explosion of newly public companies over the past year—especially those listed
through special-purpose acquisition companies, or SPACs—have also provided
ample new opportunities for innovation stock-picking.
Michel, for one, firmly believes what Wood advocates—taking a long-term view
and sticking with it through the downturns. “It’s the best time to buy when it dips,”
he says. “Though the market goes down, it almost always comes back up. You just
have to be patient.”
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Wood is still an unswerving debater and formidable thinker, says a former

colleague who asked not to be named because of his firm’s restrictions on
speaking to the press. “She can remember more facts and figures than anyone I’ve
ever met. She has a tremendous head start in any debate because of the pure
horsepower of her brain. Does that create overconviction? Yes, but it does for
everybody.”
Write to Evie Liu at evie.liu@barrons.com and Leslie P. Norton at

leslie.norton@barrons.com

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3/22/2021 ARK’s Cathie Wood Disrupted Investment Management.

She’s Not Done Yet | Barron's

ETFS WOMEN IN FINANCE

ARK’s Cathie Wood Disrupted Investment

Updated March 8, 2021 / Original March 5, 2021

Cathie Wood, founder, CEO, and CIO of ARK Investment Management

Listen to this article

Andrew Michel, a 65-year-old product-marketing engineer, made a bold—many

The Dow Rose 572 Points to Close a Bumpy Week

Nasdaq Escapes Correction Territory

ARK Innovation Falls 23% In Two Weeks. Here’s What To Watch.

Wood isn’t focused on short-term ﬂuctuations.

100 MOST INFLUENTIAL WOMEN IN U.S. Wood graduated from the

Segalas calls her a “lady with unbelievable, unwavering conviction.” He installed

ARK Active $23,040 139.9% -14.4% 0.75% Flagship

ARK Genomic Active 10,194 159.8 -15.8 0.75 Healthcare-

ARK Next Active 7,849 149.6 -8.6 0.79 Tech-

ARK Fintech Active 4,391 124.1 -2.1 0.75 Launched

ARK Active 3,537 124.1 -10.5 0.75 A third of

The 3D Index 584 92.5 -10.2 0.66 Best-

ARK Israel Index 355 52.9 -3.0 0.49 The only

Note: Data as of March 3

Sources: Morningstar; Ark Investment Management

Cathie Wood on Space, Tesla, and Following Up

00:00 / 25:55 1x SUBSCRIBE

Hi Evie, get the latest from Review & Preview

Wood is still an unswerving debater and formidable thinker, says a former

Write to Evie Liu at evie.liu@barrons.com and Leslie P. Norton at

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