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> Wood’s flagship fund, the ARK Innovation ETF, had lost roughly half of its value over the prior year, as its aggressive bets on hot companies from Coinbase to

by bko 4y ago

> Wood’s flagship fund, the ARK Innovation ETF, had lost roughly half of its value over the prior year, as its aggressive bets on hot companies from Coinbase to Robinhood and Tesla had melted down amid a bear market in tech stocks. It's important to note what this really means. You can have 4 years of 20% returns and if the last year you're down 50%, you gave back nearly everything you've ever made, assuming you had no new money come in those years, otherwise even more. The max drawdown is whats important. You can almost always make money writing out of the money call options, except the one year where you give back everything you've made and then some. As expected: > Her ARK Innovation fund, often known by its ticker as ARKK, returned some 157 percent during that first year of the pandemic, compared to just 18 percent for the S&P 500 as a whole... Wood’s fund is now exactly where it was in March 2020, meaning pandemic investors who bet on her have now round-tripped all the way up and all the way back down. Adjusting for inflation, they have lost money. Cathie Wood is one of those investors that just makes directional bets, in her case high growth tech stocks. They happened to do well last 5 years or so, so it appears that Cathie has done well. But same as someone who just plowed a bunch of money into Bitcoin in 2012, it doesn't mean you're a good investor or you have anything interesting to share today. I read her Twitter occasionally and found her very unimpressive. For instance, she made some uninformed comments about "velocity of money" decreasing and that's the reason we won't have inflation (this was during the "transitory" phase of inflation denial). Then she had some ridiculous examples of things actually going down in price like AI training costs, which should balance things out. It was so comical it could have been on the show Silicon Valley. https://mleverything.substack.com/p/cathie-wood-inflation-and-velocity https://mleverything.substack.com/p/cathie-wood-inflation-an...

hamiltonians 4y ago
it lagged the qqq too. at best it generates beta. no alpha.
- bko 4y ago
  Yeah. If someone wants to do a levered bet on tech, they should. This is essentially what Cathie Wood is selling. So let's just drop the BS. Peter Thiel gave a speech at a Bitcoin conference a few months back where he explained Bitcoin price movement resembling a levered tech stock. And I'll say, it makes a lot of sense and dispels the whole idea of Bitcoin being an inflation hedge. https://www.youtube.com/watch?v=ko6K82pXcPA https://www.youtube.com/watch?v=ko6K82pXcPA
  - devoutsalsa 4y ago
    Bitcoin is not backed by any fundamental at all. Any movement up or down is pure speculation.
    - deleted 4y ago
      [deleted]
krsrhe 4y ago
mym1990 4y ago
The crazy thing is that right up until March 2020 the ARK fund had good returns but had only a fraction of the AUM of where it is now(or where it was at the peak in 2021). The fund had an incredible run in 2020 due to the Fed stimulus, but then again, anyone who was in the market was making a killing. The 2020 performance attracted more investors, but by that point the magic was gone. If you were unlucky enough to hop on the bandwagon near the end of 2020 and you're still holding on now, that is really unfortunate.
jmyeet 4y ago
A similar thing happened with Bear Stearns. It beat the market consistently every month... until it didn't. IIRC it blew up very very quickly. This is the same issue with these ridiculously high "guaranteed" returns on DeFi lending. Any significantly above market returns of any kind are either a scam or have risks that are either not understood or not disclosed. I'm honestly surprised the hedge fund industry has survived so long and grown so large. In some cases you get to invest in a market you otherwise couldn't access but it seems like long-term returns underperform passive investments in most cases.
- ta988 4y ago
  You forgot one case, the method gets applied by others and ROI crumbles.
  - nr2x 4y ago
    You can only model systems that don’t know about your model. ;-)
    - thomasahle 4y ago
      Modeling systems that know about you is game theory. I wonder how much of that is in modern trading algorithms?
- forum_ghost 4y ago
  > Any significantly above market returns of any kind are either a scam or have risks that are either not understood or not disclosed. Before computers were widespread there used to be niches where outsized returns did exist, but just too small for large professional investors to bother. Like a once a month mis-pricing that you could make a few thousand on, max, due to low liquidity. Hilariously enough, that’s exactly how the most famous “value” investor Buffet started out: convertible bonds arbitrage. So much for “buy and hold undervalued but very good companies forever ” lol. He eventually grew out of that niche and became too big, so he had to develop a new image to sell to his LPs/investors and move on to bigger things. I have a hunch that the hedge funds proliferation in some part is due to the availability of speed and compute. Today you can leverage machines to exploit a million small niches, and lots of funds are doing just that. Tons of mini buffets around, they just can’t grow as big anymore, or at least with much lower frequency.
tootie 4y ago
Nobody knows what they're doing
hardwaresofton 4y ago
> some uninformed comments about "velocity of money" decreasing and that's the reason we won't have inflation (this was during the "transitory" phase of inflation denial). Far be it from me to defend ARK but this statement I've seen repeated by CFAs -- velocity of money is linked to inflation -- it's the only reason we didn't see inflation in the "real" economy earlier, no? Since financial assets were still moving freely (and sovereign bond yields were crushed), they felt the immediate effects of inflation. It's obviously idiotic to say that velocity of money will be decreasing going forward or something (did she say this? surely not?), but it seems like the recent increase in inflation is due to the real economy opening back up (and velocity returning to normal) along with lingering supply side shocks. Would love some correction if I've got this the wrong way 'round.
- texasbigdata 4y ago
  There is very little econ on the CFA.
  - hardwaresofton 4y ago
    Well to be fair sometimes there's very little econ in public markets!
- hodgesrm 4y ago
  Wasn't the lack of inflation driven by countervailing deflation from moving supply chains into lower cost regions like Eastern Europe and China? It's been a good 30 year run but that chicken is now coming home to roost.
  - hardwaresofton 4y ago
    That sounds like reasonable analysis, but I do want to point out I was thinking much shorter term -- like literally in the last 3 years and this situation specifically. I do agree You're right that we are probably seeing the effects of globalization policy though, but I can't say I've thought much about that long of a time frame.
99_00 4y ago
When prices are going up people will believe any BS that justifies it. Once you know that you see it again and again
- supramouse 4y ago
  pretty much
encoderer 4y ago
> You can have 4 years of 20% returns and if the last year you're down 50%, you gave back nearly everything you've ever made Yes but luckily the fund went up much more than that, much faster. Feels like a strange point to make?
- esoterica 4y ago
  It's also down more than that (70%).
sytelus 4y ago
I was impressed by ARKK performance until I heard her podcast where she lays out her reasoning. Her idea was that some tech will change world so much that there will be 100X return. This makes her buy into all kind of fishy things which we in tech know as usual startup BS that fails 90% of the times. The problem is that her bets are $125M instead of $125K. As someone working in tech, I thought she was just following buzzwords and hopping at least part of her portfolio would do 100X over 10 years. She is not a tech person. She isn’t a visionary. She has no magic crystal ball. Her fund is directional day trader and nothing more which means it will invest in all kind of bogus companies and likely lose or get lucky.
- DANK_YACHT 4y ago
  > Her idea was that some tech will change world so much that there will be 100X return. Is that really so different from the VC approach?
  - lordnacho 4y ago
    It's not but then it's more appropriate to use a VC vehicle where the money is locked up then an open ended fund that people can buy or sell every day. ETF is also investible by normal people, not just accredited investors.
  - pyuser583 4y ago
    VC normally looks for deals like “stock that gets treated like a pseudo creditor”, so even if a company fails, they’ll break even. Also a seat on the board. VC really makes its money work for it. ARKK is just picking stocks.
  - pharmakom 4y ago
    VC is much earlier stage. I think ARKK only invests in publicly traded companies. The potential for a 100x is much greater at earlier stages.
    - refurb 4y ago
      Exactly. A VC putting in $1M for a Series B and getting $100M out is within the realm of possible. Buying $10M of public stock and having it turn into $1B isn't quite so realistic, at least not on a continued basis that an investing thesis would require.
pyuser583 4y ago
She wasn’t hiring qualified people to due diligence on the companies she was investing in . Recent college grads, not experienced compliance people. Her response: “my team is more diverse than most, and diversity adds effectiveness.” She also supported Trump. Like she’s going for crazy in all directions.
- goodguyamercunt 4y ago
blitzar 4y ago
> You can have 4 years of 20% returns and if the last year you're down 50%, You can also have 4 years of 20% returns with 10bn of capital, and then 1 year of down 50% with 50bn and have actually lost $$$'s despite a nice looking % return. It also happened to some household names that you would consider "legendry investors" who made massive returns in 08.
- id 4y ago
  That's just called dishonesty. If a millionaire doubles $100 with an investment, I consider that a .01% return.

by bko 4y ago

hamiltonians 4y ago

it lagged the qqq too. at best it generates beta. no alpha.

bko 4y ago
Yeah. If someone wants to do a levered bet on tech, they should. This is essentially what Cathie Wood is selling. So let's just drop the BS. Peter Thiel gave a speech at a Bitcoin conference a few months back where he explained Bitcoin price movement resembling a levered tech stock. And I'll say, it makes a lot of sense and dispels the whole idea of Bitcoin being an inflation hedge. https://www.youtube.com/watch?v=ko6K82pXcPA https://www.youtube.com/watch?v=ko6K82pXcPA
- devoutsalsa 4y ago
  Bitcoin is not backed by any fundamental at all. Any movement up or down is pure speculation.
  - deleted 4y ago
    [deleted]

krsrhe 4y ago

mym1990 4y ago

The crazy thing is that right up until March 2020 the ARK fund had good returns but had only a fraction of the AUM of where it is now(or where it was at the peak in 2021). The fund had an incredible run in 2020 due to the Fed stimulus, but then again, anyone who was in the market was making a killing. The 2020 performance attracted more investors, but by that point the magic was gone. If you were unlucky enough to hop on the bandwagon near the end of 2020 and you're still holding on now, that is really unfortunate.

jmyeet 4y ago

A similar thing happened with Bear Stearns. It beat the market consistently every month... until it didn't. IIRC it blew up very very quickly. This is the same issue with these ridiculously high "guaranteed" returns on DeFi lending. Any significantly above market returns of any kind are either a scam or have risks that are either not understood or not disclosed. I'm honestly surprised the hedge fund industry has survived so long and grown so large. In some cases you get to invest in a market you otherwise couldn't access but it seems like long-term returns underperform passive investments in most cases.

ta988 4y ago
You forgot one case, the method gets applied by others and ROI crumbles.
- nr2x 4y ago
  You can only model systems that don’t know about your model. ;-)
  - thomasahle 4y ago
    Modeling systems that know about you is game theory. I wonder how much of that is in modern trading algorithms?
forum_ghost 4y ago
> Any significantly above market returns of any kind are either a scam or have risks that are either not understood or not disclosed. Before computers were widespread there used to be niches where outsized returns did exist, but just too small for large professional investors to bother. Like a once a month mis-pricing that you could make a few thousand on, max, due to low liquidity. Hilariously enough, that’s exactly how the most famous “value” investor Buffet started out: convertible bonds arbitrage. So much for “buy and hold undervalued but very good companies forever ” lol. He eventually grew out of that niche and became too big, so he had to develop a new image to sell to his LPs/investors and move on to bigger things. I have a hunch that the hedge funds proliferation in some part is due to the availability of speed and compute. Today you can leverage machines to exploit a million small niches, and lots of funds are doing just that. Tons of mini buffets around, they just can’t grow as big anymore, or at least with much lower frequency.

tootie 4y ago

Nobody knows what they're doing

hardwaresofton 4y ago

> some uninformed comments about "velocity of money" decreasing and that's the reason we won't have inflation (this was during the "transitory" phase of inflation denial). Far be it from me to defend ARK but this statement I've seen repeated by CFAs -- velocity of money is linked to inflation -- it's the only reason we didn't see inflation in the "real" economy earlier, no? Since financial assets were still moving freely (and sovereign bond yields were crushed), they felt the immediate effects of inflation. It's obviously idiotic to say that velocity of money will be decreasing going forward or something (did she say this? surely not?), but it seems like the recent increase in inflation is due to the real economy opening back up (and velocity returning to normal) along with lingering supply side shocks. Would love some correction if I've got this the wrong way 'round.

texasbigdata 4y ago
There is very little econ on the CFA.
- hardwaresofton 4y ago
  Well to be fair sometimes there's very little econ in public markets!
hodgesrm 4y ago
Wasn't the lack of inflation driven by countervailing deflation from moving supply chains into lower cost regions like Eastern Europe and China? It's been a good 30 year run but that chicken is now coming home to roost.
- hardwaresofton 4y ago
  That sounds like reasonable analysis, but I do want to point out I was thinking much shorter term -- like literally in the last 3 years and this situation specifically. I do agree You're right that we are probably seeing the effects of globalization policy though, but I can't say I've thought much about that long of a time frame.

99_00 4y ago

When prices are going up people will believe any BS that justifies it. Once you know that you see it again and again

supramouse 4y ago
pretty much

encoderer 4y ago

> You can have 4 years of 20% returns and if the last year you're down 50%, you gave back nearly everything you've ever made Yes but luckily the fund went up much more than that, much faster. Feels like a strange point to make?

esoterica 4y ago
It's also down more than that (70%).

sytelus 4y ago

I was impressed by ARKK performance until I heard her podcast where she lays out her reasoning. Her idea was that some tech will change world so much that there will be 100X return. This makes her buy into all kind of fishy things which we in tech know as usual startup BS that fails 90% of the times. The problem is that her bets are $125M instead of $125K. As someone working in tech, I thought she was just following buzzwords and hopping at least part of her portfolio would do 100X over 10 years. She is not a tech person. She isn’t a visionary. She has no magic crystal ball. Her fund is directional day trader and nothing more which means it will invest in all kind of bogus companies and likely lose or get lucky.

DANK_YACHT 4y ago
> Her idea was that some tech will change world so much that there will be 100X return. Is that really so different from the VC approach?
- lordnacho 4y ago
  It's not but then it's more appropriate to use a VC vehicle where the money is locked up then an open ended fund that people can buy or sell every day. ETF is also investible by normal people, not just accredited investors.
- pyuser583 4y ago
  VC normally looks for deals like “stock that gets treated like a pseudo creditor”, so even if a company fails, they’ll break even. Also a seat on the board. VC really makes its money work for it. ARKK is just picking stocks.
- pharmakom 4y ago
  VC is much earlier stage. I think ARKK only invests in publicly traded companies. The potential for a 100x is much greater at earlier stages.
  - refurb 4y ago
    Exactly. A VC putting in $1M for a Series B and getting $100M out is within the realm of possible. Buying $10M of public stock and having it turn into $1B isn't quite so realistic, at least not on a continued basis that an investing thesis would require.

pyuser583 4y ago

She wasn’t hiring qualified people to due diligence on the companies she was investing in . Recent college grads, not experienced compliance people. Her response: “my team is more diverse than most, and diversity adds effectiveness.” She also supported Trump. Like she’s going for crazy in all directions.

goodguyamercunt 4y ago

blitzar 4y ago

> You can have 4 years of 20% returns and if the last year you're down 50%, You can also have 4 years of 20% returns with 10bn of capital, and then 1 year of down 50% with 50bn and have actually lost $$$'s despite a nice looking % return. It also happened to some household names that you would consider "legendry investors" who made massive returns in 08.

id 4y ago
That's just called dishonesty. If a millionaire doubles $100 with an investment, I consider that a .01% return.