Speaking at the Forbes 30/50 Summit in Abu Dhabi on Monday, famed stock picker Cathie Wood of Ark Invest sharply criticized passive investing and touted disruptive innovation stocks, even as her flagship fund continues to post lackluster returns as shares of top holdings like Tesla and Zoom continue to struggle.
The founder and CEO of Ark Invest on Monday criticized the wider shift toward passive investing as “backwards looking,” arguing that “fear” has pushed investors back to “mimicking indexes, which is kind of mindless.”
“I believe this is the most massive misallocation of capital in the history of mankind,” Wood told forbesarguing that her firm’s thesis of investing in disruptive technology is now more important than ever, given today’s uncertainty in markets.
The famed stock picker emphasized that she still sees “explosive growth opportunities” ahead, but increasingly risk-averse investors have “defaulted to benchmarks” amid concerns over inflation, the Russia-Ukraine conflict and the Federal Reserve’s upcoming rate hikes.
Wood’s success soared in 2020 when her flagship Ark Innovation fund surged nearly 150%, but performance has since declined, with the fund falling 24% last year and another 37% so far in 2022.
The Ark Invest CEO remains undeterred by her skeptics: “Betting against innovation long term is a losing proposition,” she said, adding that the “visceral response [from critics] tell me we’re doing something right.”
While innovation was first “turbocharged” by the problems that arose during the coronavirus crisis in 2020, Wood now sees parallels to today’s market: “I feel we’re back there again, and now with the Russia-Ukraine issues, we have many more problem.”