Cathie Wood on ARK’s Volatility, Venture Investing and Innovation

Cathie Wood, CEO and CIO of ARK Invest, tells Harry Stebbings that she entered finance at 20 after economist Art Laffer introduced her to Capital Group. Her interest was in economics and how the world might develop, even though she knew little about investment at the time.

Wood says she has pushed against benchmark-driven and passive investing. ARK focuses its research on genomic sequencing, robotics, energy storage, artificial intelligence and blockchain. She believes these technologies could disrupt established businesses and that the shift toward benchmark-sensitive investing has gone too far. This is the view of a manager whose active strategy competes for investor assets.

Asked about the decline of Tupelo, the firm she co-founded, Wood disputes the framing. She says the family office grew from roughly $250 million to between $800 million and $1 billion while she was there, before a 20% decline in 2000. These figures are her recollection and are not independently verified in the interview.

Wood says the partners bought put options as protection when they saw excessive capital chasing immature technologies. In early 2001 they disagreed about removing the protection after Federal Reserve easing, and she left. She takes responsibility for the decline during her tenure but says she does not know what happened to the family’s assets afterward.

Discussing the venture market in late 2022, Wood says ARK’s innovation strategy had fallen sharply from its February 2021 peak and private companies were also facing lower valuations. She prefers starting portfolios during downturns and expects opportunities to average into private and public assets. Her assessment and expected opportunities are time-specific investment opinions.

She describes ARK’s new crossover fund as intending, at maturity, to hold roughly 75% private and 25% public investments, while saying it had not yet reached that allocation. She says the public portion can provide liquidity and an opportunity to buy assets she considers undervalued. The allocation was a stated goal, not a guarantee.

Wood says some holdings had fallen 80% to 90% from their peaks and attributes part of the decline to investors moving toward benchmarks in a risk-off market. She calls those prices excessive declines because she expects innovation to disrupt the benchmarks. The declines describe selected stocks, not a uniform return for every ARK fund.

Stebbings asks how she maintains conviction amid such losses. Wood says ARK revisits its research and assumptions, using client and social feedback to challenge them. If its research is right, lower prices can raise expected five-year returns; that expectation depends on forecasts and is not a realized return.

In that environment, she says ARK averaged down and concentrated its flagship portfolio from 58 holdings to roughly 32 or 33, favoring its highest-conviction names. Concentration can increase exposure to individual outcomes; Wood presents it as part of her discipline rather than diversification across all risks.

Asked whether a company could become insolvent before the market recognizes its value, Wood recalls defending Tesla in early 2019 and believing loyal shareholders would provide capital through a secondary offering. She applies similar confidence to holdings at the interview date, including Invitae, and describes hopes for its molecular diagnostics business. These are her investment judgments, not assurances of solvency or future performance.

Wood says ARK sells when a stock’s projected five-year return falls below its public portfolios’ 15% minimum hurdle, rather than simply raising valuation assumptions. She says ARK sold Nvidia as its valuation rose and had recently reinitiated a position after a decline. This is her account of the strategy and timing, not a current holding statement.

ARK organizes analysts around technologies rather than traditional sectors because Wood expects those technologies to cross industry boundaries. Concentrating a portfolio also forces the team to sell names where management turnover or other warning signs weaken conviction, she says.

Wood argues that passive and benchmark-linked flows supported large technology stocks in the 2021 market peak. She says ARK avoided several large platforms for different competitive reasons and saw early signs of a change in market leadership. These are her interpretations of market behavior and a late-2022 outlook.

Responding to criticism that ARK lacks risk management, Wood says it is a specialized innovation strategy rather than a complete asset allocation. She expects advisers and investors to decide how large a share it should occupy in a diversified portfolio. She acknowledges that the strategy is volatile and that the future is uncertain.

Wood attributes client retention partly to publishing research and repeatedly communicating a five-year horizon. She cites approximately $17 billion in net inflows in the prior year and less than $1 billion of outflows in the current year as of the interview; these are her stated figures and depend on the relevant products and dates.

She argues that investors can use ARK as a diversifying allocation, while stating that the strategy had been down 79% at its worst. Her recommendation to buy after the decline reflects her interests as its manager and is not proof that losses would reverse.

Wood rejects the idea that sharing research is like revealing a poker hand. Information is more widely available than when she entered the business in 1977, she says; the advantage lies in assembling and interpreting it. ARK combines top-down opportunity sizing, company analysis and an innovation scoring overlay.

ARK launched a venture-oriented interval fund partly in response to retail investors who wanted access to private growth companies. Wood argues that knowledge, not only wealth or income, should matter in assessing investor eligibility. This is her policy view, not an explanation of current eligibility rules.

Wood says the fund uses an interval-fund structure and partnered with Titan to distribute it and share company interviews and research with retail investors. She also says ARK seeks institutional clients through other structures. The interview does not fully specify redemption terms, liquidity limits or fund risks.

The fund had no carried interest and a 2.75% management fee, according to Wood. She compares that with a traditional 2-and-20 venture structure, later clarifying that its fees use different bases and saying that a hypothetical top-quartile comparison would cost more. The interview does not provide enough assumptions to verify or generalize her comparison.

Wood says analysts receive equity in ARK itself and cover both public and private companies, rather than being divided into separate teams. The firm wants to follow companies from private stages through public markets. That describes ARK’s incentive design and commercial strategy, not proof that its incentives are equivalent to carried interest.

Stebbings asks how ARK will access sought-after private deals against established venture firms. Wood says public research, selective portfolios and relationships can attract founders and other investors, and claims some venture firms have made introductions. These are her accounts of the firm’s access at the time.

Wood describes research with Block about using surplus energy or gas that would otherwise be flared for Bitcoin mining, and mentions a private company, Crusoe Energy. She argues such approaches could improve energy economics. Her environmental and technical claims are not independently assessed in the interview, and ARK’s investment interests are relevant.

On capital planning, Wood says the fund was small, would begin around Series B, was not then leading deals and could use secondary purchases or convertible instruments. She describes flexibility as an advantage, while recognizing that the firm was still building its venture operations.

Wood estimates that disruptive technology companies were valued at $7 trillion to $8 trillion across public and private markets and predicts that figure could reach $210 trillion over eight to ten years. Both the starting estimate and the roughly 30-fold forecast are ARK’s claims, not verified market totals or realized outcomes.

She says investors must be able to tolerate volatility and hold a long-term view if they choose the venture fund. Wood discusses daily valuation but also mentions liquidity events; the interview alone does not establish how private assets are valued daily or when investors can redeem.

Wood names the Bible and The Emperor of All Maladies among books meaningful to her. On Meta, she says its engagement figures remained impressive and calls it potentially interesting to value investors, while believing its metaverse spending may have been early. The engagement figures and analysis are her late-2022 account.

She is enthusiastic about possible changes to Twitter under Elon Musk, including subscriptions and video, and speculates about digital-wallet opportunities involving Musk and Jack Dorsey. She presents these as possibilities, not announced or completed plans. ARK used Twitter to reach audiences, making the platform commercially relevant to her firm.

Wood’s investment advice is to follow evidence even when it contradicts consensus. In late 2022 she believed the inflation data were turning in a direction the market underappreciated and expected ARK’s strategy to benefit. That was a prediction, and investment results depend on more than her inflation thesis.

She says her personal portfolio is heavily concentrated in innovation, including ARK funds, crypto and private funds, and acknowledges being fortunate enough to take that risk. Asked to choose one company, she places Tesla near or at the top because of her autonomous-technology thesis; she also argues Zoom is more than a pandemic-era product. ARK’s holdings make these interested investment views.

Over the long term, Wood wants ARK to be known for research into technological innovation and to share that research with educators and families as well as investors. Stebbings thanks her for the conversation and she thanks him for challenging questions.