Secret Sauce Behind Ark’s Success Is Cathie Wood’s Diverse Team – ValueWalk Premium
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Secret Sauce Behind Ark’s Success Is Cathie Wood’s Diverse Team

Cathie Wood’s Ark Investment Management is well known for its wildly optimistic price target for Tesla Inc., its money-spinning bet on Bitcoin and the 81% return of its main fund this year. It’s less well known that almost none of its analysts has a finance background.

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Instead, their previous careers include cancer researcher, artificial intelligence expert, gaming engineer — even sailboat captain.

The 27-person team — one-quarter people of color, 30% women and most in their 20s — has built funds around companies with the potential to shape the future, including fintech, space and imaging. Wood attributes many of her firm’s successes to her analysts’ wide range of experiences.

“You’re probably not going to find a more diversified group of people,” Wood said. “They already have one foot in the new world, and they are extremely creative in terms of figuring out how the world is going to work.”

Wood, who is 64, said that if Ark hadn’t hired analysts who’d experimented with CRISPR gene editing technology, “I wouldn’t even know what it was.”

Ark analyst James Wang focuses on AI and the next wave of the Internet. He previously worked for Nvidia and wrote tech columns for an Australian magazine. He joined the firm in 2015 after he heard Wood speaking on Bloomberg Radio, guessed her email address and reached out.

“If we all came from a financial background, we would inevitability have views that are much more similar and more aligned with the current price expectations set by the market,” Wang said.

Different Experiences

While Ark’s gender distribution is about average for the securities industry, according to U.S. Bureau of Labor Statistics data, the firm’s racial diversity is far from the norm. Out of more than 80 members of executive teams at the nation’s top banks, only one is Black. Numbers for the ETF industry aren’t available, but anecdotal evidence suggests it’s also lacking.

“It’s an example of how diversity can make companies more efficient and productive because of the diversity of experience that we all bring to the table,” he said.

Studies back this up. McKinsey & Co. found that businesses in the top quartile for ethnic diversity outperformed those in the bottom quartile by 36%.

Ark has consistently racked up strong returns since first betting on Bitcoin in 2015. Over five years, Ark has three of the top 15 U.S. equity funds in terms of performance in the past five years. In that period, her Ark Next Generation Internet ETF (ARKW) has annualized returns of more than 41%, compared to 22% for tech darling Invesco QQQ Trust Series 1 (QQQ).

Read the full article here by Claire Ballentine, Advisor Perspectives


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