Is Cathie Wood Losing Her Winning Touch? Ark Invest ETFs Underperform Broader Market In Q3

Cathie Wood's Ark Invest had a stellar year in 2020 even as other actively managed funds and fund managers struggled through the COVID-19-induced downturn. Wood was touted as having a Midas touch, as her fund's flagship ARK Innovation ETF returned a strong 153% compared to the S&P 500 Index's 16.3% advance.

Ark Suffers Post-COVID-19 Complication:Come 2021, Ark began to turn in more mixed performance. The Ark Innovation ETF fell 3.7% for the first quarter before making a comeback in the second, when it added 9%.

The third-quarter performance report released by Ark showed all of the firm's actively-managed funds as well as its two self-indexed ETFs underperformed the broader market.

Here is how each Ark ETF fared in the third quarter:

Active ETFs

• Ark Innovation ETF: (-15.5%)
• Ark Autonomous Technology & Robotics ETF (ARKQ): (-9.5%)
• Ark Next Generation Internet ETF (ARKW): (-9.9%)
• Ark Genomic Revolution ETF (ARKG): (-19.3%)
• ARK Fintech Innovation ETF (ARKF): (-8.7%)
• Ark ETF Trust - ARK Space Exploration & Innovation ETF (ARKX): (-6.6%)

Index ETFs

• The 3D Printing ETF (PRNT): (-10%)
• The Ark Israel Innovation Technology ETF (IZRL): (-8.3%)

The weaker showing is exemplified when it is weighed against the broader market performance. During the third quarter, the S&P 500 Index was up 2.5% and the Nasdaq Composite Index gained 5.1%.

Macro headwinds hurt consumer and investor confidence, Wood said in the quarterly report. The market reacted to fears of an economic slowdown after a rise in the delta variant of the coronavirus, supply chain shortages and a government crackdown in China, she added.

Ark believes inflation fears have been overblown and are likely to give way to the risks of deflation.

Tesla Helps To Mitigate Weakness:Wood is a self-professed Tesla, Inc. bull. Tesla is part of the ARK Innovation ETF, the Ark Innovation ETF and the Ark Innovation ETF, with holdings of over 10% in each.

The EV giant topped the list of contributors to the returns of each of these ETFs in the third quarter.

Taking advantage of the rebound in Tesla stock in the third quarter, Ark Invest sold about $605 million of the EV maker's stock in September alone.

The Tesla selling has continued into October.

Energy, Financial Services To Be Disrupted Most By Innovation?Among the largest beneficiaries of the rotation toward cyclicals during the past nine to 12 months are the energy and financial services sectors,Ark said. These two sectors, the firm said, will be disrupted the most by innovation during the next five years.

"In ARK's view, autonomous electric vehicles and digital wallets, including cryptocurrencies and the decentralized financial services (DeFi) associated more broadly with blockchain technologies, will disrupt and disintermediate both Energy and Financial Services significantly during the next five years."