It's the hope that kills you

Just a quick check in to highlight this excellent piece of reporting by FT’s Madison Darbyshire.

A couple of stats to highlight:

• Cathie Wood’s signature Ark Disruptive Innovation ETF (ARKK) has lost to the S&P 500 by more than 50 percentage points over the past five years. At one point it was up by nearly 200 percentage points, but it has given that all up and more. Holders for 5 years are down nearly 13%.

• Cathie Wood’s Ark Investment Management has earned more than $300 million in fees on that fund since its inception nine years ago.

A few thoughts.

First, I never want to deny anyone a good living. And I am not going to be dismissive of Wood’s hustle. Nothing was handed to her. She worked hard to be the go-to force for this bull market, and I would argue earned every dime of those fees.

Second, don’t fall into the trap of thinking that those fees corresponded with ARKK’s substantial period of outperformance. According to Darbyshire, more than 70% of the ETF’s $310 million in fees have been earned since the fund hit its high in February 2021. This isn’t a case of investors chasing alpha, this is more a case of them chasing the ghost of alpha.

Have I mentioned how amazing Koyfin is? Find out for yourself.

This is a classic case of hate the game, not the player. We’ve talked about it before: Wall Street is built on the premise that there are masters of the universe who can deliver for you what you can’t do for yourself.

Of course, that concept is balderdash. There are few, if any, masters of the universe, and the ones who do exist tend to do very little marketing and by the grace of God don’t have to do a fraction of the hard work that Cathie Wood has done over the past few years.

Cathie Wood isn’t the problem. She is but a person who figured the system out, and how best to exploit it, and put in a ton of hard work to make sure she exploited it better than anyone.

Don’t hate on Cathie. Thank her for being such an over-the-top example of what is wrong with the system that she becomes a tool to help others understand what is really going on.

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