- The ARK Invest CEO expects to see spectacular returns over the next five years
- She told CNBC in an interview that many of her investors are averaging down on investments
In a recent interview with CNBC, the founder and CEO of ARK Investment Management, Cathie Wood, has defended her firm's innovation-focused arm despite recent market plunges. Wood, who featured in our list of top 25 influential women in the crypto sector, said that she expects the Ark Innovation ETF to see spectacular returns over the next five years.
"Given our expectations for growth in these new technologies, I think we're going to see some spectacular returns," she told CNBC.
Ark Invest's innovation portfolio has plunged by nearly 50% as it has been one of the major victims of massive sell-off in the tech sector in recent months. However, Wood expects that once growth in the new technologies picks up, then the ETF's price action will start performing better.
Wood also noted that while public markets are pricing innovation stocks lower – a 60% drawdown over the last year, private markets are 20% higher.
The 66-year-old investor attributed this difference to the dominance of benchmark-sensitive investors in the public markets as opposed to the private markets, which hold opportunistic investors who foresee "explosive growth opportunities" in market-leading innovation platforms.
A terrible bear market for innovation
Though Wood acknowledged that her firm is now enduring such awful bearish market conditions, she chalked the recent downturn up to a whole different set of problems, which innovation would have to provide solutions to, hence why she's optimistic of a bullish future.
Talking about the Russia-Ukraine situation's role in this, she noted that the resulting disruptions of the markets had caused problems, including the rising gas prices.
In her opinion, the investment manager held that "a lot of demand destruction and substitution into innovation" will come from the ongoing war. She gave an example that higher adoption of electric cars over gas-powered vehicles will likely happen to cope with the surging oil prices.
She also pointed to when the innovation ETF peaked in February last year. Wood noted that it had grown by 358% from the bottom of the COVID-19 period because "innovation solves problems." The 'problems' here were the COVID-19 effects.
Investors are averaging down
The renowned stock-picker said that the innovation ETF has seen "significant inflows" for over a month now, referring to the nearly $1 billion in inflows that the ETF has registered since 17th January.
She explained that more of its investors are averaging down (buying into assets with the dropping prices), adding that over time, strategies should rise above the averages established.
"You'd be amazed if you average down over time, how quickly a strategy can come back above that average. And if we're right, significantly above that average over the next five years,” Wood asserted.