Cathie Wood’s new fund to invest in disruptive tech in private markets

12:55 pm Friday, February 04th, 2022

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Ark Invest’s Cathie Wood is taking another stab at investing in “disruptive innovation,” this time through a new fund that will target illiquid securities including those of private companies, a regulatory filing on Thursday showed.

Wood, known for managing ARK Innovation, the firm’s flagship exchange-traded fund, filed for an interval fund that would expand the firm’s reach to allow it to invest in “disruptive innovation” in securities of firms that might not have a secondary market, the filing said.

An interval fund is a closed-end mutual fund that does not trade on an exchange and only allows investors to redeem shares at particular intervals and in limited quantities.

The filing comes at a time when the ARK Innovation ETF, which bested all other U.S. equity funds in 2020, has slumped about 55% from its year-ago record high amid a rotation out of growth and technology stocks.

The new fund’s investments will include early- to late-stage private companies engaged in introduction of technologically enabled new products or services that “potentially changes the way the world works,” the filing said.

The fund, which will have a minimum initial investment threshold of $1,000, will look to invest in firms involved in a wide range of areas including artificial intelligence and automation, the filing said.

The fund will only offer redemptions of between 5% and 25% of the fund’s shares just once a quarter, the filing said. Such restrictions are a common way to get around the problems expected due to the illiquid nature of these types of securities.

“ARK has a strong following with investors that can help to raise awareness,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.

“But the limited demand for their latest ETF, CTRU, highlights the challenge to gather assets during a recent period of underperformance,” he said.

The socially focused ARK Transparency ETF, launched in early December, has had a lukewarm reception from investors and is down 19% from its Dec. 8 market debut price.

“There’s likely to be interest in the interval fund, but since it structured differently than an ETF it might require more education,” Rosenbluth said.

(Reporting by Saqib Iqbal Ahmed; Editing by Bernard Orr)