How Cathie Wood Revolutionized ETFs With ARK Invest

What's up guys. In this video, we're going to talk about Cathie Wood. Okay. We're going to talk about her portfolio, her career. I don't know about you guys, but I just felt like that she came out of nowhere. On the headlines, you were always seeing Warren Buffett and Ray Dalio and Ken Griffith and Jeff Bezos, but you just never heard of Cathie Wood until like 3 or 4 years ago. And then now she's like weekly, you can count on seeing something coming out from her. So we're going to talk about ARK Investment, how it started. Um, let's jump into it. So yeah, she graduated and started at Jennison Associates in 1980, and then she worked there actually for 18 years. She started as an analyst, a securities analyst, researching different stocks, different investment opportunities, and worked her way all the way up to Chief Investment Officer and Chief Economist. So I guess that's what 18 years at one spot will do for you. After that, she left and decided to, you know, co-found a hedge fund in 1998. Called Tupelo Capital Management. And we're going to talk about how this maybe affected her career a little bit. We don't have a ton of information on it, but basically she left after 3 years and went over to Alliance Bernstein. So, and she was there for about, you know, 12 years at Alliance Bernstein. For reference, at Tupelo Capital Management, she was managing about $800 million. Obviously there's a big difference between just an asset manager and an actual hedge fund. We don't really know if she didn't like it or, you know, what the reason was, but At Tupelo, she was only managing about $800 million, and then at Alliance Bernstein, she was managing $5 billion. Okay, so definitely a difference in the amount of capital there. So, and that's where she kind of was planning on ending her career. So in 2014 is when she left. She was 57, and she didn't honestly leave her prior career on a high note. At Alliance Bernstein, she was actually pretty criticized for her management. She was the chief investment officer, and if you don't know, the financial crisis Which hit during that time period in '08 while she was there. And yeah, she just didn't have that great of a reputation. Like, I mean, she was great, but just, you know, you didn't really hear about her that much. Nothing noteworthy. And then when she was 57 years old is when she started ARK Invest. And that's probably how you know her by. At least now it's plastered all over everything. She started this investment group. And it's actually an ETF. So we talk on this channel a lot about funds. It's this is an exchange traded fund. We have other videos about that, but she kind of pioneered a new type of ETF. Most ETFs were and are passively managed instruments. You know, you kind of set an allocation; they follow an index. They're just not super active like mutual funds. But she kind of launched this active ETF. There were some. People on the market that were doing it. It just wasn't very common. And to kind of give you for context, like a traditional ETF will charge like 0.1% to 0.3%, like a fee, a management fee. A mutual fund, however, is more like 1% to 2%. You know, it's way more actively managed. But with Cathie, if you go look at her offerings, they're right in the middle. They're about 0.7% is kind of the fee she charges. So not a hedge fund, but you know, these active ETFs where she's constantly reallocating and, you know, having different positions. So something I really like about this is in 2014, she self-funded the entire operation of ARK Invest for 3 years out of her own bank account. She just paid for everything. ARK Invest currently now has 38 employees. And working at an asset management firm is not cheap. That was definitely not a cheap experience. And then just starting an ETF, you know, all the legal is, you know, $100K to $1 million depending on the complexity of the offering. So, you know, she put a lot of her own money into, you know, starting this entity, but she kind of, she had a purpose. So ARK actually is named after the Ark of the Covenant. Kathy is a very religious person and she just felt like she had more to offer this world and wanted, wanted to have a bigger impact. And she was actually criticized. So kind of back to AllianceBernstein, one of the reasons why she was criticized is they felt that she was making too risky of trades, that, you know, she was always very bullish on these emerging trends and emerging tech and wanted to make big allocations there. But, you know, from a risk standpoint, AllianceBernstein wouldn't have it. But hey, when you start your own, uh, firm, then you, you can choose the strategy, right? So at ARK Investment, um, she has a lot of offerings now, and you can go onto their website, but it all revolves around innovation. And just remember, this is not financial advice, okay? Everything revolves around innovation. In her flagship product, um, ARKK, uh, she has very high holdings of like Tesla, Zoom, Bitcoin, you know, things like that that are kind of these, you know, revolutionary groundbreaking things. So again, 2014, self-funded everything up to 2017. She got some preferred partners that came on, gave her some more money to grow, investors. I want you to take a look at this chart of assets under management that ARK has. So back in 2019, she had about $5 billion under management between like 7 different ETFs. And then you'll see that All of a sudden in 2020 and 2021, something erupted. And now currently she holds about $50 billion under management. So about 10x her operation. Like what happened? A large reason of that is because of this second graph here. This is ARK Invest's, you know, performance benchmarked against the S&P 500. I mean, one year she had like 152% return. I think it was those heavy allocations to Bitcoin and Tesla, but from a, from an actual financial product, that's awesome. That like, that's, that's really good. So that's how she got on the news. Everyone started hearing about her, started being asked to talk in different conferences. And her subscriptions have just gone up like crazy. You know, we always tell our emerging fund managers that if you're able to perform, then the money's going to come. And I think this is a great example. of, of just that. Like if you're able to beat the market consistently, and as you can even see prior to the COVID crash in '20, um, or COVID correction, I should say, uh, she was still outperforming the market and that's when you start getting attention. So if you want to raise a lot of money, just invest really well and, and you'll be able to get there. One last thing I want to comment on Cathie Wood that I really admire about her investing approach is as she was starting ARK Invest, She took she took the approach of diversity very literally. Okay, a lot of asset management firms, hedge funds, or even finance—they they hire out of the same pool. These Harvard grad management consulting and you know the investment banking—the same career path—and they get a bunch of these finance people together and they start a fund. Kathy, on the other hand, she hired experts from various verticals. So she hired like a physics guy for, you know, that had worked with physics and math for, you know, 20+ years, a scientist, a, you know, healthcare administrator for 20 that had worked in the space for 20 years. Any aspect of emerging tech that she wanted to focus on, she hired, you know, registered experts in that field. And so just, you know, really diverse team that she has there, which I think is really cool. And one of the reasons why she's able to perform the way she has. So that's it on Cathie Wood, guys. I'd love to hear what you guys think about her in the comments, but that's it for today.