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As a money manager, what works best for yourself and what works best for investors can be and often are two different things. Consider the high beta leveraged hot story stock manager who does better than average in bull markets but terrible during bears. They are swinging for the fences as they know blowout returns draw assets, even though they might also know that when the crash comes the fund will be decimated. Since it is other people's money they are investing and they are collecting fees of that money, do they always care that tomorrow might not look as good as today? Now consider the manager who instead of swinging for the fences tries to hit singles and doubles and play defense. They won't draw as much assets during a raging bull market. Which is the better manager for investors? Which is the better manager for themselves?
Every PM who acheives short-term rock star status and becomes a media darling whose every utterance & move is covered on page one of the financial infotainment world is due to crash sooner or later. Bill Gross, Rob Arnott, Michael Hassenstaab, etc. Cathie will be no different.
Yeah, no argument with you here on that, but I think having an unwavering religious conviction about the ostensibly scripturally-ordained outcomes for other people's money in a manager's portfolio invites an agency problem of biblical proportions. Let's say someone manages $80 billion at a fee of 0.50% of assets. Even if the manager invests her entire net worth in the funds under her purview, she is still collecting $400 million a year in fees off that money. Now let's say the funds fall 50%--still $200 million a year in fees and a massive net worth already invested in the fund cut in half is probably still massive. Meanwhile, ordinary investors can suffer a lot along the way. And I expect in this case and most money managers' cases their entire net worth isn't in their funds. Taking these massive risks with other people's money seems a lot easier than doing it with one's own.
@LB, I bet a nickel you are mistaken about her own personal portfolio. Someone with these sorts of convictions --- you have heard her speak? --- is a true believer through and through.
I don't doubt she invests in her own funds. I've checked the ETFs' SAI and she definitely has money invested in them, but I would be surprised if she has her entire net worth in them. Interestingly, she does not have an equal amount per ETF:https://etfs.ark-funds.com/hubfs/1_Download_Files_ETF_Website/Performance-and-Other/ARK_Active_Funds_SAI.pdf Perhaps less holy faith in Israeli tech in the ARK Israel Innovative Technology ETF--under $1 million--than U.S. tech in ARK Innovation--over $1 million. (Invites Raiders of the Lost Ark jokes I guess.) Also, even if she does have her entire net worth, collecting fees off the entirety of assets acts as a shield for downturns. She'll collect millions of dollars off the ETFs in fees no matter what happens, a few million less if they fall. And imagine even if the entirety of one's net worth is invested but that net worth is say $100 million, well a 50% decline hurts, but not nearly as much as the poor sap who bought into the ETFs with say $50,000 to her/his name. It is still other people's money that is the cash cow.
@LewisBraham - you speak as though she is deceiving/conning her investors and stealing their money. Is anyone forcing investors to hand their money over to her? Are her investors not capable of reading, finding, or hearing the same information we blather about on this board or elsewhere? Near as I can tell she's far more open about who she is and how she invests and what she's buying or selling then a heck of a lot of other money managers. To that extent I think that if you buy her fund(s) you have a good idea of what you're getting. Those same investors are also capable of investing in other, similar funds if they'd rather or choose to. I'm not sure why you make it sound like she is the only fund manager who does these things.
(p.s. PIMCO managers also don't have their entire net worth in their funds and invest more $$$ in some than others. Also many fund managers in all manner of funds have zero of their money invested in the funds they manage.)
Is not most investing connected to "other peoples money" in one fashion or another? Over many years we have profited from "OPM" whether it be from the FED., large fund and pension houses and numerous individual investors, both foreign and domestic. I/we have to calculate the risk/reward based upon numerous factors. The potential of any given investment sector is one of the critical decisions that must be considered. The who, why and where of cash flows. With negative interest rates on government issues in several large global economies; there remain those who wonder how could our Treasury and economy continue with a 1.5% yield on a 10 year note or 1.9% on a 30 year bond. These yields look nice, many times, in the eyes of foreign monies. TIS OPM, somewhere; every minute of the business day, globally speaking. Good Evening, Catch
you speak as though she is deceiving/conning her investors and stealing their money.
No, I'm not. Don't put words in my mouth. I am speaking about a structural problem that has existed in the mutual fund and ETF industry since the beginning. This agency problem exists at any fund where there is a conflict of interest between the manager seeking to gather more assets and collect fees for himself/herself at the expense of fund shareholders. It's not a con, but it is a persistent problem that has often manifested itself especially with trendy niche funds. This phenomenon is nothing new. The irony is John Bogle spoke about it for decades in biblical terms, citing the roots of the fiduciary principal in the Gospel of Matthew: "No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other." In the fund industry he felt those two masters were the profit seeking fund management company and the fund investors, whose interests were often not aligned. It's the reason he created Vanguard with its quasi-non-profit structure. He wanted to eliminate the agency problem and have funds serve only fund shareholders. Unfortunately, the industry is fairly far from his original vision today. As for whether investors are capable of recognizing the risks of hot niche strategies, history has shown again and again that many are not. The tempation to performance chase is too great. I think 2020/2021's chasing after stocks like Game Stop is more than ample evidence that performance chasing persists. And when the music stops, the least sophisticated investors often get burned. What is irksome especially in this case is that this behavior is presented somehow as a godly pursuit. That and the extraordinary trendiness of companies with valuations exceeding many of those in the dotcom bubble with a portfolio p-e of 120: https://morningstar.com/etfs/arcx/arkk/portfolio For those that don't understand the risks this could end badly. The more trendy, faddish, narrowly focused, high cost and aggressive a fund is, the less like a fiduciary that puts his/her shareholders best interests first a manager seems.
Nothing new here. Just a few general thoughts...... **Megastars come and go as winning active investment approaches evolve (the market inevitably figures out how to outwit them). **It's probably better for active managers to invest heavily in their products (or at least in the stocks their products buy) than not to invest in them at all. **Those who invest in actively managed investment products need to pay attention. Otherwise their annual investment returns eventually trail the market. **An active manager's personal beliefs may impact their investment success. But it's the ongoing success of the investment strategy that matters to the individual investor's bottom line.
Ask these meme lovers why GME went up +27.5% today (8/24), and they answer "Fundamentals". LOL. But pressed further, they have no idea how to answer. The new generation of uninformed traders thinks its the quickest road to riches. Seems a lot more like musical chairs to me. Is either GME or AMC worth more than $8/share?
Its a market gone mad, and this paves the way for a Cathie Wood type figure to get her 15 minutes of fame. Ride the wave.
Eventually, the wave crashes, and Cathie gets dumped into the dustbin of history. Fads come and go, and so do bubbles.
Comments
Every PM who acheives short-term rock star status and becomes a media darling whose every utterance & move is covered on page one of the financial infotainment world is due to crash sooner or later. Bill Gross, Rob Arnott, Michael Hassenstaab, etc. Cathie will be no different.
>> consider the manager who instead of swinging for the fences tries to hit singles and doubles and play defense.
I do not begrudge CW her convictions and am not posting about her for not being what she transparently is not, per the above.
I just am struck by someone called by God to do as she does, quite aside from being a prize student of a laughable economist.
From 5mos ago:
https://www.barrons.com/articles/arks-cathie-wood-disrupted-investment-management-shes-not-done-yet-51614992508
(p.s. PIMCO managers also don't have their entire net worth in their funds and invest more $$$ in some than others. Also many fund managers in all manner of funds have zero of their money invested in the funds they manage.)
With negative interest rates on government issues in several large global economies; there remain those who wonder how could our Treasury and economy continue with a 1.5% yield on a 10 year note or 1.9% on a 30 year bond. These yields look nice, many times, in the eyes of foreign monies.
TIS OPM, somewhere; every minute of the business day, globally speaking.
Good Evening,
Catch
**Megastars come and go as winning active investment approaches evolve (the market inevitably figures out how to outwit them).
**It's probably better for active managers to invest heavily in their products (or at least in the stocks their products buy) than not to invest in them at all.
**Those who invest in actively managed investment products need to pay attention. Otherwise their annual investment returns eventually trail the market.
**An active manager's personal beliefs may impact their investment success. But it's the ongoing success of the investment strategy that matters to the individual investor's bottom line.
Its a market gone mad, and this paves the way for a Cathie Wood type figure to get her 15 minutes of fame. Ride the wave.
Eventually, the wave crashes, and Cathie gets dumped into the dustbin of history. Fads come and go, and so do bubbles.