Morningstar analyst Jeffey Ptak has been tracking the performance of ARKK since it commenced, and comparing it to the return of the average ARKK investor. The differences are astounding. Even though ARKK has delivered 13.6%pa since commencing, the average investor dollar in ARKK has lost 33%pa.
How could that be? Well, it all comes down to timing. Much of the money in ARKK was invested after periods of exceptional outperformance. These investor dollars then suffered through the underperforming periods, including the last 12 months. Then investors panicked, and took their money out again. And it’s only gotten worse in May.
It’s why we would rather back a great fund manager after they’ve underperformed for a couple of years, than when they’ve had a fantastic run. By the way, we believe that almost none of the stocks currently held by ARKK could be considered cheap, which means the rough trot could continue.
Quote of the month.
“Since I started Third Point 27 years ago, I have seen many investors (including myself) stumble after years of success because they did not adapt their models and frameworks quickly enough as conditions shifted. I have said before that they don’t ring a bell when the rules of the game are changing, but if you listen closely, you can hear a dog whistle. This seems to be such a time to listen for that high-pitched sound.”
US hedge fund manager Dan Loeb, explaining that in financial markets, everything has changed. We agree. What worked best from 2010 to 2021 is unlikely to do so for the next few years at least. The rules of the investment game have changed.
This day in (financial) history.
In May 1568, one of the earliest known junk bonds was issued. The Russia Co. borrowed 4,000 pounds, 8 shillings, and 10 pence from the British exchequer. The interest rate was 13.5%. The company had a monopoly on trade between England and Muscovy (the precursor of Russia). The company repaid the loan not with cash, but with hundreds of tons of cables and rope. No word on what the British exchequer did with it.
Vaguely interesting facts.
- The clothes of a fully-dressed 20th century man had 78 buttons and 24 pockets.
- A butt is a real unit of measurement, for a cask of wine. To be exact, a buttload is about 108 gallons.
- During World War II, the United States began rationing shoes. Citizens were allowed three. What the…
- Nostrils take turns receiving the majority of the air you breathe, which explains why one is usually stuffier than the other.
- The most common last name in each of the US, Canada, UK, Australia and New Zealand is the same. Can you guess what it is? (see below *)
And finally…game of the month.
“And so selling…was a way for me to walk away from that. I didn’t want to be paying a lawyer to issue cease and desists on the game that I’m not making money from. It felt like it was all going to get really, really complicated in a way that just [made me] pretty stressed out, truthfully.”
Who is Josh Wardle? Well, he invented Wordle. The game has taken the world by storm. If you haven’t tried it, it’s addictive.