From Economist to Billionaire - Cathie Wood's Hidden Rise to Fame
With a relatively secure job worth millions of dollars, Cathie Woods really had everything to lose. Still, her firm conviction was stronger than you could ever imagine, which led her to quit her job and start her investment fund – Ark Invest.
This was a small company that did not even have an office, and at the time, no outside investor believed in her vision, and even her close personal friends ridiculed her for this decision. Fast forward, just seven years later, and Cathie was crushing it. She smashed the S & P 500 and became a celebrity in the financial space, which proved all of her doubters wrong.
This is the story of Cathie Wood and her rise to fame. Not surprisingly, nobody believed her. She explained how for four years, nobody thought of her.
Of course, in the end, she was right, and by 1983, the inflation rate had dropped from 13.5% to 3.2%. Segalas had Cathy in the nearby office so he could constantly give her tasks. In retrospect, he said that she was by far the sharpest. She always made him look good.
The decline in interest rates resulting from the decrease in the inflation rate set the stage for a massive innovation ahead. New products were coming out left, right, and center.
Disposable cameras, personal computers, and DNA fingerprinting were all invented in the 80s.
In 1985, she became an equity research analyst, and in 1990, she was a portfolio manager. Her strategy was completely unconventional as she looked at places where no other analyst was looking at. She said that she was like a dog looking for scraps under the table.
While looking through stocks that no one wanted, she realized that something big was coming. This was the start of the internet.
In 1998, amid the dot-com era, she co-founded her own hedge fund – Tupelo Capital, with one of her co-workers. Three years later, in 2001, she joined Alliance Bernstein as the Chief Investment Officer and Thematic Research Strategist.
She was managing more than $5 billion. Her investment strategy consisted of finding high-growth small cap stocks that had promising potential. This was called “The satellite strategy.”
Instead of diversifying into the same stocks that everyone else was investing in, she invested in disruptive opportunities and did not diversify much. In this way, her portfolios were uncorrelated with the funds that everyone else invested in.
This allowed her clients to increase their returns while lowering their overall risk. So, just like many other successful CEOs, Cathie was constantly working. Now, while her conviction was always high, her clients did not always feel the same, and her portfolio was incredibly volatile, which upset most of her clients.
In 2006, she saw a significant housing bubble and thought it was about to collapse. As a result, she suddenly reduced the risk in her portfolios dramatically, leading her to underperform in the market by over 10%.
In 2012, she wanted to transform the actively managed investment space by shifting the portfolios over to an EFT system. When she proposed her idea to Alliance Bernstein, everyone doubted the viability of her idea, which prompted her to start her own business.
Most people assumed she would fail, but she felt there was a huge and unmet need, which was the best way to start a business. Despite her many doubters, Cathie started Ark Invest, named after the Ark of the Covenant, a Jewish and Christian tradition.
As a result, she decided that she wanted to start her fund using this idea, which was the start of the business. There were no outside investors for Ark Invest for the first three years, which forced Cathie to pay for all of the expenses, and there was also no office. Everyone was working in public spaces.
Starting such an unconventional fund was a pretty bold move at the time, even though the first years were tough for her. The fund ranked in the bottom 25 of its peers, and to pay for the expenses; she was forced to sell a majority stake in Ark and partner with other institutions.
Today, Ark Invest is owned by two companies – American Beacon and Nico Asset Management. That is not all, but the employees also own nearly 10% of Ark.
Now, regardless of her lackluster performance, Cathie was planting seeds of her fund deep in the soil of innovation, where she was able to purchase bitcoin at 250 dollars per coin in 2015. She also invested in Amazon and Tesla, and as they say, the rest is history.
Cathie destroyed the S & P 500. Today, she manages over 46 billion dollars through six active EFTs
• ARKK – Ark Innovation EFT
• ARKQ – Autonomous Technology & Robotics EFT
• ARKW – Next Generation Internet EFT
• ARK – Genomic Revolution EFT
• ARFK – Fintech Innovation EFT
• ARKX – Space Exploration & Innovation EFT
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