Ark’s Cathie Wood Sees Silver Lining in $2 Billion Loss

(Bloomberg) — Cathie Wood highlighted one silver lining of the brutal run her exchange-traded funds suffered through last year: those billions of dollars in losses will help offset future tax bills on gains.

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The founder and chief executive officer of ARK Investment Management told Bloomberg TV Tuesday that she has over $2 billion in losses from selling stocks during the market rout. By selling stocks at a loss, those losses can now lower, and potentially offset the tax bill Wood’s funds could receive on future capital gains.

“It’s over $2 billion right now against which we can take future gains and then concentrate towards our highest-conviction names,” Wood told Bloomberg Technology.

Wood explained that as her flagship fund fell from its February 2021 peak, it reduced the holdings from more than 50 to just 28 stocks. Selling stocks at a loss to offset a portfolio gain is a popular strategy investors use during market downturns to soften the blow of a rout.

ETFs are already generally more tax-efficient than mutual funds because of how they work with a market maker to do in-kind redemptions.

Although the ARK Innovation ETF (ticker ARKK) is up 28.00% year-to-date, it is coming off its worst year on record, when it plunged 67% last year amid the Federal Reserve’s aggressive monetary policy tightening to battle inflation. Wood has long criticized the central bank’s policy, saying its interest rate hikes could raise the risks of a deflationary bust.

Despite her funds’ 2023 rebounds, investors aren’t keen to load up on Wood’s funds yet. All but two ARK ETFs are beating the S&P 500 to far this year, but every one of her funds has seen net outflows in 2023, with ARKK bleeding $47 million through March 20.

–With assistance from Ed Ludlow and Angel Adegbesan.