Cathie Wood
Adrienne Grunwald
ARK Investment Management is famed for investing in companies whose profits are years if not decades away. But even the growth-focused investor has had its patience tested by China’s regulatory crackdown.
In a monthly investment seminar, ARK CEO Cathie Wood discussed a “valuation reset” in the Chinese tech sector, according to Bloomberg News. “From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down,” she said.
On Tuesday, the ARK Innovation ETF sold $25 million worth of Tencent stock, to take its holding in the Chinese internet company down to 0.1% of the portfolio. China’s weighting in that fund is now less than 1% from 8% in February, and the China weighting in the ARK Next Generation Internet ETF is the lowest since at least 2014, according to Bloomberg.
Read: Fund Manager Ryan Jacob Takes On Cathie Wood’s ARK Funds With New ETF
Wood is hardly the only foreign investor to grow impatient with China. Global fund managers in July moved out of China-led emerging markets by the most of any asset class, according to Bank of America’s survey.
China has taken a range of measures against domestic tech companies including Alibaba and DiDi Global, in areas including competition, data privacy and financial services.
Even in a year where the ARK Innovation ETF has struggled with performance, with the fund down about 2%, it’s still drawn in $6.95 billion in inflows, according to FactSet, which is the eighth highest of any equities exchange-traded fund.
