Cathie Wood’s Ark Innovation ETF Completely Divests from China Amid Regulatory Concerns

In a strategic move, Cathie Wood’s Ark Innovation ETF has completely eliminated its exposure to Chinese assets. The decision came as a response to China’s recent crackdown on its tech sector, which spooked the renowned tech investor. Wood revealed that the fund started reducing its stake in China after witnessing the government’s regulatory actions against tech companies, including Alibaba, and co-founder Jack Ma.

Previously, Ark Innovation ETF held a significant percentage of its assets in China, nearly 25%, due to the country’s impressive economic restraint during the pandemic. However, concerns grew as the Chinese government’s actions expanded beyond individual cases, leading to a broader crackdown on technology firms. As a result, Ark’s fund managers steadily reduced the fund’s exposure to China, eventually bringing it down to zero.

Wood also expressed concerns about China’s real-estate crisis, highlighting that the economy’s growth has been disappointing since the end of its COVID-zero policy. The country’s rapid growth had concealed underlying debt issues, especially in the property space, prompting Wood to predict a looming “day of reckoning” for China in this regard.

Despite the withdrawal from Chinese assets, the Ark Innovation ETF has been performing well, closing 0.4% higher at $47.93 on the last trading day. Year-to-date, the fund has seen a substantial 54% increase, showcasing its resilience amid the changing investment landscape.

In summary, Cathie Wood’s Ark Innovation ETF has exited all its positions in China, driven by concerns over the regulatory environment and the real-estate crisis. The fund, once heavily invested in Chinese assets, has now reallocated its portfolio to other markets, maintaining a strong performance throughout these shifts in investment strategy.

Summary

• Cathie Wood’s Ark Innovation ETF has completely divested from China assets.
• The decision to cut exposure came after China’s tech crackdown, particularly targeting Alibaba and Jack Ma.
• The fund previously had a significant percentage of exposure to China in 2020, including stakes in Alibaba and Tencent.
• Concerns about China’s real-estate crisis and economic growth have contributed to the decision to divest.
• Ark’s CEO and CIO, Cathie Wood, praised China’s initial response to the pandemic but expressed disappointment in its economic growth trajectory.
• The Ark Innovation ETF currently manages nearly $9 billion in assets and closed at $47.93 on the last trading day.
• Year-to-date, the fund has gained 54%.
• Wood’s concerns about excessive power concentration in Chinese companies led to the decision to cut exposure to China.
• The previous restraint shown by China in handling the pandemic impressed Ark, but recent developments have prompted the divestment.