Cathie Wood plots move into private equities with ARK Venture fund

Cathie’s Wood ARK Invest has filed to launch a new fund, the ARK Venture fund, that will invest in both public and private equities.

The new fund, which will have limits on how often and to what extent investors can redeem shares, will follow Wood’s theme of investing in ‘disruptive innovation’, across the same industries she favors in her ETFs, such as healthcare, clean energy, and artificial intelligence. But unlike her existing offerings, the new fund will invest in unlisted stocks.

According to a filing with the Securities and Exchange Commission (SEC), the fund’s investments will include ‘early- to late-stage private companies and micro-, small-, medium- and large-capitalization public companies’.

The new fund will be able to use leverage and may also invest in non-US stocks in both developed and emerging markets, cryptocurrencies via the Grayscale Bitcoin Trust, as well as venture capital funds, and SPACs.

Fund structure

The fund will be an interval fund, a type of closed-end fund, but which differ from traditional closed-end offerings in that they are non-listed funds that do not trade on the secondary market. As such, they cannot be bought and sold daily. Instead, they allow shareholders of the fund to sell a portion of their shares back to the fund on a periodic basis at a price based on net asset value.

The repurchases of these shares take place at certain ‘intervals,’ which are usually every three, six or 12 months. On any given occasion, the repurchases can range from 5% to a maximum of 25% of the total assets within the fund.

The mechanism allows these funds to invest in traditionally less liquid asset classes – the majority of existing interval funds focus on private credit, private equity, and real estate – but gives investors the option of quarterly, biannual, or annual liquidity. In ARK’s case, the filing suggests that liquidity will be offered quarterly.

‘The fund believes that an unlisted closed-end structure is most appropriate for the long-term nature of the fund’s strategy,’ the filing with the SEC reads.

The document does not list a launch date nor management fee for the ARK Venture fund, which Wood will manage. 

Tough time

Plans for the new fund come at a time when ARK and Wood are experiencing a prolonged run of underperformance. Her flagship fund, ARK Innovation ETF (ARKK) enjoyed a stellar 2020, returning about 150%, but finished 2021 down around 23% as the tech-focused growth stocks it favors, such as Zoom and Teladoc Health, fell significantly. This trend has continued into 2022 with the fund down 28.82% so far this year.

ARK’s filing for the ARK Venture fund was first spotted by Morningstar’s chief ratings officer Jeff Ptak.

ARK has registered an interval fund, ARK Venture, to invest in privately placed/restr. securities of firms ‘capitalizing on disruptive innovation or…enabling the further development of a theme in the markets in which they operate’. Cathie Wood to manage. https://t.co/8Ssyxzo8n5

— Jeffrey Ptak (@syouth1) February 3, 2022

Wood first hinted that the firm might do something in the private equity space back in December 2020, in a interview with Bloomberg.