As equity long-short hedge funds suffer massive withdrawals, once high-flying stockpickers, such as Julian Robertson’s Tiger Cubs, can look to Cathie Wood for some inspiration on how to fundraise and retain clients.

After the 2022 bear market, investors have grown sceptical that growth-oriented managers can protect their portfolios during downturns. Those searching for undervalued companies are also not favoured. Greenlight Capital’s David Einhorn lamented that the rise of passive index funds and algorithmic trading has eroded the equity market’s ability to discover value.

When questioned by sceptics why her flagship ARK Innovation ETF dropped Nvidia in January 2023 and thus missed out on the chip designer’s rally, Cathie Wood said that chasing it was too easy, expensive and obvious.Credit: Bloomberg

Airing grievances won’t do. Rather, active managers need to become better storytellers — like Wood.

Granted, long-short equity hedge funds underperformed the US stock market in nine out of the last 10 years. But Wood did not deliver either. On the contrary, among providers of mutual funds and exchange-traded funds, her ARK Investment Management topped the chart in wealth destruction. Its family of ETFs, which managed around $US16 billion ($24.7 billion) as of 2023, wiped out $US14.3 billion ($22 billion) in shareholder value in the past decade, according to Morningstar estimates.

Miraculously, most investors stayed. After gaining huge inflows in 2020 and 2021, withdrawals have been fairly muted.

People are sticking around because Wood’s pitches are interesting. She’s been buying the dip in Tesla even as Wall Street sours on the stock because demand for electric vehicles is slowing and a vicious price war has broken out. But hey, Wood nailed it with her bull-case prediction in 2018 — some would even argue her stardom rose with that conviction call — so she might just be right again.

Cathie Wood has been buying up Tesla despite Wall Street souring on the stock.Credit: AP

Or consider her exposure to artificial intelligence. When questioned by sceptics why her flagship ARK Innovation ETF dropped Nvidia in January 2023 and thus missed out on the chip designer’s rally, Wood said that chasing this mega-cap was too easy, expensive and obvious. She has a point.

Even massive losses can turn into a positive spin at ARK — imagine years of tax write-offs. “I don’t think many people understand what an asset we have in terms of those tax-loss carry-forwards,” Wood has said.