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Cathie Wood’s Ark Invest files to to launch venture fund

Yahoo Finance's Alexandra Semenova discuss Cathie Wood's Ark firm's plans to launch a venture fund.

Video Transcript

BRIAN CHEUNG: Well, Cathie Wood's ARK Invest has had a rough few months, to put it lightly. Its main strategy and its main ARK Innovation Fund down 50% over the last year, but ARK hoping to take on a new look with a fresh fund that's apparently going to be a little bit different from its current ETF. So for more on this, let's bring in Yahoo Finance's Alexandra Semenova, who's got the details on the new offering. Alexandra.

ALEXANDRA SEMENOVA: Well, Brian, as you said, Cathie Wood is doubling down on her bets on disruptive innovation, but with a bit of a different approach this time. ARK Invest has filed to launch a new fund that will focus on investing in private companies. The investment vehicle, which will be known as the ARK Venture Fund, is going to mimic the same investment themes that her ETFs do, focusing on sectors such as artificial intelligence, financial technology, and internet companies, among others, and all of the sectors that follow the innovation theme that she has become-- that Cathie Wood has become known for.

On the financial technology side, the fund is expected to invest in companies that develop and use blockchain technology and also may have exposure to cryptocurrencies, such as Bitcoin. This also opens the door for Cathie Wood to invest in many more companies in these innovation sectors that are private and in the growth stage. This is a big move for ARK Invest, which manages a family of actively traded ETFs.

According to the SEC filing, ARK Venture is said to be a closed ended interval fund, which is a type of investment strategy that does not trade on an exchange and periodically offers to repurchase shares from its investors. A spokesperson told me that the fund is currently under review by the SEC. And we'll get more information on that once that review process is over. Brian.

BRIAN CHEUNG: Really interesting, Alexandra. I mean, obviously, ARK really wants a win here. But the focus on these private securities and the fact that this is a closed end fund is really interesting. Why might Cathie Wood be interested in what might be a bit more of an illiquid market?

ALEXANDRA SEMENOVA: Well, this move comes during a challenging time for ARK Invest's other funds. ARK Innovation, the firm's flagship ETF, has lost more than half of its market value from its peak as investors brace for rate hikes and dump these type of high risk assets that Cathie Wood is known for investing in. And it's also seen massive outflows by investors.

The ARK Venture Fund will focus on illiquid or not easily tradable securities, which will limit investor exits during times of volatility like we've seen. By locking investors into these private assets, they'll have to stay the course for a longer time horizon, and they won't be able to exit during times of market turbulence. And the SEC filing says, quote, "Shareholders should not expect to be able to sell their shares regardless of how the fund performs." Brian.