Writing about poor market performance is always a delicate matter for investment managers. Even so, 2022 was one of those years when getting the messaging right proved especially tricky. In a year when many formerly top-performing funds logged negative returns of 20%, 30%, or more, below-par performance became the elephant in the room (and on websites) that had to be addressed. Communications that show too much humility serve no one well, least of all a manager’s clients struggling with their own stirrings of regret.
Understandably, managers try to strike a balance between empathy and assuredness, between looking back at some of what went wrong and the positives they see going forward: At all the holdings whose underlying fundamentals remain rock solid and poised for growth. At the positions they’re now adding to at much more attractive valuations.
No manager—or their supporting communications managers—wants to have to keep up this balancing act for too many quarters in a row. In 2022, it’s safe to say those engaged in a down-market investment writing drill had plenty of company.
In comes Cathie Wood’s ARK Invest
In 2022, ARK Invest, the investment firm whose funds became synonymous with pandemic boom stocks like Tesla, Zoom, Robinhood, Shopify, and Roku, became the poster child for very difficult-to-explain performance. In 2020, three of its actively managed Exchange Traded Funds (ETFs) posted returns of over 150%, making them three of the top four performing equity funds in the world. In 2022, the “best” performing of them declined 46.93, and the largest, the firm’s flagship ARK Innovation ETF (ARKK), declined 63%, more than three times the losses of the S&P 500, or 81% off the fund’s February 2021 peak. That ranked ARKK 3,544th out of all 3,552 actively managed US equity funds in Morningstar’s 2022 rankings. For context, among the handful of funds that did worse was the Voya Russia fund.
Prominent pundits once lauded Wood for the early call on Tesla that enabled her investors to capture the entire 1,000+% increase in its stock price between 2018 and 2021. Now, they have every reason to pillory her—and many do. CNBC’s Jim Cramer, who famously anointed Wood a “genius,” now calls her “the kiss of death.” Morningstar, whose fund-rating analysts generally eschew colorful language, has lambasted ARK’s “perilous” approach and “haphazard” disregard for risk.
And yet: Wood has responded to this draw-and-quartering with her own carefully calibrated external messaging. She’s struck a fine balance between defiance (“I do understand there are companies like that one [Morningstar] who do not understand what we’re doing”) and confidence, tracking as downright evangelical zeal about the enduring power of innovation. On her firm’s website, she recently penned a report predicting that Zoom, ARKK’s largest holding, will reach $1,500 a share by 2026 as workers across the world chafe at returning to the office. Her “bear” case was $700. (The stock currently trades at around $70 .) During a November interview with Bloomberg, she forecast that Bitcoin, another disastrous ARKK holding, will reach $1 million by 2030, a 6000% jump from today’s prices.
It is predictions like these that caused one professional short-seller, among those of his ilk who have made a fortune in recent months betting against ARKK, to label Wood “perhaps the wackiest portfolio manager on earth.” Here’s the thing, though: From a marketing and copywriting perspective, the wackiness is definitively working. While many of Wood’s fellow growth equity managers with half her losses have seen significant outflows this year, her fund has seen net inflows of $1.6 billion. To be sure, that is many times less than two years ago, but under the circumstances, it is a remarkable figure which suggests her message of unwavering faith in herself and the future is resonating with investors.
As the head of analytics at a financial consultancy recently told Reuters , “The investor loyalty in the fund is abnormal.” ARK Invest’s 2022 performance was a horror show, but its messaging was arguably the financial copywriting story of the year.
So, what’s her secret?
What are the tactics behind Wood’s unorthodox approach to the usual investment content protocols? We think it comes down to a handful of basic copywriting practices:
1. Stay true to you
In financial parlance, Wood is what’s known as a “perma bull,” the kind of investor who views even the most dour downswings as part of a longer-term upward trajectory. In other words, the 67-year-old devout Catholic, a one-time self-described investment “nobody,” is highly resourceful when it comes to finding silver linings.
See, for example, her third-quarter shareholder letter riff about the “wall of worry,” a financial term describing how markets that capitulate to fear will then sometimes mount a recovery in the face of ongoing uncertainty as seemingly bad news keeps pouring in: “The wall of worry built on the back of high multiple stocks bodes well for equities in the innovation space. The strongest bull markets do climb a wall of worry, a fact that those making comparisons to the tech and telecom bubble seem to forget. No wall of worry existed or tested the equity market in 1999. This time around, the wall of worry has scaled to enormous heights.” In Wood’s telling, the magnitude of today’s challenges is a good thing because of how much worse things seem now than at similar points during other notorious market bubbles.
Wood’s perpetually sunny outlook makes some of her writings read almost as parody. Yet she seems to recognize that the moment investors are inundated with reasons to turn against her marks a precise opportunity to gain major points by leaning even further into who you are.
2. Pick a fight
Through much of 2020 and 2021, Cathie Wood’s ETFs seemed capable of leaping tall buildings. Since then, rising inflation and interest rates have been their kryptonite. The US Federal Reserve has been a central actor in this not-so-comic drama. For the past year-plus, the “Fed” has aggressively raised interest rates. Its goal has been to slay inflation, but those rising rates mean that investors can now earn a much better return from low-risk investments like bonds, reducing their appetite for the kind of highly innovative but more speculative investments favored by Wood.
According to conventional market wisdom, it’s pure folly to “fight the Fed.” But, in case you hadn’t noticed, Wood is not conventional. This fall, she published “An Open Letter to the Fed,” arguing that it has gone way overboard in its interest-hiking, to the point it risks soon unleashing deflation on the economy—worse than inflation, in her view.
Moderating inflation data over the past couple of months suggests that Wood may have actually been onto something. More to the point, her sling shot of an article was a marketing masterstroke, planting the seed for the possibility of a return to the low-inflation, low-growth environment most felicitous for her kinds of stocks—all while deflecting some of the blame for her travails in the interim onto the markets’ most powerful actor.
When you’re feeling cornered, that might just be the best time to come out swinging—and aim high.
3. Define your terms
Tellingly, Wood’s market commentaries, stubbornly upbeat as they are, get little play on ARK’s website. Instead, most of the featured insights focus on the companies and industries identified by the firm as the next great disruptive sources of innovation.
A visit to the site is like a spin through one of those imaginariums at EPCOT. There are well-researched and persuasively argued pieces about the types of gene-editing technology likeliest to achieve medical breakthroughs, and on the mainstreaming of psychedelics in tackling previously intractable mental illnesses. There is a report applying an obscure economic theory called “Wright’s Law” to AI accelerators. And another on how a certain type of battery chemistry is posed to create a leap in green energy storage and EV affordability.
Some market observers have argued it is borderline reckless for Cathie Wood and ARK to continue to focus so exclusively on innovation when the market backdrop that gave rise to the spectacular run-up in the share prices of their funds has changed so dramatically. Others would argue that the young investors drawn to Wood’s site are savvy enough to know she had a tough year. And that these investors—many of whom have investment horizons that stretch into the decades—aren’t coming to her for reasons why her investment approach can’t work right now. They’re coming for Big Ideas and for reports of where to find the most powerful drivers of change in society and the economy.
In either case, ARK Invest’s content curation is a provocative reminder that you get to define the terms of what’s featured on your website. The more well-defined those terms are, the more successful your content is likely to be.
4. As long as they spell your name right
Even Wood’s staunchest critics implicitly acknowledge her role as the Innovation Queen. These investors note that a portion of her inflows now seem to be coming from short-sellers looking to hedge their risk by covering their short positions with long ones in ARKK. As another, prominent early (long) investor in ARKK recently told The Information, “An ecosystem is forming around” Wood’s firm. “People are shorting ARKK. There are funds that bet triple on ARKK, double negative, triple negative, all these things. She is creating what QQQ [the Invesco passively managed index fund of the top 100 names on the Nasdaq] used to be, 20 years ago.”
For anyone wanting exposure to innovation in its most unadulterated form, there is one place to go—whether you’re with her or against her. In other words, own the narrative, and you can make even the down times a way to expand your acclaim and your reach.
An AI-powered trading platform got a new spin on its web copy
A data platform for financial traders, TrendSpider used clever AI technology to boost performance and make day trading more effective. Unfortunately, its old website buried the platform’s true value in industry jargon. Unfazed, MarketSmiths dove headfirst into the industry specifics. We combined targeted questions with platform demos, research, and even a brief foray into day trading. All this hard work soon paid off. TrendSpider’s finished website threads wit through reason, enticing visitors to explore all the platform has to offer—while its ingenious use of AI are getting traders to return time and time again.
In short: keep self-doubt out of your copy
If investment messaging is an art form, ARK Invest’s Cathie Wood is this generation’s Andy Warhol, an iconoclast with her own slightly zany, oddly effective communications style. Even investment managers who disagree with every last word she says have to admit: her brand seems to be weathering a storm that would have leveled many a competitor. Among her greatest tools? The power of positive copywriting—and the enduring resilience of a mission.
If you are running a portfolio (or indeed any business), it’s likely because of a strong set of core beliefs and convictions that have given you a reason to exist. That is what your customers (and employees) are invested in. When performance is off—even when it’s way off—they may want to see that you have learned from your mistakes or are capable of empathy and self-reflection. But they don’t want to believe you are questioning your core principles. In the Tao of Cathie Wood, self-doubt has no business in copy.
Only time will tell if Wood’s approach to investing once again finds vindication. In the meantime, her uniquely upbeat and future-facing approach to communications has most assuredly helped keep the lights on.
At MarketSmiths, we haven’t done any copywriting for “Cathie Bae.” But our copywriting system has been proud to give written shape to many a mission—investment related and otherwise. Through its ability to hone in on the silver lining, that same system has kept our clients’ fires fueled and burning through market ups and downs, good times and frightful ones. If you think we can be of assistance, reach out.