Cathie Wood says her flagship innovation fund has completely exited China

Ark Invest CEO Cathie Wood speaks during an interview with CNBC at the New York Stock Exchange on February 27, 2023.

Brendan McDermid | Reuters

Cathie Wood of Ark Invest said her flagship innovation fund had reduced its exposure to China to zero as developing markets faced a slowdown.

The tech investor revealed that she Ark Innovation ETFAccording to Morningstar, who manages nearly $9 billion in assets, she has exited stocks that generate income from China as she consolidates her portfolio into her favorite investment areas, such as tesla, Coinbase, Year and soaring In a downturn in the market.

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“As we’ve always done during bear markets, we’ve focused our strategy on the names we’re most confident in, and especially as we focused, the Chinese names came up one by one, so right now, at least in our flagship strategy, we really don’t have China exposure,” Wood said in a pre-recorded investor webinar on Thursday.

ARKK once held stakes in Chinese tech giants Tencent and property websites HKUST Holdings. Wood said her exposure to China and other emerging markets has reached about 25% in 2020, as she was impressed by China’s initial response to the coronavirus outbreak.

“We’re looking at fiscal and monetary policy responses around the world and have been impressed by China’s restraint. They haven’t invested heavily in issues. They’ve been very disciplined in their monetary and fiscal policy responses,” Wood said.

The innovative investor said she had reversed her stance on China after Beijing began tightening its grip on the economy by cracking down on the super-rich and the tech sector.

The widely-followed investor said she was particularly concerned about China’s real estate market, which has racked up a lot of debt after more than a decade of rapid expansion.

“It contributed to about 15 years of double-digit real GDP growth … that kind of growth can cover up a lot of sins,” Wood said. “These sins often involve debt, and importantly in real estate, and we do believe that China is facing a day of reckoning in that regard.”

Ark FinTech Innovation ETF (ARKF) Still holds a small stake in the Chinese e-commerce company Jingdongbut it has ditched other Chinese names such as Pinduoduo and Tencent.

However, Wood said she would likely increase her holdings in China-related stocks as the country overcomes tough times and the market enters a new bull cycle.

“More diversification during a bull market, especially as we do more IPOs and as we reconsider some of the companies we let go in our concentration strategy,” Wood said.

Her flagship fund has performed well so far this year, with her main holdings bouncing back from steep losses triggered by rising interest rates. ARKK is up more than 50% in 2023.

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