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Tech investor Cathie Wood’s flagship ETF Ark Innovation now has no exposure to Chinese assets.
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Wood said on Thursday that the fund had begun to reduce its stake in China following Beijing’s tech crackdown.
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Alibaba co-founder Jack Ma was one of the most high-profile targets of the crackdown.
China’s crackdown on Alibaba scared tech investor Cathie Wood so much that she’s cut Ark Invest’s flagship fund’s China exposure from a significant percentage in 2020 to zero now.
“We saw the trouble that Alibaba, Alipay got themselves into – Jack Ma in particular, and we started to think, ‘Oh no, is this an all-out government crackdown on a company or someone with too much power?’ And that’s exactly what it was, as it turns out, in hindsight,” said Wood, CEO and CIO of Ark, during a webinar Thursday.
Ma angered Chinese authorities after delivering a speech in October 2020 in which he criticized China’s financial regulatory system and claimed that Chinese banks operated with a “pawnbroker” mentality. His words prompted intense regulatory scrutiny of his companies — including Alibaba and fintech firm Ant — and a broader crackdown on tech companies in China.
Wood said L’Arche had invested in China, especially since she was impressed with the country’s “restraint” during the pandemic.
“They weren’t throwing money at the problem. They were very disciplined in terms of monetary and fiscal policy responses,” Wood said. Ark Innovation ETF, the flagship fund, approached 25% exposure to China and other emerging markets – with holdings in tech giants Alibaba and Tencent, among others.
But the fund’s exposure to China has now fallen to zero after fund managers have steadily reduced its holdings. The fund has nearly $9 billion in assets under management, according to Morningstar, a financial services company.
Wood also said Thursday that she was concerned about the nation’s housing crisis.
She said China’s economy – which has thrown up one red flag after another – has been a “huge disappointment” since it ended its COVID-zero policy after nearly 15 years of double-digit real GDP growth.
“Such growth can cover many sins and those sins usually involve large debt in the real estate space, and so we believe China is facing its day of reckoning in this regard,” she said.
ETF Ark Innovation closed up 0.4% at $47.93 on Friday. It is up 54% since the start of the year.
Read the original article on Business Insider