In September, Titan announced a new partnership with Cathie Wood's Ark Invest to provide access to the new Ark Venture Fund, a brand new, exclusive private equity fund for retail investors.
The new Ark fund provides retail investors access to pre-IPO companies that has previously been restricted to institutional and wealthy individuals — but an analyst says retail investors have several reasons to think twice before backing Wood's latest fund.
Ark joins Apollo Global Management (NYSE: APO) and Carlyle Group Inc (NASDAQ: NASDAQ:CG) in partnering with Titan to offer retail investors new opportunities in crypto, private equity and much more. Ark has said its new ARK Venture Fund will invest between 20% and 85% of its assets in private companies.
Red Flags To Watch: Empire Financial Research editor in chief Sam Latter recently warned investors about the dangers of investing in the Ark Venture Fund. Latter said there are "many red flags" when it comes to both Wood and the new Ark fund.
Related Link: ARK Invest Short Sellers Have $2.3B In Profits So Far In 2022
Latter said 90% of startups ultimately fail, making private companies inherently more risky and volatile than public ones. Risk and volatility management has historically been one of Wood's blind spots, according to her former boss at AllianceBernstein.
Even if investors are willing to tolerate the extreme risk of the Ark Venture Fund, Latter said the exorbitant fees the fund charges will make it difficult to outperform in the long-term.
Latter pointed out the Ark Venture Fund will charge a 2.75% management fee in addition to a total expense ratio of 4.22%.
"If Wood's new fund returns 10% per year, you're left with just 3.03% after paying nearly 7% in fees," Latter said.
Related Link: Titan Investors Can Now Access Private Equity Markets
Lack Of Liquidity: In addition, Latter said Ark Venture Fund investors should understand that it may be difficult to withdraw their money once they have invested. Because of its lack of liquidity, the fund will limit investor withdrawals to an estimated 5% per quarter.
Finally, because it's difficult to accurately value private companies, Latter said investors will need to trust Wood and her team's valuation methodology and projections, which he said have proven to be highly suspect in recent years.
Wood's Bold Claims: Wood rose to popularity when her bets on high-risk speculative investments generated some staggering short-term returns during the market's recovery from the COVID-19 sell-off in 2020.
Investors have dumped speculative assets in the last 12 months, and the Ark funds has been among the market's worst performers due to Wood's extremely aggressive growth investing strategy.
Wood has famously made bold claims that Bitcoin (CRYPTO: BTC) prices would hit $1.36 million by 2030 and that Tesla (NASDAQ: TSLA (NASDAQ:TSLA)) will reach $1,800 per share by 2025.
Six months ago, Wood said she projects a 50% compound annual rate of return from Ark's flagship ARK Innovation ETF (NYSE: ARKK).
That projection is off to a bumpy start, to say the least. In the last six months, the ARKK fund is down nearly 40%, and the entire collection of ARKK funds have severely lagged the S&P 500 so far in 2022.
"That forecast is so farfetched, you can only hope nobody will believe it and fork over money to the person who said it," Latter said.
Benzinga's Take: Wood is sticking to her bullish stance on struggling tech stocks and Bitcoin, though it's difficult to have any confidence in her projections at this point given her abysmal performance.
In fact, rather than betting on Wood and her funds, short sellers who have bet against them had made more than $2.3 billion in profits as of the end of September.
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