Cathie Wood has revealed that Bill Hwang, the investor whose family office Archegos Capital blew up causing billions of dollars of losses, played a central role in the launch of her asset manager Ark Invest.
In a television interview on Friday, Wood also said she had swapped ideas with Hwang about US stocks and in particular the media sector back in 2013, when Archegos was still mainly focused on investing in Asia.
Wood created Ark, which runs exchange traded funds focused on innovative tech companies, in 2014 after a long career on Wall Street at AllianceBernstein and Jennison Associates.
“He [Hwang] did provide the seed for our first four ETFs and we were very grateful to him. It was at a time where market makers were sick of seeding new strategies, because they’d be stranded with $2m stuck in an ETF that doesn’t go anywhere,” she told CNBC.
“We needed to go out and find that seed and Bill, hearing what I was saying about the company that I was going to start . . . was very intrigued, and very intrigued with the stocks we were interested in,” she said. “He was just beginning to learn about them.”
A ferocious rally in tech shares has helped propel Ark into the top ten of largest US ETF managers and investors have poured money into its funds. The flagship Innovation fund now has $22bn in assets. The other three Ark funds seeded by Hwang are its Genomic Revolution, Next Generation Internet, and Autonomous Technology and Robotics funds.
Wood, like Hwang a devout Christian, who named Ark after the gold-covered chest described in the Book of Exodus, said she met the former hedge fund manager when they were both advisers to a religious group that ministers to young people on Wall Street.
“On our way back from that event, we were exchanging stock ideas back then and I know he bought into one of the stocks in which we had a high degree of confidence, Netflix,” Wood said.
Banks that acted as prime broker to Archegos suffered $10bn of losses in late March after Hwang’s highly leveraged bets on a small number of US and Chinese stocks turned against him, among them media group ViacomCBS.
When asked whether Hwang still owned a stake in any of Ark’s funds, Wood said ETFs do not know who their shareholders are, and added: “I’ve never asked him if he kept the money in. If he wanted to volunteer he might have but, no, we have never had that conversation.”
A number of banks are seeking compensation after suffering losses tied to derivatives trades with Archegos, which the Financial Times reported this week was preparing for insolvency. Securities regulators in Washington are probing the debacle.
Wood said she had not spoken to Hwang since Archegos blew up. “I sent him a note after I heard about the unfortunate events that we’ve all witnessed and I’m wishing him well,” she told CNBC. “He was there for us in the early days and we’re very grateful to him.”
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