Cathie Wood Cuts China Stock Holdings, Leery of Beijing’s Crackdown

The growth stock maven thinks official persecution will squelch valuations, especially of promising tech titans.


Growth-stock icon Cathie Wood is trimming her commitment to China, concerned that the nation’s companies will suffer stock-price plunges amid the Beijing regime’s recent crackdown.

To Wood, head of the tech-heavy Ark Invest fund company, it’s disconcerting that the Chinese government is putting many of its most innovative and promising technology businesses under a pall of anti-monopoly and data security investigations. And that will depress these companies’ stock prices, she warned. Already, the MSCI iShares China exchange-traded fund (ETF) is down more than 3% this year, while other major nations’ stocks are faring much better.

“The incentives to become incredibly successful in China are diminishing somewhat now that the government is expressing concern,” Wood said at an Ark Invest webinar. “Some people feel they have more power than the government would like them to have. So I do think there’s a valuation reset.”

The upshot: She has been unloading big chunks of online retailer JD.com and videogame and technology producer Tencent, although for now she has kept some shares in them, as well as in e-commerce giant Alibaba and internet search provider Baidu. 

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How much further her divesting of China holdings will go remains to be seen. These large Chinese companies have global ambitions, but “there are some national security considerations that might either slow them down or stop them,” Wood said. “These stocks have come down and from a valuation point of view will probably remain down.”

In addition to leaning on these large players domestically, China is reining in their ability to garner fresh capital from elsewhere by selling stock in the US and other nations. The government has vowed to “update” rules for Chinese outfits listed on US exchanges. Stock in Didi, the ride-hailing app company, tanked last week when officials suspended new user authorizations. The regime has fined Didi, Alibaba, and Baidu for alleged monopolistic behavior.

This storm has been gathering for a while now: Last fall, Chinese officials deep-sixed digital financial services titan Ant Group’s plan to go public, aiming to raise a stunning $34 billion. The impetus to punish it appeared to be Ant founder Jack Ma’s criticism of China’s financial regulators.

Wood’s flagship, the Ark Innovation ETF, enjoyed a spectacular 153% stock run-up last year, and is off around 2% in 2021. Much of that has to do with the ebbing of Big Tech’s fortunes earlier this year, something that lately has started to turn around. A mere 13% of the ETF’s holdings are non-US, thus the impact of official Chinese persecution on its remaining Chinese stocks is marginal.

Nevertheless, Wood’s interest in Chinese equity remains strong. Just two weeks ago, she bought a bunch of stock in Kanzhun, which makes job-seeking apps powered by artificial intelligence (AI). Perhaps paradoxically, Wood supported the anti-China policies of the Trump administration.  

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CalPERS Reports Preliminary Return of 21.3% for 2020-21

The strong performance triggers a reduction in the assumed rate of return to 6.8%.


The California Public Employees’ Retirement System (CalPERS) reported a preliminary 21.3% net return on investments for the 12-month period ending June 30 to raise its total asset value to more than $469 billion. Despite the strong performance, it fell just short of the portfolio’s benchmark return of 21.7%.  

“I’m proud of our investment office and of our ability to execute on our strategy to achieve strong returns in these unprecedented times,” Dan Bienvenue, CalPERS’ interim CIO, said in a statement.

The lion’s share of the gains was led by private equity and public equity investments, which had net returns of 43.8% and 36.3%, respectively. Real assets and liquidity returned 2.6% and 0.1%, respectively, while fixed-income investments ended the fiscal year down 0.1%.

As of the end of May, the portfolio’s largest asset allocations were 52% in public equity, 28.9% in fixed income, 9.9% in real assets, and 8.2% in private equity. Private equity has been the highest returning asset class for the portfolio over the longer term, with 10- and 20-year annualized returns of 12% and 10.1%, respectively.

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“Our investment team has done an outstanding job of capturing strong returns in this very dynamic investment environment,” Theresa Taylor, chair of CalPERS’ investment committee, said in a statement. “These results prove that we have the right investment strategy in place to take full advantage of what the markets have to offer.”

Under a policy enacted by the CalPERS Board of Administration in 2015, the double-digit return will trigger a reduction in the assumed rate of return used to calculate employer and member contributions to 6.8% from 7%. CalPERS said that from the preliminary returns, it estimates the pension has a funded status of 82% based on a 7% assumed rate of return, and 80% based on the new 6.8% assumed rate of return.

“As pleased as we are with these great returns, let me emphasize that we don’t count on this kind of investing environment every year,” Taylor added.

The fiscal year returns raised the fund’s five-, 10-, 20-, and 30-year annualized returns to 10.3%, 8.5%., 6.9%, and 8.4%, respectively.

CalPERS has been without a permanent CIO since early August, when then-CIO Ben Meng left the pension fund giant under a cloud of controversy. He said he had resigned for health reasons.

In April, officials suspended the search for a new CIO to replace Meng and said they did not expect the process to resume until early this month.

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