Cathie Wood, the founder, CEO and CIO of Ark Invest, held discussions with Bill Hwang of Archegos Capital about U.S. stocks and, in particular, the media sector back in 2013.
What Happened: In an interview with CNBC, Cathie Wood said hedge fund veteran Hwang provided seed capital for Ark's first four exchange-traded funds.
"He 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," she said in the interview.
Why It Matters: Hwang ran Archegos Capital Management, the family office that imploded in March and caused massive losses at a few big banks when Archegos couldn't meet margin calls.
Wood said she had sent Hwang a note "wishing him well" after the Archegos collapse. Wood said she had no idea if Hwang had remained a shareholder in Ark ETFs.
Hwang was very successful with his family office until he began to overutilize leverage, or borrowed money, to chase higher returns in the market. The problem with this strategy comes when investments start to lose money, and the banks lending the investor money begin to get nervous and initiate margin calls.
Also, during the interview, Wood spoke about Ark ETFs and said, "The ETF ecosystem is a beautiful thing for portfolio managers."
Ark now manages a range of ETFs, including some that have been a runaway success during the pandemic boom market. They include the flagship Ark Innovation ETF (NYSE:ARKK), Ark Next Generation Internet ETF (NYSE:ARKW), ARK Genomic Revolution ETF (NYSE:ARKG) and the Ark Fintech Innovation ETF (NYSE:ARKF).
Ark Invest's fund flows went from $10 billion to $80 billion in just under a year, she said, adding that the acceleration in fund flows was "parabolic."