Inside the minds of growth investors

Beyond SoftBank and its woes, many tech-focused growth investors have seen the value of their portfolios shrink significantly over the past year, raising questions about the soundness of their investment strategies. T Rowe Price’s Global Technology Equity Fund has fallen 45% over the past year; as has Tiger Management by 50%, and Ark Innovation by 55%.

Why should we care?
Current volatility may have raised questions about growth investors’ practices, but not all of them have answered in the same way. Tech stocks have fallen uniformly, without distinction between growth stocks (like SaaS companies) and legacy companies. According to Kirsty Gibson, an investment manager at Baillie Gifford, this means growth businesses are currently being sold at a discount, which makes present volatility an “exciting time” rather than a “comfortable time.” We may be able to make sense of the real long-term viability of tech companies according to the ethos of the investors behind them. Ark Innovation’s Catherine Wood, for example, appears committed to an ideological approach to investment. “Innovation solves problems, and the world is facing many more problems today than two years ago,” Wood tweeted last week, without describing how innovation and growth solve the problems she references. “Innovation is key to real growth!” Meanwhile, Ben Rogoff, Co-Head of London-based Polar Capital, said that Polar has shortened the duration of investments and taken a more diligent look at a company’s fundamentals. “It’s clear the market just isn’t going to finance open-ended growth stories anymore unless they can really prove out the economics of the business and generate cash flow quickly,” another investor added. Those diverging paths may have serious effects on these respective firms’ returns, in addition to those of investors that take inspiration from bigger players’ strategies and rhetoric.