Cathie Wood is on CNBC explaining her genius investment strategy. Ron Baron is on CNBC explaining his. ARES is up 23% annually over ten years. APO is up 22%. ARKW nearly doubles the S&P. Give them your money.

The raw numbers are real. The outperformance is not. It decomposes cleanly into two things: elevated beta (these funds carry 1.3–1.7× the market risk of a plain index fund, which earns a risk premium in bull markets whether or not the manager is skilled) and survivorship (running many high-volatility funds guarantees a spectacular right tail to advertise). Strip both out and there is nothing left.

Step 1: the raw numbers

Here is what you see on CNBC. Annualised total returns over the analysis period (131 monthly observations, 2015–2025), vs SPY at 13.4%.

Fig. 1. Raw annualised returns for each fund, sorted descending. Dashed line = SPY (13.4%). Eight of eleven funds beat the index on raw returns. Several by a wide margin.

Step 2: strip the beta

Every fund in this sample runs with a true OLS beta against SPY of 1.31–1.72. The S&P 500 carries an equity risk premium; higher beta amplifies it. That amplification is not skill; it is compensated risk. You could replicate it by borrowing and buying index funds.

ARKK’s self-reported beta is 0.89 against its own benchmark. Against SPY it is 1.72. Once you charge each fund for its actual market exposure using Jensen’s alpha, the picture changes completely.

Fig. 2. True OLS beta against SPY for each fund. All carry substantially more market risk than the index; the dashed line marks beta = 1.0.
Fig. 3. Jensen’s alpha (annualised) after adjusting for each fund’s true beta against SPY. The same funds that looked impressive in Fig. 1 are now at or below zero. Only ARES and APO show meaningful positive alpha; see the regression table for detail.
Fund Raw CAGR Raw α vs SPY True β R² Beta explains Jensen’s α
ARKW Next Gen Internet19.7%+6.3%1.710.54+8.0pp-0.2%noise
ARKQ Autonomous/Robotics18.9%+5.5%1.390.59+4.4pp+1.7%noise
ARKK Innovation12.3%-1.1%1.720.52+8.2pp-5.9%destroys value
ARKG Genomic Revolution1.6%-11.8%1.600.45+6.8pp-13.3%destroys value
ARKF Fintech6.8%-6.6%1.660.54+7.4pp-10.4%destroys value
BPTRX Baron Partners19.4%+6.0%1.490.52+5.5pp+1.7%noise (Tesla)
APO Apollo Global22.3%+8.9%1.510.46+5.8pp+4.9%possible
BX Blackstone14.8%+1.4%1.470.49+5.3pp-1.7%destroys value
KKR15.6%+2.2%1.640.53+7.2pp-2.6%destroys value
CG Carlyle9.6%-3.8%1.650.46+7.4pp-6.8%destroys value
ARES23.1%+9.7%1.310.38+3.5pp+8.3%illiq. premium

OLS vs SPY, 131 monthly observations. Jensen's alpha annualised from monthly intercept. Beta contribution = (beta − 1) × market risk premium. Raw CAGR = SPY (13.4%) + raw α.

Eight of eleven funds beat the S&P 500 on raw returns. After adjusting for their actual market exposure, Jensen’s alpha is zero or negative for nine of eleven. The two exceptions; ARES and APO; are private credit and alternative asset managers whose returns likely include an illiquidity premium, not stock-picking skill.

Step 3: what’s left is survivorship

After stripping beta, a few funds still show marginally positive Jensen’s alpha: ARKQ (+1.7%), BPTRX (+1.7%). These are not statistically distinguishable from zero. But even if they were real; a zero-skill manager running 8 high-volatility funds should expect the best fund to beat the S&P by ~8pp annually just from the right tail of the return distribution. You launch many, advertise the winner, quietly close the rest. ARKW’s raw outperformance is roughly the 50th percentile of what that exercise should produce by chance alone. ARKG is the same strategy, different seed.

Fig. 4. Expected best-fund and median-fund CAGR from 30,000 zero-alpha Monte Carlo simulations. A manager with no skill whatsoever should expect their best fund to beat the S&P by 8–11pp annually just from running a large enough fund family.

AUM makes it worse: capital chases recent winners. ARK peaked at ~$51B in early 2021, right after a 152% annual return and right before the collapse. The average retail investor bought near the top. Equal-weighted average ARK return: 9.8%. AUM-weighted (what investors actually experienced): 12.5%. Neither beats the S&P, and the AUM-weighted figure flatters the true dollar-weighted return because most capital arrived late.

Fig. 5. ARK funds by since-inception CAGR (x-axis) and Jensen’s alpha (y-axis); bubble size = peak AUM in $B. Every fund sits below the zero-alpha line. The largest fund (ARKK, $28B peak AUM) has the worst alpha; most capital flowed in near the top, after the return was already earned.

Appendix: private markets, same tricks better hidden

NAV smoothing Quarterly appraisals lag public markets 1–2 quarters. During COVID, PE NAVs fell ~15% while public markets fell ~35%. Measured beta: ~0.4. True beta: likely 1.5+.
Buried leverage Funds use 50–65% debt at portfolio company level. 2x leverage implies ~1.7x effective market beta, hidden in portfolio company financials.
IRR gaming Early distributions inflate IRR. Fund I was small and easy to deploy. Fund VIII is $20B in a crowded market. Advertise Fund I's 35% IRR.
GP co-invest skimming Best deals go to GP co-invest vehicles at lower fees. Fund LPs get average deal quality. Performance reported often includes GP co-invest returns.

Phalippou (Oxford, 2020): PE funds since 2006 deliver net PME of ~1.0 vs the S&P. Gross PME exceeds 1.0, but 2% management + 20% carry consumes all of it. The entire fee stream is a transfer from LPs to GPs with zero aggregate alpha. [Phalippou & Gottschalg 2009; Phalippou 2020, “An Inconvenient Fact”]

Verdict

The outperformance that gets managers on CNBC decomposes as follows: most of it is beta; higher market exposure, higher expected return in a bull market, nothing to do with skill. What remains after beta adjustment is statistically indistinguishable from zero for nine of eleven funds. The two that show real positive alpha (ARES, APO) are private credit managers collecting an illiquidity premium, not stock-pickers. The few funds with marginally positive Jensen’s alpha (ARKQ, BPTRX) are consistent with what zero-skill produces across a large enough fund family.

Throughout all of this, ARK collected 0.75% annually. Baron collected 1.0–1.4%. On tens of billions of AUM. On zero net alpha. That is the business model.

Strip the beta. Account for the survivors. There is nothing left; except the fee.
Data: Yahoo Finance monthly adjusted close, 2015–2025 (131 observations). OLS vs SPY. Survivorship simulation: Monte Carlo 30,000 iterations, zero true alpha. PE analysis: Phalippou & Gottschalg (2009), Phalippou (2020). AUM: ETFdb.com and company disclosures. Not investment advice.