While many active stock-pickers these days are worrying about money walking out of the door, Cathie Wood will soon have the opposite problem. Her firm, Ark Investment Management, could be getting too successful for its own good.

Already in February, Ark’s small lineup of exchange-traded funds has added another $7 billion in assets. That’s on top of January’s roughly $8 billion flow, taking the money manager’s ETF assets to $58 billion.

“Too much money” is not a phrase heard often on Wall Street, but for a thematic fund specialist like Ark, it could be a headache. The business Wood founded seven years ago invests in future-focused trends like genomics and robotics, and there are only so many stocks that fit the bill.

As the cash continues to pour in, Ark already owns 10% or more of at least 24 companies, according to data compiled by Bloomberg. They include Invitae Corp., Cerus Corp., and CRISPR Therapeutics AG.

High Stakes

Ark owns more than 10% of at least 25 companies

Source: Bloomberg

“There is risk with so much money flowing into so few,” said James Pillow, managing director at Moors & Cabot Inc. “When the flows stop, or worse yet reverse, one should expect a day of reckoning.”

Two kinds of threats are looming, Peter Garnry of Saxo Bank wrote in a research note this week. The first is Ark’s potential impact on the market. The firm’s huge inflows over the past year have helped fuel a biotech boom, for instance. If assets start to flow out, it could undercut the sector.

The second threat is from the market to Ark. A slide in the companies it is heavily exposed to could force the firm to sell in turn, starting a feedback loop, according to Garnry, Saxo’s head of equity strategy.

Ark isn’t the first investment firm to grow so big so fast. Back in the 1990s, the Janus Twenty mutual fund was red hot. By investing in a small group of growth shares, it rose more than 500% in the decade, garnering assets of as much as $38 billion and making a star of manager Scott Schoelzel.

It went on to drop by more than 50% during the dot-com crash before staging a more evenly paced recovery from late 2002, although investors were ultimately rolled into a different fund.

“Probably the one thing she is going to have to figure out a way to navigate is size,” Schoelzel said about Wood on a recent episode of Bloomberg’s Trillions podcast. “I don’t know if it’s $50 billion or $70 billion or $100 billion or $150 billion, but there will be a point where size will become her enemy.”

Wood addressed the concerns on a webinar early this week, noting that the stocks her firm buys scale quickly, which helps to relieve capacity issues. Plus, the increase in initial public offerings and special-purpose acquisition companies will give them more options to choose from.

“When people say, ‘oh, they’re forced into larger-cap stocks,’ well, I can give you a few examples,” she said during the webinar, citing Invitae, which went from “roughly $250 million, if I’m not mistaken, to $8 billion.”

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