Great investors come and go, and it's difficult to be successful in every investment environment. That has certainly been the case for Ark Invest's Cathie Wood, who has become a steadfast champion of high-growth innovation stocks.

Wood's strategy served her well in 2020, with most of the ETFs  in her Ark Invest family of funds producing stunning returns. Yet 2021 didn't prove to be as kind to Ark Invest, and 2022 has been particularly harsh, saddling Wood's funds with substantial losses.

Wood's cornerstone Ark Innovation ETF (ARKK -1.15%) has definitely had a tough time this year, but it isn't the worst performer in the Ark Invest family. With just a few trading days left in 2022, that dubious distinction instead appears likely to go to Ark Next Generation Internet (ARKW -0.69%), with year-to-date declines approaching  68%.

A tough year for Wood's top picks

Ark Next Generation Internet's investment objective is to find companies that will benefit from long-term trends like cloud computing, e-commerce, artificial intelligence, mobile technology, social platforms, and blockchain technology. The stocks Wood chooses for the ETF are ones she believes should benefit from this ongoing technological shift.

Unfortunately, the bear market in 2022 seemed to focus the brunt of its force on many of the stocks that had benefited so greatly during 2020's banner year. Every single one of the top 10 holdings in the ETF were down at least 60% with just days left to go in December.

Three of those top 10 stocks were particularly notable because of their even greater losses. Coinbase Global (COIN -1.27%) has been the worst performer in group, plunging 87% in 2022 as investors have largely lost confidence in the cryptocurrency exchange provider's ability to overcome the huge negative forces holding back the industry. A host of bad events for the digital asset universe, including multiple failures among institutional crypto investors and the recent failure of the rival FTX exchange, have made shareholders less comfortable that Coinbase will be able to drive further innovation. Moreover, the threat of new regulation could make it even more onerous for Coinbase to prove to its customers that it can survive where its competitors have failed.

Meanwhile, Twilio (TWLO -2.60%) has also taken a big hit, losing 83% of its value this year. The provider of a subscription-based communications platform, Twilio has enabled its enterprise clients to manage their communications more effectively to deliver strong customer service and responsiveness in whatever way their end-customers prefer. Yet the company has warned that its organic sales growth is likely to slow considerably from recent rates, and Twilio's vulnerability to worsening macroeconomic conditions has disappointed many shareholders who believed that the company's SaaS stock status would insulate it from business cycles.

Lastly, Roku (ROKU 0.57%) has fallen sharply from its highs, posting an 82% decline since the year began. The rising star in streaming video has been a casualty of falling advertising revenue, and even though Roku's usage metrics remain strong, it has reversed profits a year ago with losses this year. Investors expect a weak ad market to continue in 2023, and that has many worried that it could take a while for Roku's business to recover fully.

Can Ark Next Generation Internet bounce back?

Ark Next Generation Internet's holdings span many different industries, from software, financial services, and entertainment to e-commerce, electric vehicles, and health services. Many of those industries have their own unique dynamics, but the ETF's stocks share high growth potential with heightened risk.

For now, investors don't seem excited to take on that risk in pursuit of outsized rewards, so it could take a while for Ark Next Generation Internet to bounce back. Given time, though, the current fear in the stock market is likely to swing back toward greed, and that could give the Ark Invest ETF a chance to rebound at some point in the future.