NEW YORK, June 29 (Reuters) - A more than 10% surge in growth stocks since the start of the quarter is fueling a comeback in star stock picker Cathie Wood"s ARK funds, which posted some of the worst declines among all U.S. equity funds over the first three months of the year. The ARK Innovation fund (ARKK.P), which is managed by firm founder Wood, gained 3.5% on Monday and is now up 4.3% for the year to date, highlighting a nearly 31% comeback since hitting its May 13 low. Prior to its recent rally, the fund had been down by as much as 9% for the year. Driving the gains are declining fears of runaway inflation and the failure of U.S. bond yields to follow through on their dramatic first-quarter rally, accelerating a rotation back in to the sort of hyper-growth stocks that helped Wood post the best returns of all actively managed mutual fund managers in 2020 tracked by Morningstar. Monday"s move was also helped by breakthroughs in gene editing announced on Saturday which boosted the shares of several biotech companies Wood"s firm holds in several of its funds, including its flagship Ark Innovation fund. "Investors have been rewarded for staying loyal to ARK and their long-term growth strategies as fears of rising interest rates were diminished," said Todd Rosenbluth, director of mutual fund research at CFRA. "ARKK has significantly outperformed the broader market in the past month and is now in the black after being down double digits." Among Wood"s holdings are Regeneron Pharmaceuticals Inc (REGN.O), which is up 22.1% since its March low, and Intellia Therapeutics Inc (NTLA.O), which rallied more than 50% on Monday after posting positive interim data over the weekend from its ongoing early-stage trial for its genome editing candidate, NTLA-2001. Overall, the Russell 1000 Growth index (.RLG) is up 11.4% since the start of the quarter, nearly triple the 4.6% gain in the Russell 1000 Value index (.RLV) over the same time. Those gains have come as the price of lumber and other commodities has fallen from multi-year peaks, helping ease investor concerns over spiking inflation. The Federal Reserve took many investors by surprise with a more hawkish turn at its most recent policy meeting, sending the yield of the benchmark 10-year Treasury below 1.5% on expectations that the central bank would be less tolerant of rising inflation. That has helped bolster tech and growth stocks, as rising yields threaten to erode the value of their longer-term cash flows. Despite ARK"s recent gains, the performance of its flagship fund remains in the bottom 100th percentile among U.S. mid-cap growth funds, according to Morningstar data. Whether the fund continues its recent hot streak will largely depend on the direction of the 10-year Treasury yield, said Jim Paulsen, chief investment strategist at the Leuthold Group. "There"s a high correlation between the 10-year and whether it"s growth or value overall," as lower yields eat in to the profits of cyclical stocks such as financials, he said. While growth stocks are outperforming now, Paulsen remains skeptical the rally will continue. "Growth is going to be really strong in the economy this year and next and I don"t think we have seen the last of the inflation scare," he said.