NEW YORK, Sept 28 (Reuters) - Struggles are mounting for the flagship fund of star stock picker Cathie Wood’s ARK Invest, as investors favor stocks that can benefit from rising economic growth and rising bond yields threaten the appeal of technology shares. The ARK Innovation ETF, which had $25.5 billion in assets at the end of June, was down 4.2% on Tuesday, outpacing a 1.9% drop for the benchmark S&P 500 and a 2.6% fall for the tech-heavy Nasdaq. Wood’s fund, which was the best-performing U.S. equity fund in 2020, is down more than 9% so far this year, while the S&P 500 has gained 16%. The ARKK fund ranks in the lowest percentile year-to-date among 601 mid-cap growth funds tracked by Morningstar. The high-growth names that helped Wood reap outsized gains during last year’s coronavirus lockdowns have hurt the fund’s performance in 2021, with so-called stay-at-home stocks such as Teledoc Health and Roku losing their luster as investors have turned to financials, energy companies and other economic reopening plays at various times over the last few months. “What worked for the fund in 2020 has not persisted even if the long-term trends favored by ARK remain relevant,” Todd Rosenbluth, head of ETF & mutual fund research at CFRA, said in an emailed comment. Some have also interpreted a hawkish tilt from the Federal Reserve’s meeting last week as a vote of confidence for the U.S. economy, buoying reopening stocks and boosting Treasury yields. While rising bond yields tend to reduce the relative attractiveness of many stocks, they can particularly weigh on tech and other growth names whose valuations rely on future cash flows, which are discounted more severely as bond yields rise. Since Wednesday, the yield on the 10-year U.S. Treasury note has climbed 23 basis points to 1.53%, while the ARKK ETF has fallen over 4%. Earlier this month, Wood reiterated her call that slowing economic activity in the United States will bolster growth stocks. ARK Invest did not immediately respond to a request for comment on Tuesday. Short interest in the ARKK fund amounts to 21.41 million shares, or 11.9% of the float, with short interest declining by 1.1% in the past week as shorts have covered their bets, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. The fund’s top holdings include electric carmaker Tesla Inc as well as virtual health company Teladoc and television streaming firm Roku. While Tesla has climbed 10% in 2021, Roku has slumped 6% and Teledoc shares have dropped some 35%. Last week, China’s moves to crack down on bitcoin trading dealt another blow to the fund, which lists cryptocurrency trading firm Coinbase Global Inc as its fifth-largest holding. Since its inception in 2014, the ARKK fund is up about 450% against a roughly 115% gain for the S&P 500, and ranks in the top percentile in its category of funds tracked by Morningstar over a five-year period. (Reporting by Lewis Krauskopf; additional reporting by David Randall; Editing by Steve Orlofsky) Our Standards: The Thomson Reuters Trust Principles.