Ark Invest founder Cathie Wood (pictured) and Rize ETF’s co-founder Stuart Forbes – now head of Ark Invest Europe – speak to Portfolio Adviser in the wake of the firm’s acquisition of specialist ETF issuer Rize ETF from AssetCo, discussing the reasons behind the acquisition and the firm’s expansion into Europe.
On 20 September, it was announced that Europe’s first specialist thematic ETF issuer Rize ETF would be purchased by US investment management giant Ark Invest, subsequently renamed Ark Invest Europe, and be positioned as a separate arm of the Florida-based firm, with the deal marking the start of Ark’s bid to expand into Europe.
“We have been looking for a partner in Europe for a number of years now,” Wood said.
“The reason is, while we give our research away, if you look at the subscriptions to our research, roughly 25% of them come from Europe and the UK. The number one question we get in coming to us is: ‘Why can’t we access Ark’s funds in the UK and Europe?’ So that is a huge selling point for us.”
She added that Ark had previously struggled to find a European partner which matched the firm’s “DNA”.
“Part of this DNA is we have an active strategy and Rize has an indexed systematic strategy. Both of us are thematic, both of us know the companies inside our ETFs. We know the management teams, certainly I make it my business to to know the management teams and hopefully hopefully deeper down the lines from top management.
“We’re thrilled to be able to give Rize more access to the management teams in the US. We’re both agnostic to benchmarks and we’re both accountable for our results when something having to do with sustainability goes awry in one of now Ark Europe’s portfolios.”
Valuation write down
The firm’s purchase from UK asset management firm AssetCo, which first bought a 70% stake in the company in 2021, adds approximately $452m (£365.8m) in assets under management to Ark’s $25bn (£20.2bn).
AssetCo will partner with Ark and the new Invest Europe platform to launch several ETFs for River & Mercantile – the active equity management subsidiary of AssetCo.
However, Martin Gilbert’s firm wrote down the value of Rize by £5m in June, stating the ETF provider was “materially behind plan”.
When asked about the reasons for the write down, head of Ark Invest Europe and Rize ETF co-founder Forbes said: “When you’re a small business, you’re growing and you have a business plan, and when your asset gathering isn’t as high as you’d originally set out, that’s going to adjust the valuation that you ascribe to the business itself. And that’s all that was. They have to make certain regulatory announcements for full transparency to their shareholders.
“So whether just adjusting the value of the business, they have to announce that, but when you look at that versus the other players out there, I think considering the size that we are, we’ve actually done comparatively very well for the market and we have a lot of expertise there.”
Reflecting on the last two years, he added: “The last 18-24 months for thematic investing has been tough for the whole market and I think that the RNS from AssetCo was misinterpreted by a lot of the press, who didn’t do their own research and look at the flows that the various thematic ETF providers have had.
“We’ve had net inflows every year since we launched, whereas other firms have had outflows – last year in particular. We’ve just launched two more with clients seed on day one, and with a huge pipeline of investment for those strategies.
“We’ve launched a US version of our Global Environmental Impact Fund, and we’ve also launched a sustainability strategy, all on the back of demand.
“Obviously, we would have loved to have gathered more assets in the last 24 months than we did. But we still did gather assets where many others didn’t. And, given the nature of the global economy and the invasion of Ukraine and the impact all that had on interest rates and inflation, it has meant that allocations to thematic equity strategies has been a lot lower than it otherwise would have been.”