How Cathie Wood's ARK plans to crack Europe

By David Ricketts

Breaking into Europe's competitive exchange traded funds market has been a long-standing ambition for ARK Invest, the U.S. firm founded by star portfolio manager Cathie Wood in 2014.

A decade after Wood broke away from AllianceBernstein to strike out on her own, her firm now oversees around $25 billion-- although that figure is down from a peak of more than $60 billion in February 2021.

Having attracted tens of billions of dollars from a loyal base of U.S. investors, ARK has now shifted attention on achieving similar success in the European market. On Sept. 20 it announced it had acquired London-based Rize ETF to assist its push into Europe.

"We have been looking at the European market for some time," Tom Staudt, chief operating officer at ARK Invest told Financial News.

The acquisition of Rize, which manages around $450 million across 11 European ETFs, will also see ARK work closely with City veteran Martin Gilbert, whose AssetCo business sold its majority stake in Rize. AssetCo acquired a 63% stake in Rize in 2021 for GBP16.5 million.

River and Mercantile, which AssetCo acquired last year, will launch its own ETFs on Rize's platform following the deal.

ARK's purchase of Rize was brokered in "a matter of months", according to Michael O'Riordan, founding partner of consultancy Blackwater Search & Advisory, who introduced the two firms.

O'Riordan added that ARK's decision to acquire an existing ETF player, rather than build a business from scratch in Europe, meant it got instant access to boots on the ground and knowledge of the local market.

"In the case of ARK, they have a lot of products and ambitions to launch more. It made more sense to have their own platform," said O'Riordan.

"For a lot of U.S. managers with intentions of coming to Europe, the idea of starting from scratch can be intimidating. If they can get access to a team straightaway, that is more appealing."

For Rize, which was founded in 2019 by a group of former Legal & General Investment Management professionals, the deal will eventually see it rebranded to ARK Invest Europe and provide the firepower needed to grow assets and gain a foothold with key distributors.

"When you are a small player in the ETF market, it can be a bit like David versus Goliath. Having a brand like ARK can be a game changer," said O'Riordan.

ARK's push into Europe is a logical next step, according to Staudt. Around 25% of inbound emails, social media engagements and contacts currently originate from continental Europe and the UK.

"That's without us having a formal presence or product on the continent," he said. "We have a strong belief there is unmet demand."

Staudt pointed to other partnerships outside the U.S. market where it has had success, including a tie-up with Nikko Asset Management in Japan.

An expanded version of this story is available at FNLondon.com

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09-28-23 0548ET

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