The $25 billion firm didn't have an undertakings for collective investment in transferable securities, or UCITS, product — which would have granted it that access to European investors. There was $1.66 trillion invested in Europe's ETFs industry at the end of August, according to research and consultancy firm ETFGI.
"We had been looking at how to enter Europe, and we know Europe is a very complicated environment to navigate," Wood said. Then Tom Staudt, chief operating officer, "found this little gem inside of AssetCo."
That "little gem" was Rize ETF — now ARK Invest Europe — a thematic ETF issuer founded in 2019 and based in London with $452 million in assets under management across 11 UCITS ETFs. Each of those ETFs is classified as Article 8 or 9 under the Sustainable Finance Disclosures Regulation. AssetCo bought its 70% stake in Rize ETF in 2021.
Rahul Bhushan, co-founder of Rize ETF, said in the same interview that "it's been a journey … to find the right partner." Following internal discussions and then talking to ARK, it "was quite clear early on … that there was a lot of cultural alignment." The two firms were on the same page about the future of ETFs, thematics and research-driven development, Bhushan said.
ARK Invest acquired Rize ETF last month, agreeing to pay up to £5.25 million ($7 million) for the business.
Rize ETF's relationship with regulators was also a draw, Wood said, and the firm is hoping to "achieve Article 8 (across products) — we know that's important to the European marketplace," she said.
Of the decision to acquire rather than grow organically into Europe, Staudt said in the same interview: "We try to be very clear that we don't know what we don't know. We have had the ability to expand globally by identifying key partners that are leaders in their markets and partner with the best people."
ARK Invest also counts Nikko Asset Management as a strategic partner — an "incredible partnership for ARK," particularly given that some U.S. managers have struggled to gain a foothold in Asia and Japan specifically, Staudt said.
Wood added: "We're not presumptuous that you could walk into Europe and be successful — I don't think we could. We would not move into Europe without this sort of partner."
In terms of the outlook for ETFs in Europe, Wood sees a deepening of liquidity "because the market makers will have now more arbitrage opportunities between Europe and the U.S.," she said.
Institutional investors might be "introduced to our ETFs perhaps tactically, but as they're looking into the ETFs, because they can see what's inside, they realize that we own stocks that they do not. Our active share relative to broad-based benchmarks is 95%-plus. And so that's something they're also seeking — diversification," Wood said.
ARK Invest focuses on disruptive innovation and believes there are five "major innovation platforms, which involve 14 different technologies, (which) we believe are going to disrupt and disintermediate the traditional world order," she said. Those five platforms are artificial intelligence, energy storage, robotics, DNA sequencing and blockchain technology.
"And so we're a good source of diversified exposure to innovation that is going to be disruptive to many companies that are in the traditional benchmark — so we're a hedge against that disruption," Wood said.