Since acquiring Rize ETF in September 2023, Ark Invest Europe has wasted no time in bringing products to the European market.
The firm launched three thematic ETFs in April focused around the themes of artificial intelligence, genomics and innovation, while Ark also announced partnerships with firms such as eToro and Evidence Based Investing (ebi) to include their products in MPS ranges.
“Between us in Europe and Cathie Wood and her team in the US, we’ve been surprised by how many additional synergies we’ve uncovered since we did the deal,” said Ark Invest Europe head and Rize ETF co-founder Stuart Forbes (pictured), reflecting on the firm’s first year.
“We were focused on a couple of main areas and benefits when we were doing that transaction, but we’ve since realised it’s so much more. We have been a specialist in sustainable and impact investing here in Europe, and there’s a whole element there which we can take more globally.
“We’re actually going to be launching some products in the US market. We’ve had conversations with a number of players internationally, so there’s been a whole new element that’s come to the table.”
Thematic flows
In April, the firm rolled out the ARK Artificial Intelligence & Robotics UCITS ETF. Since launch to the end of October, the fund returned 24.8% and is up higher on the back of the US election result.
“It’s special to Europe. We haven’t launched it anywhere else, and it’s been a revelation for us in terms of how well it’s been received,” Forbes says.
“It’s very early, and obviously a lot of investors require quite a long track record before they can allocate in meaningful size, but it’s performing exceptionally well and we are very pleased with that. We have a big pipeline and conviction in that product.”
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Since launch to the end of October, the strategy has gathered $9.3m assets.
Forbes admits that it has been a tough market environment to launch in, with the thematic sector in general struggling to attract inflows over the last year.
According to Morningstar, Europe-listed thematic ETFs suffered €1.6bn outflows in Q3 2024, bringing total assets in the sector down to €35.6bn.
“Its been a tough period for thematics generally,” Forbes says. “Over the last couple of years, performance has not been great. The core benchmarks have outperformed, and that has been a story across the board.
“We’re very aware of that, but we have a mixture of products. What we’re excited about is interest rates and inflation starting to come down, which bodes very well for us. We do have something for all weather in our sustainable infrastructure strategy, which has added more to our repertoire of products that we can offer clients.
“X trackers has absolutely dominated the thematic ETF market in terms of flows over the last year, but everybody else has had a poor time and this has not been good. We are 1.27% of total thematic ETF assets in Europe. Yet, we’ve had an inflow in this last year [across all funds]. I think we’ve done pretty well, considering the market we’ve been in.”
“If you look at sustainable thematics, the market has been in outflow over the last year. In the last year, we’ve taken just under $100m in inflows. We launched our Rize Global Sustainable Infrastructure and the US Environmental Impact funds last August. Both of those have taken in $94m and $80m respectively which is an amazing effort, considering they’re brand new funds and the market conditions that we’ve had.”
Partnerships
The firm is also looking to partner with further companies to help manage MPS ranges following its announced deals with ebi and eToro this year.
Ark partnered with platform eToro in October to launch a technology and innovation-focused ‘Smart Portfolio’, named ARK-FutureFirst.
The portfolio, which aims to achieve high levels of growth for investors through exposure to technology, healthcare and sustainability sectors, comprises seven equally-weighted positions in ARK Invest’s UCITS ETFs.
A month earlier, ebi launched a new index-tracking MPS range, consisting of 11 portfolios with an ESG focus – run by Ark.
“A lot of our time has been spent helping to educate clients on when they go into launching thematic funds of funds or strategies that embed ETFs, or even sustainable models. There are a lot of people launching these now — a lot of people launched them in 2022 and early 2023 and then have been hurt by performance and a lack of flows.
“But we’re seeing a lot of people looking at it now, getting ready for this next wave of equity allocation that everybody hopes happens over the next year or two as interest rates continue to come down.”
This article originally appeared in our sister publication, Portfolio Adviser
