Can Cathie Wood’s Ark crack Europe?
Cathie Wood faces ‘tough nut to crack’ as Ark sets sights on Europe
Armed with messianic conviction and social media savvy, Cathie Wood has built a lucrative career pitching disruptive companies to US retail investors, write Chris Flood and Emma Boyde in London.
But even the 67-year-old acknowledges that her quest to bring Ark Investment Management, the Florida-based firm she set up in 2014, to Europe is a daunting one.
Europe is a “tough nut to crack,” Wood told the Financial Times. “We knew, as an American company, that Europe and the UK is the most complicated region in the world. We needed local talent and local leadership.”
Wood has long harboured ambitions to break into the $1.5tn European exchange traded fund market, but it was only last month that Ark took its first step with the acquisition of London-based Rize ETF, which manages more than $450mn.
The decision by Martin Gilbert’s AssetCo to sell Rize barely two years after acquiring it points to the obstacles in breaking the dominance of the 10 players — among them BlackRock, Amundi and DWS — who control more than 90 per cent of the ETF market in Europe.
Alongside Ark’s poor performance and questions over whether her evangelism could misfire in Europe, Wood and Ark will need to overcome several hurdles.
In many European countries, asset managers can pay financial advisers a commission to recommend an actively managed mutual fund. ETF providers do not pay any similar incentives, which has slowed their adoption by financial advisers in Europe.
ETF trading in Europe is conducted across multiple exchanges, dividing liquidity and increasing transaction costs. Meanwhile, distribution channels for selling ETFs also vary across the continent, which will require Ark’s salesforce to win orders from a mix of fund supermarkets, banks, brokers, wealth managers and financial advisers, alongside individual retail investors. And unlike in the US, ETFs do not offer tax advantages in Europe.
Amin Rajan, chief executive of the consultancy Create Research, cautioned that almost every small ETF manager had failed to gain critical mass in Europe, before adding that “if there is anyone that can, then it is Cathie Wood”. Read the full story here