16 OCT, 2023
By Constanza Ramos
Cathie Wood, CEO of ARK Invest.
In this exclusive interview, we have the privilege to talk with Cathie Wood, CEO of ARK Invest. Wood's innovative approach to investment has made her a prominent figure in the financial industry, and her recent acquisition of Rize ETF Limited has generated significant interest.
We discussed the exciting collaboration between Rize ETF and ARK Invest and its potential to redefine the investment landscape. Wood will share her vision for offering clients a broader range of innovative investment options in a rapidly evolving market.
This transaction marks a significant milestone in ARK’s global expansion strategy. It allows the firm to bring its suite of innovation-based active equity ETFs to investors across Europe, the United Kingdom, and new markets globally. The transaction allows ARK to establish a European UCITS suite of ETF strategies along with the proven distribution excellence of Rize ETF. It also incorporates Rize ETF’s valuable and differentiated impact strategies to be distributed by ARK globally. We are planning to launch several of ARK's actively managed strategies in the European markets by the end of the year.
The acquisition of Rize ETF by ARK Invest is strategically aligned as both firms share a common focus on the future and thematic investing. The expected synergies primarily revolve around combining ARK’s focus on disruptive innovation and expertise in the active management of ETFs with Rize ETF’s experience in providing investment solutions that align with global megatrends. Together, we aim to create innovative investment products that cater to a broader range of investors.
Rize ETF has created a range of ETFs focused on investing in the world’s most compelling megatrends, both thematic and sustainable, with a view to providing investors with the choice and flexibility they need to benefit from the structural changes unfolding around them. Both Rize ETF and ARK are steadfast proponents of a transparent, research-driven investment methodology. This union melds Rize ETF’s prowess in thematic and sustainable investing with ARK’s deep-rooted research and actively managed portfolios focused on disruptive innovation. We anticipate ARK’s research and insights to significantly benefit Rize ETF’s European clients while emphasizing the need to position investment portfolios on the right side of technological change.
We look forward to bringing our products to this market in the coming months. We are currently working on various elements of our launch, and we look forward to sharing details with you as they become available.
The leadership of Rize ETF is committed to becoming key members of the ARK team and all ARK members are excited to welcome them. The Rize ETF founders, who have been instrumental in Rize ETF’s growth and success, will become integral members of ARK Invest Europe in order to maintain consistency and reliability for all existing and future investors.
According to Cerulli, growing recognition of the benefits of active ETFs in portfolio management is driving increased interest among European investors. Assets held in active ETFs in Europe have more than doubled since 2018, rising from €7.4 billion (US$7.3 billion) to €16.0 billion at the end of July 2022. Active ETF assets account for just 1.2% of the €1.3 trillion European ETF market, which suggests an opportunity for growth.
As a pioneer in active ETF investing in the U.S., ARK has recognized this burgeoning opportunity in Europe. Through our marketing team, we also know that about 25% of the search queries on our website come from within Europe, demonstrating demand for our investment solutions and research in Europe. Accordingly, the timing of this acquisition was driven by recognizing our businesses’ (ARK’s and Rize ETF’s) shared strengths and passion for investing in innovation, the above dynamic shifts in the ETF landscape, and Europe’s growing appetite for actively managed strategies.
The current name and brand of Rize ETF will be phased out, as the platform transitions into “ARK Invest Europe,” a division of ARK Invest Limited LLC and the hub for ARK’s expansion into Europe, the United Kingdom, and new markets globally. The strong cultural alignment between ARK Invest and Rize ETF was a key motivator for both the Rize Founders and me in wanting to join the two firms and seize upon the opportunities to grow bigger together.
Accordingly, the essence of Rize ETF — our dedication to thematic and sustainable investing and our deep-rooted expertise in building pioneering Article 8 and 9 sustainable investment frameworks — will stay central to our new collective identity. On the ARK Invest Europe platform, existing Rize ETF index products will continue to be distributed with ‘ARK’ instead of ‘Rize’ as the prefix. We shall continue to leverage our unique sustainability program to expand our Article 8 and 9 ETF range in Europe, noting that we launched two additional Article 9 sustainable thematic ETFs in late August. However, we will of course, from time to time, undertake regular assessments of our product range to ensure alignment with market demands and investor needs. Current investors in Rize ETFs do not need to take any action with regard to their existing positions.
Artificial intelligence (AI) continues to be a focal point in the market, thanks to provocative proofs of concepts and ChatGPT specifically. Increased demand for AI hardware is pointing toward a significant acceleration in software revenue growth. As companies develop AI-powered products and services, ARK estimates that software may generate up to $8 of revenue for every dollar spent on AI hardware by 2030. In what could be “winner take most” opportunities, we believe companies with large pools of proprietary data and broad-based distribution should be best positioned to capitalize on AI use cases and reap the potentially dramatic productivity gains associated with generative AI.
The adoption of new technologies typically accelerates during tumultuous times as concerned businesses and consumers change their behavior much more rapidly than otherwise would be the case. As a result, stocks of innovation-oriented companies have historically performed better and emerged as new market leaders toward the end of a bear market. We believe the coronavirus crisis and Russia’s invasion of Ukraine have transformed the world significantly and permanently, suggesting that many innovation-driven strategies and stocks could be productive holdings during the next five to ten years.
In our view, the wall of worry bodes well for equities in the innovation space. The strongest bull markets climb walls of worry, a fact that those making comparisons to the tech and telecom bubble seem to forget. No wall of worry existed or tested the equity market in 1999. This time around, the wall of worry has scaled to enormous heights.
The semiconductor industry is moving quickly in light of the heavy demand for Graphics Processing Units (GPUs) sparked by ChatGPT. ChatGPT captured the imagination of businesses and consumers, unleashing excitement that sparked a rally in mega-cap technology stocks. The race to train new artificial intelligence (AI) models is creating unprecedented demand for GPUs and high-bandwidth memory chips, not to mention significant challenges for the advanced chip packaging processes that protect and connect them. Unlike previous architectures, AI accelerators that train large language models (LLMs)—like NVIDIA’s H100 and AMD’s MI300 platform—require not only high-bandwidth memory and logic chips packed closely together but also dense interconnects between the chips.
Given the importance of semiconductors in the role of AI, we expect countries will try to compete fiercely to innovate in this area. Nvidia, headquartered in Santa Clara, is leading the GPU race in our view, but we expect other sovereignties to try to play catch-up to the best of their ability. A country’s (and its homegrown businesses’) ability to understand AI will be crucial to enhancing the productivity of its citizens and protecting against potential threats.
At ARK our aim is to focus solely on disruptive innovation. Broadly, we believe the five innovation platforms we center our research around (Artificial Intelligence, Robotics, Energy Storage, Multi-omic Sequencing, and Blockchain Technology) and the companies enabling their underlying technologies will offer the United Nations the best hope for achieving its Sustainable Development Goals by 2030.
Our strategies invest in companies that are:
ARK’s flagship Disruptive Innovation strategy is a concentrated, high-conviction portfolio that invests across all innovation themes.
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