ARK Invest, a US-based ETF firm founded by Cathie Wood, recently entered the European ETF market by launching three actively managed ETFs focused on innovation, genomics, and artificial intelligence. The anticipation of the launches sparked questions from fund selectors about whether Wood’s success in the US market would be replicated in Europe. Despite concerns about its volatile track record and reputation as a ‘FOMO-stock’ with retail investors, ARK Invest is engaging professional investors through a European roadshow after acquiring Rize ETF from AssetCo last September. Wood stated that the launches are not just a response to increased interest from European investors but a declaration of their long-term commitment to Europe.
In contrast to ARK Invest’s successful entry into the European ETF market, BlackRock’s world ETF listed on the Deutsche Boerse experienced a sudden 5% drop in price shortly after US jobs data was released earlier this month. The $74.4bn iShares Core MSCI World UCITS ETF (EUNL) briefly encountered a flash crash at 2.30pm CET on 5 April but quickly recovered as normal trading resumed. Despite the incident, other listings of the ETF across different exchanges remained stable. Following the crash, Deutsche Boerse conducted an investigation that did not reveal any signs of suspicious trading, market manipulation, or rule violations. Multiple stop orders were also triggered which exacerbated the decline. As a safeguard, trading was halted after a 5% volume limit was reached based on the previous night’s closing value.
The first quarter of this year saw significant inflows into European ESG ETFs drop by 94% compared to the previous quarter to €7.1bn from €13.8bn in Q4 2020, representing only 16% of total €44.5bn inflows for Q1 2021. This shift suggests that investors are increasingly moving away from European exposures towards global developed markets and US markets due to their perceived higher returns and lower risks compared to Europe’s underperforming investments in recent years.
However, despite this trend towards global markets and increased competition from other firms like ARK Invest and other emerging players like First State Asia Pacific Leaders Fund (ASAPX), BlackRock remains one of the largest players in Europe with over $600bn assets under management across multiple asset classes including ETFs.
Overall, while there may be challenges for some firms like BlackRock facing competition from new entrants and shifting investor preferences towards global markets, there remains strong demand for quality products and services within Europe’s growing ETF marketplace.
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