ARK Invest’s European Launch Sparks Questions: Will Success Be Replicated or Will ESG Trend Falter?

Cathie Wood’s Ark Invest recently entered the European ETF market, launching three actively managed ETFs that focus on innovation, genomics, and artificial intelligence. The anticipation of these launches sparked questions from fund selectors about whether Wood’s success would be replicated in Europe. Despite concerns about its volatile track record and “FOMO-stock” reputation from retail investors, ARK has launched a European roadshow to engage professional investors.

On the other hand, 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 incident prompted an investigation by Deutsche Boerse that did not reveal any signs of suspicious trading, market manipulation or rule violations. However, multiple stop orders were 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.

In Q1, European ESG ETF inflows dropped by 94% to €7.1bn from €13.8bn in the previous quarter, accounting for only 16% of the total €44.5bn inflows. This shift reflects a broader investor pivot towards US and global developed market exposures. Despite the general growth in European ETFs – which saw assets reaching a record $1.92trn – ESG funds are experiencing a relative decline as investors seem increasingly disillusioned with their prolonged underperformance, suggesting a potential crisis for ESG investing.