MutualFundWire.com: Six Years In, a $44B-AUM Startup Renegotiates

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Monday, December 28, 2020

Six Years In, a $44B-AUM Startup Renegotiates

A growing, six-year-old startup fund firm is staying independent, thanks to a new deal with a private-equity-backed multi-boutique asset manager and longtime ally to the startup.

Catherine "Cathie" Wood
ARK Investment Management, LLC
Founder, Chief Executive Officer

Today Cathie Wood — founder, chief investment officer, and CEO of Ark Investment Management LLC [profile] — and Gene Needles, chairman and CEO of Resolute Investment Managers, Inc., confirm that the two companies have renewed their long-term partnership. Under the renewed deal, Irving, Texas-based Resolute will continue to be a key Ark ally (mainly in terms of distribution) and a minority shareholder (the biggest non-employee one); meanwhile, Ark will remain mostly owned by employees, with Wood at the helm and still the majority shareholder.

Story3 Advisors and Signum Growth Capital advised Ark on the deal, while J.P. Morgan Securities advised Resolute. Proskauer Rose provided legal advice to Ark, while Skadden Arps Slate Meagher & Flom did so for Resolute and Davis Polk & Wardwell did so for Wood herself. Eldridge Corporate Funding will finance the deal through a multi-tranche term loan financing facility for Ark.

American Beacon (now one of Resolute's other boutiques) bought a minority stake in Ark four years ago, two years after Wood founded the active ETF shop. The deal marked the beginning of what would become the Resolute multi-boutique dealmaking effort: Resolute now supports includes a total of nine boutiques, including Ark and American Beacon.

The initial Ark-American Beacon deal gave the multi-boutique the option to increase its stake down the line. Recently, Resolute was reportedly moving to possibly take control of Ark, much to Wood's chagrin. When American Beacon bought into Ark in 2016, the Gotham startup had $275 million in AUM: as of the end of last month, it had $43.6 billion. (In other words, its AUM has multiplied by more than 158 in four years.) Also as of the end of last month, Resolute's affiliates had $119.5 billion in combined AUM. (36.5 percent of that is Ark alone.)

Under the deal unveiled today, Resolute's option to up its Ark stake "has been extinguished," according to a joint statement from the two firms.

"We can succeed only with strong partners by our side," Wood states today, "and we are delighted to have reaffirmed the partnership with Resolute for our U.S. distribution."

Needles, for his part, hints that the new deal will be a long-term partnership and offers praise for the Ark folks.

"Cathie Wood and her team have done an exemplary job building ARK Invest from the ground up, and we look forward to supporting the firm's momentum for years to come," Needles states today. "We're pleased to continue being an instrumental part of ARK's growth, a role we have fulfilled since acquiring a minority investment in the company in 2016."

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