Cathie Wood's ARK Investment Management LLC on Tuesday debuted the ARK Venture Fund, the firm's first foray into private investments.
The venture fund intends to invest in early- to late-stage private companies and publicly traded businesses similar to those held by ARK's high-growth, technology-focused exchange-traded funds.
The ARK Venture Fund is available to U.S. investors, including individuals, for a minimum initial investment of $500 on the online investment platform of financial-technology startup Titan. Venture-capital funds traditionally limit access to accredited investors such as wealthy individuals or institutions.
"We think retail investors should have the right to participate in the value creation of the most exciting and successful technology companies on the planet, even if they're private," Maximilian Friedrich, a member of the ARK Venture Investment Committee and an analyst at the firm, said in an interview. "That is a value add that sets us apart from traditional venture capitalists, which often do not have a broad reach and audience with retail investors."
Ms. Wood and ARK rose to prominence during the Covid-19 pandemic when the firm's ETFs posted huge returns as low interest rates and stimulus boosted investor appetite for riskier assets. Those bets have struggled this year as the Federal Reserve raises interest rates at an aggressive clip to try to curb persistent inflation, making unprofitable companies promising growth in the future a harder sell to investors. The flagship ARK Innovation ETF is down 61% in 2022, yet has seen steady inflows this year.
ARK plans to also offer access to the venture fund to registered investment advisers, family offices, high-net-worth individuals and institutional investors through other distributors down the line, according to Mr. Friedrich.
The fund has a target portfolio composition of 70% private companies and 30% public companies. Although traditional venture-capital funds often look for exit opportunities such as initial public offerings or acquisitions, ARK's fund aims to continue holding portfolio companies after they enter public markets. ARK declined to name its initial portfolio companies.
The ARK Venture Fund is an interval fund, a vehicle that restricts withdrawals, but gives investors access to more illiquid assets less likely to trade on financial markets. ARK's fund plans to offer quarterly redemptions capped at 5% of the fund's net asset value, according to Mr. Friedrich.
The fund has a 2.75% management fee and anticipates distribution and other fees to total 1.47% in its first year of operation, assuming average net assets of about $250 million during that period, according to ARK. Investors won't pay an additional platform fee to Titan for the fund. Interval funds in the U.S. have an average management fee of 1.4%, according to Morningstar Direct data tracking 72 funds.
ARK's venture fund doesn't have carried interest, a share of profits paid out to the fund's managers. Venture-capital funds traditionally have a fee structure of a 2% management fee and 20% carried interest.
The launch of the fund comes as venture-capital deals have slowed this year amid a broader market downturn. Still, venture funding and startup valuations remain at some of the highest levels on record. ARK first filed to launch the venture fund in February and filed a fund prospectus in August.
"Not only is the Ark team via Titan able to provide retail access to venture, we're doing it at a time where arguably the Ark team can go strike favorable deals from an investment standpoint," said Joe Percoco, co-founder and co-chief executive of Titan, in an interview.
Titan earlier this month launched real-estate and private credit funds managed by Apollo Global Management Inc. and Carlyle Group for individual investors on its platform. The startup says it has roughly 55,000 clients and more than $750 million in assets under management.