ARK Investment Management is working with cryptocurrency-focused technology provider Eaglebrook Advisors to make two digital asset investment strategies available to advisors by the middle of this month, according to Eaglebrook CEO Chris King.
The ARK additions will be offered alongside two Franklin Templeton strategies added to the Eaglebrook platform in September, following an undisclosed investment made by Franklin Templeton in April.
“The ARK strategies are significantly and materially different from the Franklin strategies, which is why it made sense to launch the two around the same time,” said King. “We want to make sure there is something for all advisors who want to gain access.”
“Custom allocation modules” that have been offered by Eaglebrook are comprised exclusively of Bitcoin and Ethereum investments, said King, which represent the largest cryptocurrencies by value. Franklin Templeton and ARK bring more diversified, multi-asset portfolios to the platform; the former manages 10 to 15 different types of digital currencies, he said, while ARK is more selective in choosing assets and more active in their management.
“The strategies will be separately managed accounts designed to meet the needs of financial advisors, wealth managers, and their clients by offering direct ownership, low minimums, and portfolio reporting integration amongst other benefits,” said ARK CEO and CIO Cathie Wood, in a statement.
According to King, fund expense ratios range between 1.7% to 2.15%, and the ideal allocation for advisors looking for active, institutional exposure to digital assets is between 2% and 6% of the overall portfolio.
One of the new ARK strategies is invested exclusively in Bitcoin and Ethereum, while the other actively manages between 10 and 20 currencies representing thematic opportunities in areas such as smart contract networks, decentralized finance, Web3 and the infrastructure and scaling of crypto networks.
“Just as the internet turned information into packets online, ARK believes public blockchains are likely to turn all assets into transactions on-chain,” according to the announcement.
Founded in 2014 by Wood, St. Petersburg Fla.-based ARK has grown assets under management to more than $14 billion, but both the firm and its owner have come under fire in recent months after its flagship ETF strategy foundered amid ongoing market volatility.
“There have been a few epic failures such that I think the risk/volatility would be hard to identify,” said T. Neil Bathon, managing partner at FUSE Research Network. Bathon, who has been publicly critical of Wood on social media, suggested that her notoriety and media presence might be more valuable to Eaglebrook than her investment chops.
“Is enough really known about the players in this space to suggest to investors that a thorough due diligence/understanding of the market is in place?” he asked. “At the advisor level, given how few of them understand this space well enough to present the full investment thesis, I would worry about violating my fiduciary obligations to my clients should I encourage them to invest in these ARK strategies. I see the incredible buzz and the allure it creates, but it might be seen as irresponsible to present an investment for which quite a bit is still unknown.”
King said ARK’s seven-year track record of holding crypto, primarily Bitcoin, in its flagship fund gives him confidence even as market fluctuations have battered the volatile asset class in recent months.
“If you think about it, crypto and digital assets are really a disruptive innovation and these things cycle,” he said. “We think that, over the next 5 years, these strategies are going to have strong performance based on the fundamental bottom-up, top-down research and portfolio management that ARK offers.”
King said Eaglebrook has already been approached by around 40 asset managers but will bring in additional strategies deliberately and without haste.
“I think we’ll add less than a handful in 2023,” he said. “But we won’t be adding any more this year because we want to make sure that these are successful and that we can provide the resources, because we're partnering on marketing, distribution and other business initiatives with these two firms.”
“And then we can start working with other asset managers that are looking to launch digital asset products in the separately managed to account format,” he said.
Miami-based Eaglebrook was founded in 2019 as an institutional crypto-only turnkey asset management platform for registered investment advisors and was initially seeded with $2 million from industry veterans Ric Edelman, Mark Casady and Marty Bicknell. Mariner Wealth Advisors, run by Bicknell, helped to build out the platform and became its first client when it launched in March 2021.
Early this year, Eaglebrook received another $20 million in a series A round led by Castle Island Ventures and Brewer Lane Ventures. To date, the firm has brought on 75 RIAs and 500 advisors, and it has raised more than $125 million in cash. According to King, it is now the largest separately managed account platform in the crypto market.