Cathie Wood launches new venture fund on robo-adviser Titan Invest

The fund requires a $500 minimum investment and charges a management fee of 2.75%, with a total expense ratio estimated at 4.22%.

Cathie Wood’s ARK Investment Management is making its latest fund available exclusively to retail investors on the digital investing app Titan Invest.

The ARK Venture Fund, which has been in the works since February, will invest in early-stage private and public companies primarily focused on technology. The fund requires a $500 minimum investment and charges a management fee of 2.75%, with a total expense ratio estimated at 4.22%. The fund does not charge any carried interest or load fees.

The fund has a target portfolio composition of 70% private companies and 30% public companies. Titan won’t charge additional platform fees but will generate revenue by taking a portion off the flows into the ARK fund.

“ARK Invest focuses exclusively on technologically enabled disruptive innovation, not only in our research and investment strategies, but also our products and services,” Wood said in a statement.

While the venture fund is currently only available to retail investors on Titan, ARK does plan to eventually make it available to registered investment advisers, family offices and institutional investors, according to the Wall Street Journal.

As an interval fund, the product is able to get around the traditionally high asset minimums required to invest in private companies through venture capital, said Joe Percoco, co-founder and co-CEO of Titan Invest.

“Historically, retail investors have been very forgotten by the institutions running venture capital. They would rather give an endowment a phone call and raise $500 million in one check,” Percoco said. “An entire population was locked out of investing in some of the most iconic businesses in Silicon Valley until they went public.”

Interval funds are increasingly popular among financial advisers, but are much less liquid than mutual funds, giving investors less control over when and how they can pull out their money. ARK plans to offer quarterly redemptions capped at 5% of the fund’s net asset value, according to the Journal.

Titan plans to offer significant education about the product, and it won’t recommend the strategy to all investors, Percoco said. Participation will be voluntary and require investors to opt in rather than automatically allocate portfolio assets toward the venture fund.

The partnership with ARK is Titan’s latest attempt to expand beyond what Percoco calls “the McDonald’s menu” of investment products offered by other robo-advisers. Earlier in September, Titan launched real estate and private credit options, and the company also supports cryptocurrency investments.

Titan Invest launched in 2018 and has $792 million in assets under management, according to its most recently filed form ADV. The robo-adviser closed a $58 million round of funding in 2021 and has raised a total of $75 million.

It has routinely outperformed other automated investing services, especially during the pandemic-fueled downturn in 2020, according to research from Condor Capital (formerly Backend Benchmarking). However, recent research from Morningstar rated Titan among the least attractive robo-advisers because of higher costs and lower transparency.

The costs are worth it to receive access to strategies retail investors can’t get from any other digital adviser, such as products from Apollo Global Management, the Carlyle Group and now ARK, said Percoco.

Besides expanding the menu of products available on Titan, the company hopes the partnership with such a high-profile name as Wood will expand the reach and awareness of the Titan Invest platform, he added. Wood and ARK rose to prominence during the COVID-19 pandemic on the back of the outsize performance of the firm’s ETFs.

“To be the best wealth management [company] that’s ever existed, we need the highest-quality partners,” Percoco said.

However, Wood’s strategies have struggled lately. ARK’s flagship innovation fund is down 60% this year and off 70% from its 52-week high in November, according to CNBC. In July, Wood closed one of her exchange-traded funds, the first time her ARK Investment Management has pulled the plug on an ETF.

The fund comes as venture capital investing is down across the board amid a broader market downturn. Funding in technology startups is the lowest since 2019, and prominent organizations like YCombinator have urged founders to “prepare for the worst.”

[More: Pair of adviser fintech startups pull in funding despite a decline in tech investing]