Canadian Regulators Order Shutdown of ARK ETFs

The likely demise of the Emerge ARK ETFs leave Canadian investors with fewer options to invest with Cathie Wood.

Investors in a handful of Cathie Wood-affiliated exchange-traded funds listed in Toronto are going to have to find some other way to invest with the popular fund manager.  

Last week, Canadian regulators ordered the company behind the ETFs, Emerge Canada Inc., to wind down the funds after it failed to comply with regulatory working capital requirements.  

The order means that six Emerge ARK ETFs will likely be shut down, including the largest of the bunch—the Emerge ARK Global Disruptive Innovation ETF (EARK), with C$76 million Canadian in assets under management (US$56 million). 

The Emerge ARK ETFs are subadvised by ARK. “ARK provides daily investment recommendations for each of our 6 Emerge ARK ETFs,” Emerge says on its website. 

EARK has closely tracked the performance of the U.S.-listed ARK Innovation ETF (ARKK).  

Alternatives 

Emerge has come out strongly against the order to wind down its funds. A spokesperson for the company told Bloomberg that a press release responding to the order is forthcoming.  

But it’s unclear what Emerge can do to prevent the closure of its funds. Canadian regulators said the firm had a working capital deficit of as much as $4.5 million versus the surplus of $100,000 it needs to maintain its registration as an investment fund manager.  

The likely shuttering of the Emerge ARK ETFs would make it slightly more difficult for Canadian investors to invest in ARK’s strategies. Instead of purchasing Canadian-listed ETFs, those investors will have to purchase the original U.S.-listed ARK ETFs, like the aforementioned ARKK. 

This is relatively simple to do using most Canadian brokerages, though it may be more costly.  

On its website, ARK advised investors seeking to invest with it to consider the Emerge ARK ETFs.  

Meanwhile, Emerge noted that Canadian-domiciled and Canadian listed ETFs are better suited for Canadian residents “because it is not considered U.S. property and you benefit from Canadian listed ETF tax advantages.” 
 
 

Contact Sumit Roy at [email protected]