September 14, 2022
Happy Wednesday, Fintech Deals readers. Despite yesterday's stock market rout, today's newsletter is all about new trading apps getting funded.
1 big thing: Ethical investing gets royal treatment
Ethic, the socially responsible investing startup backed by Prince Harry and Duchess of Sussex Meghan Markle, has raised $50 million in Series C funding, the company told Lucinda exclusively.
Why it matters: The funding round highlights the continued inflows into value-based investing even in a market downturn.
- It also shows how the new era of wealth management tech has turned to automating work for advisors rather than replacing them with robo-advisors.
Background: Ethic's assets under management has grown 53% since October 2021 to $2 billion, the company says (the S&P 500 fell about 9% during that same stretch).
- Ethic creates personalized portfolios based on investors' values, which may may include climate change, women's rights, and deforestation.
- It also helps users reduce their capital gains taxes — a feature that has become an important draw during the recent market volatility, CEO Doug Scott said in an interview.
Details: Jordan Park, an existing investor and client of Ethic, is leading the funding round. Other investors include UBS Next, Oak HC/FT, Nyca Partners, Sound Ventures, Urban Innovation Fund and Kapor Capital.
- Joining Park in the round are Meghan and Harry, after joining the startup as "impact partners" and making their first investments late last year.
- Though the company is not disclosing its exact valuation, Scott says that this is an up round.
Context: Ethic is among the few index personalization firms that remain independent after a string of acquisitions in the space.
- Last year's consolidation wave included Franklin Resources' acquisition of O'Shaughnessy Asset Management; Vanguard of JustInvest; BlackRock of Aperio; Morgan Stanley of Parametric Portfolio.
- Ethic's financing round allows it to better compete against these peers, with Scott noting the company plans to remain independent.
Looking forward, the roughly 72-person firm plans to use the new capital to hire around 10 more people by the end of the year, expand into asset classes outside of equity (fixed-income being first), grow internationally, and expand into institutional investors.
- "We're three immigrant founders," says Scott, noting the EU will likely be the company's first international market. "So we've always had a global mindset for Ethic."