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Rating:Three Things to Know from WisdomTree’s Earnings Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, February 04, 2013

Three Things to Know from WisdomTree’s Earnings

Reported by Tommy Fernandez

The year 2012 was very good earnings-wise for ETF-manager WisdomTree, but the firm plans to invest heavily to make subsequent years even better.

First the basics, according to SeekingAlpha’s transcript of the earnings call, as well as the company’s earnings information.

The year 2012 was record for AUM growth. Its assets under management rose 50 percent to end the year at $18.3 billion. It had inflows in the fourth quarter of $1.1 billion and a record $4.7 billion of inflows to the year.

It also had had record revenues, $23.6 million in the fourth quarter, up 46 percent year-over-year and $84.8 million for the full year, up 30 percent. Pro forma net income more than tripled to $5.1 million in the fourth quarter and to $14.8 million for the full year.

Now, when looking at the SeekingAlpha transcription and the company’s earnings release, you’ll find at least three powerful takeaways about the company’s plans for future growth.

They are:

POINT #1: WisdomTree Plans to Accelerate Product Launches
POINT #2: WisdomTree Plans to Invest Heavily in Sales and Business Development
POINT #3: WisdomTree Continues to See Opportunity in Active ETFs and Alts
Now to elaborate on these three points.

POINT #1: WisdomTree Plans to Accelerate Product Launches
Last year, WisdomTree launched two new ETFs, covering emerging market corporate bonds, and China ex-Financials. And the day before the earnings call, it launched its second active bond fund with Western as sub-advisor, global corporate bonds or GLCB.

Chief executive and president Jonathan Steinberg had to say this about the pace of produce development in coming years.
So, when we discuss fund launches, we are always trying to do something that’s first-to-market or something innovative, a differentiated approach that we are adding choice to the market. We have never launched a ‘me too’ proxy. We will continue to do that. The guidance that we have given is three to five new funds a year. For the last two years, we were on the low end of that. This year, you should expect to be at the high end of that range. So, five or six funds would be not to be surprising.

POINT #2: WisdomTree Plans to Invest Heavily in Sales and Business Development
WisdomTree said it was the fastest growing publically traded asset manager in 2012 with 39 percent organic growth. It intends as quickly as possible to being in the top 5 of all U.S. ETF sponsors.

Steinberg had this to say about the company’s planned investments in sales and business development.
For the coming year, we intend to invest $5 million to $8 million on strategic initiatives to continue to support and accelerate our growth. These growth initiatives include expanding our marketing efforts to further support our existing and new products and enhancing the WisdomTree brand. Second, it includes continuous product development initiatives and new ETF launches to further our diversification efforts. Third, it includes adding to our staffing levels, particularly in sales and other function that support our sales efforts to continue to grow our top line revenues.

POINT #3: WisdomTree Continues to See Opportunity in Active ETFs and Alts
WisdomTree will continue to be an aggressive player in the active ETF space, as well as alternative ETFs. Steinberg had this to say on the subject at various points in the call:
Yesterday, we launched our second active bond fund with Western as sub-advisor, global corporate bonds or GLCB. WisdomTree is currently the second largest player in active bonds, behind PIMCO and I expect that over the next few years this will be an area of continued activity for our firm.

So, Global Corporate Bonds is it’s a really new asset class, but it’s the first actively managed execution. So, that happens to be a deep market. What I would just say is new funds are positive. Obviously, you try to be an active gatherer in the year that you launch them, but it’s really more than just a year that you will launch them. So, last year, we launched emerging market corporate bonds, and it took maybe 105 million in the first year. But it’s not about the first year. What is it going to do in the second, third or fourth and fifth years? We really don’t launch anything that we don’t think has the ability to be a $1 billion fund.

We have a few alternatives, it’s an area that because of all of the regulatory-exempted release that we have, it’s something that we are focused on. We want to grow the existing funds, and you will see some selective launches in that space overtime, but we are bullish on alternatives in the ETF format.
For more information, turn to the SeekingAlpha transcript of the earnings call, as well as the company’s earnings information.  

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