WisdomTree Swings to Profit on Surge in Inflows

by: Michael Johnston

WisdomTree (WSDT.PK), the New York-based firm behind more than 45 ETFs, reported first quarter net income of $0.2 million, the first profitable quarter for the publicly-traded ETF issuer. ETF assets at the end of Q1 totaled $11.3 billion, up nearly 70% from the same period a year earlier. “WisdomTree is extremely pleased to report our first quarter of GAAP net income on the back of another strong quarter of net inflows and overall ETF industry market share,” WisdomTree CEO Jonathan Steinberg commented. “I am proud of the track record we are building as we execute the corporate goals we outlined for our shareholders.”

The company’s cash inflows in the first quarter represented about 4.7% of the total for the ETF industry, making WisdomTree one of the fastest-growing issuers. Those inflows were boosted by a favorable market response to two new products that have debuted so far this year:

Ticker ETF Launch AUM*
WDTI Managed Futures Strategy Fund 1/5/2011 $94.3 million
ALD Asia Local Debt Fund 3/17/2011 $222.4 million
*As of 4/26/2011
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WisdomTree finished the quarter with 46 ETFs, up from 44 at the end of 2010. The company has previously indicated it expects to launch between four and eight new products in 2011. That could potentially include further expansion of the international fixed income product suite. In addition to ALD, WisdomTree laid out plans for a Latin America Bond Fund and EMEA Bond Fund last year. Given the impressive accumulation of assets in ALD to date, it wouldn’t be surprising to see the company roll out additional options for accessing international debt.

3 Months Ended
3/31/11 12/31/10 3/31/10
ETF AUM ($ millions) $11,284 $9,891 $6,713
ETF Inflows ($ millions) $1,264 $1,271 $582
Average ETF AUM ($ millions) $10,294 $9,104 $6,311
Average ETF Advisory Fee 0.56% 0.57% 0.54%
Revenues ($ thousands) $14,533 $13,413 $8,714
Net Income / (Loss) ($ thousands) $155 ($580) ($968)
Source: WisdomTree.com. $ in millions.
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WisdomTree’s most popular ETPs include the Emerging Markets Equity Income Fund (NYSEARCA:DEM), India Earnings Fund (NYSEARCA:EPI), Emerging Markets SmallCap Dividend Fund (NYSEARCA:DGS), and Emerging Markets Local Debt Fund (NYSEARCA:ELD).

Upcoming Changes

Also in the first quarter, WisdomTree announced the filing of a Registration Statement on Form 10 with the SEC. That move represents another step in the process of listing WisdomTree stock on a national securities exchange - WSDT is currently traded on the Pink Sheets. The company also announced plans to change investment objectives, strategies, and fund names for eight of its ETFs. Those changes are scheduled to become effective beginning in mid-June.

Those changes include converting the WisdomTree Dreyfus Euro Fund (NYSEARCA:EU) to the WisdomTree Dreyfus Euro Debt Fund. As part of that change, the fund would be restructured to include exposure to debt of EU issuers denominated in euros. The duration would also be extended to achieve an intermediate-term European bond strategy.

Another change involves the WisdomTree Dreyfus New Zealand Dollar Fund (BNZ), which will become the WisdomTree Dreyfus Australia & New Zealand Debt Fund. Similarly, that change will include altering the fund to include exposure to debt of Australian and New Zealand issuers denominated in local currencies.

Disclosure: No positions at time of writing.

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