WisdomTree Investments' AUM Reaches $4 Billion

Along with the release (.pdf) of its new International Real Estate Fund (DRW) earlier this month, WisdomTree Investments (WSDT.PK) announced that assets under management [AUM] were approximately $4 billion.

As you can see from the table below, over the last six months the rate of AUM growth has been about $500 million per month for this company that launched its first set of ETFs exactly one year ago on June 16, 2006.

click to enlarge

I was recently interviewed by Dow Jones (DJ) special reporter Mara Lemos Stein for an article she was writing about WisdomTree in the Hedge Fund Trades newsletter. Her well written article titled "Wisdom or Hubris? Listing Promises Insight", appeared in the June 11, 2007 edition of Hedge Fund Trades and covered almost all the major events surrounding WisdomTree. While I cannot reproduce the entire article here, some key points from the article about WisdomTree are given below:

In the first quarter of 2007, WisdomTree took in $1.5 billion of assets for a 12.5% market share of the ETF industry according to a April 2007 Morgan Stanley report.

Ed Borgato, principal of a hedge fund called Capital Standard LLC that has $50 million under management, finds WisdomTree interesting as "a way to play ETFs' growth and to invest alongside Steinhardt". Michael Steinhardt is the Chairman of WisdomTree and a legendary hedge fund manager who left the business in 1995 to focus on philanthrophy.

There have been a series of insider sales at WisdomTree in recent months. Steinhardt sold 1 million shares in March and registered to sell 150,000 shares in late April. COO Bruce Levine, registered to sell 750,000 shares in mid-May.

According to a February 2007 article in MarketWatch.com, Steinhardt controls 34.2% of the company. AIG owns 10% after the $3/share sale to AIG that I was not happy about and mentioned in the portfolio performance section of the January 2007 edition of SINLetter. Atlantic-Pacific has a 4% stake and Wharton professor, WisdomTree advisor and author of the book Stocks For The Long Run, Dr. Jeremy Siegel owns 2%.

There were 160,000 shares of WisdomTree sold short in May.

WisdomTree had a net loss of $19.3 million in full year 2006 and a loss of $6.6 million in the first quarter of 2007.

The company plans to list on the Nasdaq towards the end of this year and this might open the investment opportunity to a greater number of investors.

Hedge funds are eying this company with a market cap of $560 because of the possibility of a buyout like the Amvescap buyout of PowerShares for up to $730 million if certain targets are met.

As dividends set by companies change, WisdomTree products may require more active involvement by index designers and this might explain the slightly higher expense ratios of WisdomTree ETFs when compared to competitors.

As the article mentioned, I am one of those investors who is expecting strong future cash flows and am willing to ride out the volatility that comes inherent in this stock.

Comments

[Ric]

2 questions:
1. Is the increase in AUM primarily from the bull market or actual increases in new accounts?

2. How does heir valuation compare to for example power shares based on AUM. Thanks.

[Asif]

Lee,

AUM have doubled since late January and obviously the stocks, markets or sectors they index have not doubled over the same time period. I believe their AUM increase is based on a combination of the bull market, increases in their existing ETFs and the introduction of new ETFs.

I compared WisdomTree to PowerShares in my original write-up about WisdomTree that you can find here

www.sinletter.com/arch...

For valuation, another comparison to look at would be U.S. Global Investors (GROW), which has about the same amount of AUM as WisdomTree. GROW is not growing as rapidly as WisdomTree and happens to offer mutual funds instead of ETFs.