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Dividends, ETFs and Currencies

The convergence of three important market thematics were highlighted recently after WisdomTree (WETF), a dividend paying stock, released its earnings: income, ETFs as a product, and currency.

We were lucky enough at our brother-property,, to speak to WisdomTree’s CEO, Jonathan “Jono” Steinberg, about the company’s recent earnings, but also some other, less “in the weeds” items including this weekend’s monumental boxing extravaganza, between Mayweather v. Pacquiao (at the time of writing, the fight has not yet taken place).

Let’s dive in.

A Great Quarter

WisdomTree posted an excellent quarter, although interestingly it took the market a few hours to digest this news, at one point, it was down nearly 5% intra-day on Friday and as of the time of writing it was up nearly 5%. A 10% point swing following the earnings call on Friday, May 1st.

The bottom line is WETF posted record AUM, net inflows, revenues and pre-tax earnings. While they didn’t report a dividend increase, they confirmed a strong cash position, one that would let them look at future dividend hikes to be sure, but also a lot of opportunity to continue blowing out their product suite. The company noted it had launched two new products this year already and had guided towards and was reiterating the launch of 8 – 10 products during 2015—implying a strong product launch pipeline for 2Q through the end of the year.

The Continued March Higher for ETF Assets (Especially Currency Hedged)

The first thematic that WisdomTree’s earnings highlight is the continued and growing adoption of the ETF product in the investing landscape. During the first quarter of 2015, WisdomTree total AUM jumped from $13.5 billion to $60 billion, totaling a net inflow of $46.5 billion. Putting things into perspective, the entire U.S. ETF industry saw roughly $56.7 billion in net flows during the same time period.

The US ETF industry now boasts >$2B in AUM and globally the asset class boasts ~$2.8T, with an imminent milestone of $3T on the horizon.

Interestingly in this quarter’s earnings, WETF unveiled their AUM growth by channel, breaking it down into the following buckets: retail, international, institutional, wirehouse and Registered Investment Advisor (RIA). The wirehouse and RIA channels continue to dominate fund flows, comprising the lion’s share of WETF total fund flows, including their two big products, HEDJ, a European currency hedged equity product and DXJ, their popular Japanese currency hedged equity fund.

The strength of HEDJ and DXJ underscore how important it is to investors within the strong dollar environment we find ourselves in to attain currency neutral exposure to the non-US market. WisdomTree’s product positioning certainly bodes well for this theme, one that on the company’s conference call could be as big as a $160B AUM market opportunity.

The popularity of EFTs persists, and funds continue to flow in to these innovative wrappers, especially the ones that give investors easy access to popular market thematics, such as dividend income and currency hedged equity exposure. It will be interesting to keep a watchful eye on how they continue to impact the broader wealth management landscape. In our discussion with WETF’s CEO, Jonathan Steinberg, he forecasted the industry was likely to grow to $5T – $6T in the next 5 years or so. This is inline with a recent PWC report on the same topic.

Beyond The Analyst Questions

After discussing the details of this quarter’s results, we were able to turn the conversation and our unique access to Jonathan Steinberg to some of the other interesting thematics affecting the world of investing.

I’d encourage you to check out the piece we posted on, found [NTD: need link to piece], and learn some of Jono’s thoughts on robo-advisors, fin-tech start-up Motif Investing and much more.