WisdomTree Investments, the New York-based ETF firm known for its funds that screen securities for dividend and earnings, posted a threefold increase in third-quarter net income from the same year-earlier quarter that was built on strong inflows, including those into its latest strategy.
The company, the only pure ETF company whose shares are publicly traded, earned a record $4.5 million in the quarter ended Sept. 30, compared with $1.4 million in the 2011 third quarter. The current-year quarter includes fees related to litigation, shareholder proxies and ETF licensing fees, WisdomTree said today in a press release.
Revenues in the quarter jumped by more than a fifth to $21.7 million—also a record—from $17.7 million in the prior-year quarter. By comparison, inflows in the 2011 third quarter were about $200 million.
"WisdomTree gathered $1 billion in net inflows and further bolstered our equity ETF offerings, launching a China-focused ETF and refining a European currency-hedged equity strategy during the quarter,” WisdomTree Chief Executive Officer Jonathan Steinberg said in the press release.
“At a time when many ETF sponsors are competing directly against each other in market capitalization-weighted, beta exposures, WisdomTree's commitment to innovative, differentiated products has strengthened our competitive position in the industry," said Steinberg.
Indeed, in a telephone conference call with analysts to discuss the earnings, company officials said WisdomTree isn't experiencing any of the pricing pressure that purveyors of pure beta funds such as Vanguard, Schwab are up against.
The company said it pulled in $1 billion in new assets during the quarter. It ended the period with $16.78 billion.
“We’re running well ahead of what we were seeing last year at this time,” Steinberg said the conference call. He said year-to-date inflows into its ETFs were almost $3.7 billion compared with $3.1 billion in the same year-earlier period.
WisdomTree, which currently has 49 ETFs, is the No. 7 U.S. exchange-traded fund company by assets under management.
“It looks like there’s a very good chance that 2012 could top 2008 as the best year ever for the ETF industry in terms of inflows,” Steinberg said in the call, citing year-to-date industrywide inflows of $132 billion.
WisdomTree said costs related to the patent suit filed against it by Rob Arnott’s Research Affiliates came in at almost $1.5 million, and Steinberg and his deputies on the call said they had nothing material to add regarding the lawsuit at this time.
Notwithstanding the positive inflows news, the company hasn’t been able to avoid being part of one of the clearer trends in the ETF industry this year; namely, the accelerating pace of fund closures.
Last week, the company said it was shutting three funds , including two focused on individual currencies and a third targeting U.S. equities.
WisdomTree officials on the conference call, in response to a question from an analyst, said that fund closures are an inevitable part of doing business as companies determine how to best allocate resources.
They said that regarding the currency funds, the feedback it is hearing from investors is that there’s more appetite for its multicurrency funds than for those singling out particular currencies.
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