Positioned at the center of WisdomTree—the only pure-play publicly traded ETF company—is its founder and Chief Executive Officer Jonathan Steinberg, who built his $2.5 billion company around two insights that were both way ahead of their time.
The first is that the future belonged to cheap, transparent and highly liquid ETFs; the second is that the future of index investing was in what has come to be called "smart beta."
"We needed to be innovators," Steinberg said in a recent interview, stressing that he saw no reason to replicate the pure-beta index funds championed 40 years ago by Vanguard. Indeed, Steinberg's firm has been a pioneer of fundamentally weighted indexing, which—in the case of WisdomTree—has meant constructing funds that weight securities by dividend and earnings streams instead of by price.
WisdomTree also creates its own indexes, putting it at the very start of another ETF industry trend; namely, self-indexing. Its stock price has more than tripled in the past two years—again a reflection of WisdomTree's success and the growing popularity of ETFs themselves.
"The ETF is the new force, and I have aligned all of my interests on what I believe to be the future," Steinberg noted. WisdomTree is now the No. 5 ETF firm by assets and total money invested in U.S. ETFs, which, as an industry, has more than $2 trillion after investors plowed almost $250 billion into ETFs last year.
So, things are definitely coming together for WisdomTree. In fact, it's behind the two most successful ETFs of the past few years: the WisdomTree Europe Hedged Equity Fund (HEDJ | B-51) and the WisdomTree Japan Hedged Equity Fund (DXJ | B-57). HEDJ is sucking in assets like a vacuum and is now a nearly $10 billion fund. For its part, DXJ, ETF.com's "ETF of the Year" in 2013, now has almost $13 billion in assets.
Both products protect U.S. investors from the weakening of the yen and the euro and, moreover, both have indexes that tilt to exporting firms that are likely to reap the benefits of a weakening currency.
WisdomTree by now has a reputation for spotting trends before they go parabolic—"smart beta," self-indexing and currency hedging, to name the most obvious examples. Steinberg projects a certain humility about it all, saying that if he does have one noteworthy gift, it's surrounding himself with major-league talent.
"It's pretty much an "All-Star" team at WisdomTree, and I couldn't do any of this without them," Steinberg said.