WisdomTree Swings To Fourth-Quarter Profit

January 30, 2012

WisdomTree swings to a fourth-quarter profit, but net income slips from third quarter as average assets fall.

WisdomTree, the only publicly traded U.S. money management firm focused solely on ETFs, swung to a fourth-quarter profit of $889,000 compared with a $580,000 loss in the same year-earlier period. The results were fueled by a more than 20 percent increase in revenue, as it continued to attract investors to ETFs such as its WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD).

However, on a sequential basis, WisdomTree’s fourth-quarter net income was more than a third lower than the $1.36 million it earned in last year’s third quarter. That was largely because its average assets under management fell by 7.3 percent during a relatively volatile fourth quarter, the company said today in a press release. Fourth-quarter revenue totaled almost $16.2 million.

But year-on-year, the company’s average ETF assets under management rose 30 percent to $11.84 billion, a clear sign that the ETF industry is gathering momentum, and that New York-based WisdomTree is at the center of that expansion with the success of funds such as its now $2.62 billion WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM) . The company ended the year with $12.18 billion in assets, 23 percent higher than $9.89 billion at the end of 2010.

ETFs still only represent 11 percent of the combined ETF and mutual fund market, but ETFs are beginning to pull in assets more quickly than mutual funds, WisdomTree Chief Executive Officer Jonathan Steinberg said in the press release.

“The larger ETF industry growth story remains intact,” Steinberg said. "2011 was another strong year, with ETFs taking $115 billion versus $32 billion for mutual funds, or 78 percent of total inflows."

The company's fourth-quarter revenue rose to $16.2 million from $13.4 million in the same year-earlier quarter.

In all of 2011, the company earned $3.1 million compared with a net loss of $7.5 million in 2010, as revenues jumped almost 56 percent to $65.2 million.

The company’s total expenses increased 9.2 percent to $15.3 million from $14.0 million in the fourth quarter of 2010.

Separately, the company is in the middle of a secondary share offering, and it plans to use proceeds from the sale of 1 million newly issued shares for general corporate expenses.

Among the milestones it highlighted, WisdomTree said it entered into a commission-free ETF trading arrangement with the online broker E*Trade in December. Also, it said it will use Legg Mason’s Western Asset Management unit as a subadvisor for global fixed-income ETFs.

ELD, the company's emerging markets debt fund, now has $1.13 billion in assets. It launched in August 2010.

 

 

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