WisdomTree's Growth Lifts It Into S&P 400

WisdomTree's Growth Lifts It Into S&P 400

As ETFs go, so goes WisdomTree, as its promotion into one of the world’s best-known indexes suggests.

Managing Editor
Reviewed by: Olly Ludwig
Edited by: Olly Ludwig

WisdomTree Investments (Nasdaq: WETF), the New York-based exchange-traded fund firm that’s been at the center of the ETF industry’s sharp growth in the past few years, today joined the S&P MidCap 400 Index—a clear sign that the company is benefiting from rapidly increasing use of ETFs in general.

The company is no stranger to major stock indexes, as it has been in the Russell 2000 benchmark of small-cap securities for some time. But its movement up the market-value chain is a clear indicator that this company is growing—as is the world of ETFs. But, crucially, WisdomTree is growing faster than the world of ETFs at large.

Firstly, consider that assets in ETFs are now at $2.153 trillion, compared with a fraction of that when WisdomTree launched its first ETF in 2005. WisdomTree now has $62 billion in assets, or just shy of 3 percent of total U.S. ETF assets. Five years ago, the company had less than 1 percent of total assets, which were then about $1 trillion, according to data compiled by ETF.com.

In the end, WisdomTree has become something of a metaphor for the entire ETF industry, as we wrote in a feature about WisdomTree two years ago.

While plenty of ETF sponsors are part of larger publicly traded entities—BlackRock’s iShares ETF unit being the ultimate example—WisdomTree remains the only pure-play ETF firm that has staked its entire future as an asset manager on ETFs. While clearly a function of distinct corporate aims, WisdomTree’s fortunes also reflect the rising tide of the ETF industry in general.

Source: ETF.com

Not An Endorsement

To be clear, the company’s promotion into an index that underlies a highly liquid fund like the $17 billion SPDR S&P MidCap 400 ETF (MDY | A-83) does not constitute an endorsement of the stock by S&P Dow Jones Indices.

David Blitzer, chairman of the S&P Dow Jones Index Committee, declined to comment on WisdomTree in particular, but instead said the company was now part of the S&P 400 because it had met criteria for inclusion. In a press release, the indexing company said Qorvo, a chipmaker, had been pulled from the S&P MidCap 400 to make way for WisdomTree.

Among those criteria that qualify a firm for inclusion into the index are annual turnover of ownership of at least 100 percent; profitability in the past four quarters; and of course that the company’s market value is between the $1 billion and $5 billion markers that S&P Dow Jones considers midcap.

Officials at WisdomTree also declined to comment.

HEDJ And DXY For The Win

WisdomTree, the No. 5 U.S. ETF firm by assets, has benefited immensely from inflows into two strategies: the WisdomTree Japan Hedged Equity Fund (DXJ |B-68) and the WisdomTree Europe Hedged Equity Fund (HEDJ | B-47).

In the past two years, HEDJ has pulled in $19.5 billion in new assets, and DXJ has gathered $13.6 billion. The two funds, which insulate U.S. investors from the dollar’s strength against the euro and the yen, respectively, together now make up more than 60 percent of WisdomTree’s $62 billion in assets.

HEDJ, the eurozone fund, has more than $20 billion in assets, while DXJ has assets of $18.3 billion. Both ETFs won ETF.com’s “ETFs of the Year” award—HEDJ for 2014, and DXY for 2013.

Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.