WisdomTree Investments
WisdomTree Announces First Quarter 2009 Results
Wednesday 29 April 2009
Continued net inflows for the quarter 24 out of 42 equity funds outperformed benchmarks through Q1
Approximately 69% of equity assets currently in funds that have beaten respective benchmarks since inception
Company decides to enter leveraged and inverse category with innovative solution
Sheets: WSDT - News), an industry leading index developer and exchange-traded fund
(“ETF”) sponsor, today reported a net loss of $6.0 million in the first quarter of 2009 as compared to $5.0 million in the fourth quarter of 2008. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $4.0 million in the quarter as compared to $3.0 million in the fourth quarter.
WisdomTree CEO Jonathan Steinberg commented, “Though the challenging market environment has continued into 2009, the financial crisis has served to highlight the important benefits of ETFs. We continue to see net inflows into the ETF industry and at WisdomTree at the expense of other investment products thanks to the importance investors continue to place on transparency, liquidity and tax efficiency.
“WisdomTree has taken steps to diversify its product set and evolve as an asset management company. The Company has broadened its equity offerings, entered the fixed income asset class and announced its intentions to enter other new categories with innovative offerings. These are among the developments we believe will position WisdomTree competitively for an eventual market recovery.”
Assets Under Management and Performance
As of March 31, 2009, assets under management (“AUM”) tied to the WisdomTree indexes were $3.2 billion and ETF AUM was $2.8 billion, both down 13% from December 31, 2008. Net inflows into WisdomTree ETFs were $22.5 million in the first quarter.
WisdomTree’s fundamentally weighted ETFs experienced relatively strong investment performance through the first quarter. Approximately 69% of the $2.6 billion invested in WisdomTree’s 42 equity ETFs on March 31, 2009 were in funds that, since their respective inceptions, have outperformed their benchmarks through that date. 24 of WisdomTree’s 42 equity ETFs outperformed their comparable benchmarks since inception through the first quarter. For complete performance information on all WisdomTree ETFs, please click here or visit www.wisdomtree.com.
Recent Business Activity
- The week of May 4, 2009, WisdomTree intends to launch the WisdomTree Dreyfus Emerging Currency Fund (CEW). The fund will provide exposure to a basket of 11 Emerging Market currencies in the ETF structure.
- On April 20, 2009, MacroMarkets, LLC, announced that it had entered into a collaboration with WisdomTree Asset Management in which WisdomTree will assist in the introduction of the MacroShares Major Metro Housing Up Trust (UMM) and MacroShares Major Metro Housing Down Trust (DMM). WisdomTree will provide educational and product support to MacroMarkets.
- On April 29, 2009, WisdomTree’s India Earnings Index was named the Most Innovative Index in 2008 at the 8th Annual Capital Link Forum on Closed-End Funds & Global ETFs. These awards are based on nominations by a committee of industry analysts. WisdomTree has undertaken certain fund restructurings in an effort to streamline the Company’s domestic and international product set, diversify its product mix, improve operational efficiencies and strengthen the competitive position of its product offerings. The changes help to establish new, distinct offerings for WisdomTree while also simplifying the Company’s overall product lineup.
- On March 27, 2009, WisdomTree announced that it will transition the WisdomTree U.S. Current Income ETF (USY) into a short–term government bond fund. The Fund will be renamed the WisdomTree Short–Term Government Income Fund. These changes reposition USY as a unique short– term bond ETF focused on government securities at the short end of the yield curve. These changes will be implemented at the end of May. This development marks WisdomTree’s first fixed income ETF.
- On April 10, 2009, WisdomTree announced the WisdomTree Europe Equity Income Fund (DEW) will change its investment objective and be renamed the WisdomTree Global Equity Income Fund. The Fund will become a “global” fund that invests in high dividend-yielding stocks listed in the
- On April 10, 2009, WisdomTree announced the WisdomTree Japan Equity Income Fund (DNL) will change its investment objective and be renamed the WisdomTree World ex-US Growth Fund. The Fund will change its investment objective so that it seeks to track the performance of WisdomTree’s new fundamentally weighted index that measures the performance of growth companies in the developed and emerging markets outside of the
- On February 24, 2009, WisdomTree announced that it will change the investment objective of two of its ETFs – the WisdomTree Dividend Top 100 Fund (DTN) and the WisdomTree International Dividend Top 100 Fund (DOO). These ETFs will be renamed the WisdomTree Dividend ex–Financials Fund and the WisdomTree International Dividend ex–Financials Fund. Both Funds will continue to invest in high dividend–yielding stocks, but they will no longer invest in companies in the financial sector. These changes will be implemented beginning in early May. The change will diversify WisdomTree’s dividend offerings and create the industry’s first dividend-focused ETFs that exclude financials.
- On April 10, 2009, WisdomTree announced the WisdomTree Low P/E Fund (EZY) will change its investment objective and be renamed the WisdomTree LargeCap Value Fund. The Fund will seek to track the performance of WisdomTree’s new fundamentally weighted index that measures the performance of large cap value companies in the
Future Product Plans
Leveraged and Inverse
The leveraged and inverse category was the fastest-growing part of the industry in 2008. However, many investors have expressed concerns over capital gain distributions and significant inconsistencies in directional movement associated with existing leveraged and inverse products when held over longer investment periods. WisdomTree believes it has identified an innovative solution to these two issues for both long-term and shortterm investors and intends to enter this category after obtaining regulatory approval for its products.
Fixed Income
WisdomTree intends to launch the WisdomTree Real Return Fund. This will be a fixed income fund designed to provide investors with a target return in excess of the inflation rate through investment in TIPS and commodities.
Commodities
WisdomTree intends to launch the WisdomTree Long-Short Commodity Fund. This will be a commodity fund designed to generate an absolute return through a dynamic allocation to long and short commodity positions.
Alternative
WisdomTree intends to launch the WisdomTree Absolute Return Fund. This fund will seek to generate an absolute return through a dynamic allocation to long and short commodity and financial futures positions.
WisdomTree intends to launch the WisdomTree Long-Short Equity Fund. This fund will seek to give investors “market neutral” exposure to
Currency Hedged Equities
WisdomTree intends to launch the WisdomTree DEFA Hedged Fund. This will be a currency hedged international equity strategy.
First Quarter Financial Highlights
Comparison to the fourth quarter of 2008 Revenues
Total revenues for the first quarter decreased 12.5% to $3.7 million as compared to $4.2 million in the fourth quarter. Average ETF assets under management decreased 9% primarily due to market declines despite $22.5 million of net inflows. The average advisory fee earned during the first quarter was 0.50% down from 0.51% in the fourth quarter primarily due to a change in the mix of ETFs assets. The overall market declines in the first quarter contributed significantly to reducing ETF asset levels to a low of $2.4 billion on March 9, 2009, a level WisdomTree last experienced in the first quarter of 2007. Since that low, ETF asset levels have increased 25% to $3.0 billion as of April 29, 2009.
Expenses
Total expenses increased 5.3% to $9.9 million, from $9.4 million in the fourth quarter. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses increased 6.8% to $7.7 million, from $7.2 million in the fourth quarter.
On an annualized basis, first quarter proforma operating expenses declined 25% from the comparable full year 2008 amount due to continuing cost reduction actions to lower the Company’s operating expense levels. However, market declines, which led to lower revenues, exceeded these reductions contributing to a higher proforma operating loss in the first quarter compared to the fourth quarter.
- Compensation and benefits expense increased 72.8% to $4.8 million from $2.8 million in the fourth quarter. Excluding stock-based compensation, compensation and benefits expense increased to $2.7 million from $1.0 million. The increase was primarily due to changes in accruals for incentive compensation. The fourth quarter of 2008 reflected a true up adjustment to reduce incentive compensation for the full year. The first quarter of 2009 reflects a normalized, and lower level, of incentive compensation on an annual basis.
- Fund management and administration expenses decreased 18.4% to $3.2 million from $3.9 million in the fourth quarter primarily due to lower portfolio management and fund administration fees due to lower average asset levels.
- Marketing and business development decreased 8.0% to $0.9 million from $1.0 million in the fourth quarter due to lower advertising spending due to the current market environment.
- Professional fees were relatively flat at $0.3 million; however, excluding stock based compensation, professional fees declined 45.2% primarily due to lower legal fees. • Occupancy, communications and equipment expense decreased 24.5% to $0.3 million from $0.4 million in the fourth quarter due to sub-leasing excess office space in our corporate office.
- Other expenses decreased 60.3% to $0.4 million from $1.0 from the fourth quarter. Excluding stock-based compensation, other expenses decreased 27.1% to $0.4 million from $0.5 million. The fourth quarter of 2008 reflected a non-cash loss for excess sub-leased office space.
Balance Sheet
As of March 31, 2009, WisdomTree had total assets of $31.3 million which consisted primarily of cash and cash equivalents of $10.6 million, and investments in
2008 Results
As stated in its fourth quarter 2008 earnings release, the Company determined it had incorrectly accounted for certain stock-based awards granted from 2003 through 2008. The cumulative affect of the adjustments correcting this error is an overstatement of $0.4 million. A schedule of the proposed adjustments and affect on the Company’s 2008 results are included in this release. The Company is currently working with its previous auditors to restate its prior results and will publish its restated audited results when the review is complete.
First Quarter 2009 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Thursday, April 30 at 9:00 a.m. ET. The call-in number will be (888) 680-0878, passcode 98210740. Anyone outside the
About WisdomTree
WisdomTree® is a leading ETF sponsor and innovative index developer using its own fundamentally weighted index methodology. WisdomTree also licenses its indexes to third parties for proprietary products and offers a platform to promote the use of WisdomTree ETFs in 401(k) plans. Approximately
$3.4 billion in assets currently are managed against the WisdomTree Indexes by WisdomTree and third parties under license from WisdomTree. For more information, please visit www.wisdomtree.com or www.wisdomtree401k.com.
WisdomTree is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiaries WisdomTree Asset Management, Inc. and WisdomTree Retirement Services, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust. WisdomTree Retirement Services, Inc. supports the use of the WisdomTree ETFs in retirement plans by financial professionals.
Media Contact:
Stuart Bell
WisdomTree Investments, Inc.
(917) 267-3702
WisdomTree Investor Contacts:
KCSA Strategic Communications
Jeffrey Goldberger / Todd Fromer
+1 212.896.1249 / +1 212.896.1215
jgoldberger@kcsa.com / tfromer@kcsa.com