Sitting at the capital markets desk at WisdomTree gives our team a unique perspective on the exchange-traded funds (ETF) industry. Oftentimes we are able to spot emerging trends among particular products and segments of the market due to our interactions with all the market participants in the ETF industry: our clients (end users of our ETFs), the market-making/trading community (liquidity providers) and our portfolio managers. Interacting with these three key groups enables us to understand their perspective while still watching and observing the markets. Over time, we see themes that begin to develop, and as we have seen in the ETF market in the past, once a strong theme takes hold, assets and volumes can increase very quickly. European small caps are a perfect example of one such theme.
ETFs can exist in hibernation for years without being noticed by investors. This is usually due to timing and market sentiment. Once the perfect market environment strikes, a fund can go from being barely noticed by investors (i.e., having low volumes and/or low assets) to growing at an incredible pace. A great example is the WisdomTree Europe SmallCap Dividend Fund (DFE). DFE launched in June 2006 with our first suite of WisdomTree ETFs. For seven years, DFE was hardly noticed by investors—but in the middle of 2013, that changed.
Here are some interesting statistics1 on DFE:
Period: 06/30/06 – 06/30/13
Average Assets under Management (AUM): Approximately $42,000,000
Average Daily Volume: 12,000 shares per day
AUM as of June 30, 2013: $57,668,528
Over the course of a few weeks in the summer of 2013, the trading community began to notice more and more buyer interest in DFE. Volumes slowly began to tick up. Small trades were crossing our screens, then bigger trades. Trading volume in DFE was picking up, and an investment trend for European small caps was emerging. The European recovery seemed to be gaining momentum. The market environment was changing, and DFE had the right exposure for investors to take advantage of this emerging trend. DFE’s AUM as of January 21, 2014, is at $892,000,000.
Below are two charts that show the increase in shares outstanding in DFE. It is important to note that the market capitalization of an ETF is calculated by taking the market price of the ETF and multiplying it by shares outstanding.
Shares Outstanding in DFE between June 16, 2006, and January 21, 2014