WisdomTree (NasdaqGS: WETF), the fifth-largest U.S. issuer of exchange traded funds and the only publicly traded pure play ETF sponsor, is pursing growth outside of the U.S. as an avenue for boosting shareholder returns.
While the U.S. continues to dominate the ETF business in terms of number of funds and assets under management, those anecdotes highlight the opportunity for ETF issuers in ex-U.S. markets is significant. Recent moves by WisdomTree indicate as much.
“International ETFs are hardly a blip. But at the same time the international opportunity is tremendous: foreign investors aren’t avoiding ETFs, it’s just that the foreign ETF market is behind the curve,” notes analyst Ben Kramer-Miller in a piece on Seeking Alpha.
As Kramer-Miller notes, WisdomTree has leads over some of its marquee rivals in some international markets. “But WisdomTree is now more than just a way for investors to play the growth in the ETF market. It has a real chance of becoming a more dominant player abroad than it is in the United States where it was relatively late to the game,” he notes in the Seeking Alpha piece.
Just last week, WisdomTree said it will partner with BetaShares, which is majority owned by Horizons ETFs, to expand its reach in Australia. BetaShares is a leading provider of ETFs listed on the Australian Securities Exchange (ASX). While still small compared to the U.S. or European ETF market, Australia’s ETF market is growing. Australia ETFs hit a record $12.2 billion in combined assets under management last month, gaining $500 million in new assets, according to BetaShares. [WisdomTree Announces Australia Expansion]
New York-based WisdomTree is no stranger to foreign markets. In April, the company said Mexico’s pension funds investment regulator, La Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR), approved six WisdomTree ETFs for sale to Mexican pension plans. [WisdomTree Expands in Latin America]
Prior to that, WisdomTree landed approval to offer a dozen of its ETFs to Peruvian pensioners and the company currently offers 13 ETFs to Chilean pension funds.
In January, WisdomTree announced the acquisition of U.K.-based Boost ETP, a boutique provider of inverse and leveraged ETFs.
During the first half of 2014, Boost’s AUM surged 170%, according to Kramer-Miller.
WisdomTree’s international expansion efforts are picking up at a time when its shares remain heavily shorted and are down 37.2% this year. While those may seem like ominous data points, a compelling case can be made that WisdomTree bears are too focused on one point while ignoring several others.
Those bearish on the stock have played Captain Obvious, willingly pointing out that the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), the company’s largest ETF, has bled assets this year (over $2.3 billion as of Aug. 19).
However, what is lost in translation is that WisdomTree had almost $35.2 billion in AUM as of Aug. 18, which is slightly above the $34.8 billion it had at the end of 2013. Sure, that qualifies as flat-ish growth, but some on Wall Street are treating WisdomTree as it is losing assets when, clearly, the math says otherwise.
Speaking of that math, WisdomTree shorts appear blind to the fact that in addition to DXJ, the firm has nine other ETFs with over $1 billion in AUM. Although those nine funds are all smaller than DXJ, several have seen AUM growth this year that rivals what was seen with DXJ in 2013. [10 WisdomTree ETFs Top $1B in AUM]
For example, the WisdomTree India Earnings Fund (NYSEArca: EPI) is now a $1.9 billion ETF by virtue of year-to-date inflows of $620.3 million. The WisdomTree Europe SmallCap Dividend Fund (NYSEArca: DFE) joined the $1 billion club in February and has since grown by 30%. The WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) became a $1 billion fund in April. It has since DOUBLED in size. [European Dividends on the Rise]
It is not just international ETFs that are contributing to WisdomTree’s growth. Investors’ thirst for dividend ETFs, which have added $7.7 billion in new assets this year, should be reflected in the stock and arguably is not.
The WisdomTree LargeCap Dividend Fund (NYSEArca: DLN), WisdomTree MidCap Dividend Fund (NYSEArca: DON), WisdomTree SmallCap Dividend Fund (NYSEArca: DES) and the WisdomTree Dividend ex-Financials Fund (NYSEArca: DTN) – combine for over $5.2 billion in AUM. With over the $892 million in assets, the WisdomTree Equity Income Fund (NYSEArca: DHS) is a credible candidate to join the $1 billion club as well.
WisdomTree Investments
Todd Shriber does NOT own shares of WisdomTree. Tom Lydon’s clients own shares of DTN.