With record growth and a more detailed look into digital assets, the WisdomTree earnings call left advisors with a lot of information to digest, going into what executives believe to be a positive third quarter.
According to Jonathan Steinberg, CEO, the second quarter saw “continued growth and strong execution” for WisdomTree Investments. WisdomTree had a record quarter with 6% growth and an AUM of $73.9 billion; of that, net inflows for the U.S. were $199 million in equities and $168 million in fixed income.
“The focus and flexibility of our business model has enabled us to retain and attract world-class talent, drive strong operating results, and engage with our clients in whichever modality they desire with an ever-expanding set of resources,” said Steinberg
“Through our investment in tomorrow’s growth, we are quickly establishing an expert voice around digital assets, cryptocurrencies, and blockchain-enabled decentralized financial services,” Steinberg said.
Jarret Lilien, COO and President of WisdomTree, discussed the company’s outperformance in its 13th consecutive month of organic growth in the U.S. Inflows within the U.S. continue to increase in percentage while outflows continue to decrease.
“We also see sustained momentum in our flows; in the quarter, nearly 90% of our U.S. funds saw AUM increase,” Lilien said.
The Q&A portion of the call was focused heavily on updates on WisdomTree’s digital assets. WisdomTree CEO Steinberg acknowledges that crypto, in general, is a complex topic but is firm that “it is an asset class. We don’t want to romanticize it, we don’t want to villainize it, but we know it is of interest to investors, and we are participating, and we are creating a leading voice there.”
Cryptocurrency investing is almost entirely made up of retail investors, for now, Steinberg said. It leaves a lot of room for institutions to get involved in the space, as was seen with JPMorgan’s announcement of allowing advisors to assist clients in accessing cryptocurrency.
When asked about any updated on their SEC filings, Steinberg had the following to say: “We are in constructive conversations with the SEC; the delay at this stage of the approval process was not unexpected.”
Delays are common when the SEC reviews crypto-asset ETF filings, and while none have been approved yet, WisdomTree believes that it will be within the first wave of approvals when that does happen for the U.S. bitcoin ETFs.
WisdomTree believes that with how smoothly things have gone with their launches in Europe, it has been reassuring to the regulators who are watching crypto spaces globally. The second quarter saw WisdomTree investing in digital currencies abroad to launch the WisdomTree Ethereum ETP in Europe alongside their existing WisdomTree Bitcoin ETP.
The bigger story, Steinberg says, though, is the digital treasury filing. “That filing is very, very important to us, potentially more exciting than a bitcoin ETP filing.” He explains it as evolving the 1940 Act. “We are creating a new wrapper, call it regulated tokens, and our regulated tokens will be native to the blockchain using Securrency’s technology to really unlock the potential of the blockchain.” Securrency is a fintech company that develops digital infrastructure.
Steinberg uses interoperability and peer-to-peer movements of exchange as examples of benefits brought with the technology. He also hinted at a wallet coming in the future that would be for “economics and business model purposes.” Gold and treasury tokens coming to market are still planned for Q4 or Q1 of next year.
This push into regulated tokens is a “nuanced” take on DeFi. “I would call it responsible DeFi, which means regulated DeFi,” said Steinberg. The introduction of DeFi on a regulatory level would be intrinsically disruptive as it takes the intermediaries out of the financial equations. WisdomTree hopes to be one of the first movers in the space.
Speaking to what WisdomTree is hoping for from the regulators, Steinberg said, “we are expecting measured, balanced regulation that doesn’t stifle innovation, but instead unlocks blockchain-enabled financial services.”
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