Q1 2021 Wisdom Tree Investments Inc Earnings Call
[music].
Good day, and thank you for standing by welcome to wisdom trees first quarter earnings call.
This time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
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Please be advised today's conference maybe recorded.
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I'd now like to hand, the conference over to your Speaker today, Jessica film with some trees head of corporate communications.
Good morning.
Before we begin I would like to reference our legal disclaimer available in todays presentation. This presentation may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
A number of factors could cause actual results to differ materially from the results discussed in forward looking statements, including but not limited to the risks set forth in this presentation and in the risk factors section of the wisdom teeth annual report on form 10-K for the year ended December 31 2020.
With injury assumes no duty and does not undertake to update any forward looking statements.
Now it is my pleasure to turn the call over to with increased CFO Amit Muni.
Thank you Jonathan good morning, everyone.
Walk through the highlights for the quarter, then turn the call over to our President Jarrett Lilien, who will provide some perspective on our successes this quarter and then to Jonathan for his closing remarks before we open the lines for Q&A.
So beginning on slide two this was one of our best quarters as reflected by our strong operating and financial results.
We ended the quarter with assets under management of $59 5 billion up 3% from positive inflows and market movement.
We generated $1 3 billion of net inflows in the quarter.
Continuing upon its success from last quarter, our ex state owned strategy products generated $1 5 billion of inflows.
Also continuing a strong trend, we had inflows of $648 million into our thematic products encompassing cloud computing artificial intelligence battery solutions and our newly launched cyber security Etfs.
The AUR and our thematic Etfs have now grown 20% to $2 6 billion at the end of the quarter.
Our European listed Bitcoin fund took a $36 million in the quarter and now stands at just under $400 million in AUM doubling in size since the beginning of the year.
On the commodity side, we saw some mixed results as we experienced strength in our silver and other precious metal products, which were offset by outflows in gold and oil due to negative market sentiment.
Looking at Q2, so far the strong momentum continues and we have now raised over $200 million, bringing our AUM to near 73 billion.
Now turning to our financial results on slide three.
Revenues increased 9% to $73 million per quarter due to higher average AUM from our strong inflows.
Adjusted net income was $12 5 million or eight cents a share up 36% from the fourth quarter.
This quarter, we took a noncash after tax gain of $2 8 million for our future gold commitment payments and 200000 and other non operating items.
Turning to margins on the next slide.
Our operating margin expanded to 25, 5%, reflecting higher average day, you win and a flat expense quarter over quarter.
Gross margins also increased to 78, 7% in the quarter.
Along with higher average AUR this quarter, the fourth quarter of last year reflected cost per rebalancing on our list on our U S listed products as well as the final Brexit related expenses for our European listed products.
There is no change to our guidance of 77% to 78% gross margins for the full year, but we will have fluctuations intra quarter.
On the next slide you can see the change in our expenses.
Our operating expenses were essentially flat at $54 million.
Compensation costs increased due to the seasonally higher payroll taxes and head count related costs.
Based on our strong results. So far this quarter, we anticipate full year compensation cost to be at the high end of our $75 million to $85 million guidance range.
We also incurred higher product development costs related to our digital asset initiatives offset by lower marketing and sales related spending and sunk cost that I referred to on the previous slide.
Our goals royalty payments declined due to lower gold prices and we exited our London lease.
Our discretionary spending remained well controlled at $10 $5 million this quarter and our full year guidance remains at approximately $49 million for the full year.
Thank you I'd now like to turn the call over to Jarrett.
Thank you Amit.
Last quarter I outlined some of the key focus areas for 2021, I talked about accelerating our momentum through targeted investments in both today's growth and tomorrows I talked about continued progress with our model portfolio offering.
Talked about new global product launches with a focus on core tactical thematic in ESG exposures.
I talked about maintaining our leadership position in crypto Etp's, while also establishing ourselves as a leader in digital assets and how this last initiative holds the promise for lease intrigued to tap additional revenue streams further accelerating organic growth and what we see as the next chapter in <unk>.
<unk> services.
And so our Q1 results make clear we are executing well on all fronts, we have momentum and are generating strong organic growth overall top line growth led to a very strong all around quarter within flow is driving record AUM and strong revenues and expanding operating margins and net income.
Our team remains focused and dedicated to strong execution and this and the breath and diversified mix of our business gives us confidence that our momentum will continue.
Regarding organic growth, we are enthusiastic about global flows industry driven gold outflows notwithstanding we have the broadest range of <unk> available and our success in industrial metals copper and silver shows that there is a wider opportunity for us to capture.
Further semantics had been a strong success, where we strive for differentiated and thoughtful exposures through a combination of our internal research and collaboration with deep subject matter experts are thematic suite, including cloud computing artificial intelligence battery technology and cyber security.
<unk> saw strong inflows across both our U S and European platforms.
The U S. Our model portfolio initiative also continues to stand out we are converting on previously announced successes like our third party model mandate with Merrell and through collaboration such as tax smart portfolios with 55 I T.
In the first quarter, we launched our model adoption centered the Mac, which provides holistic support solutions for advisors to leverage our portfolio analytics and investment capabilities for their end clients overall, our model portfolio initiative is gaining more traction and its.
<unk> deeper client relationships larger client relationships and stickier more diversified flows in the coming quarters, we anticipate announcing additional major model partnerships and leveraging additional collaborations such as our recently discussed relationship with Onramp inverse.
<unk> financial technology startup, which will allow us to incorporate crypto assets into workflows and into our models for <unk>.
In terms of mix and breadth our emerging markets ex state owned Enterprise fund excess. So we was a Q1 star with its sister ex state owned China from <unk> also contributing following the implementation of additional esg's screens during the quarter. We are excited about our <unk>.
Strong position in this strategically important categories of both emerging markets and ESG investing.
But the quarter was really marked by the overall diversity and breadth of our flows in the U S. A growing percentage of our funds are seeing inflows, while a declining percentage of our funds are seeing outflows further a third of our U S funds hit new all time, AUM hide and globally, we now have 32.
Funds with AUM over $500 million in 'twenty over $1 billion. This diversity and breadth is fueling our momentum we're including April the U S. Now has 10 consecutive months of inflows.
Best such streak in six years in Europe, we are building on two consecutive years of record organic growth and in April. We are also seeing positive flows group run rate revenue based on current AUM levels is now at $300 million up nearly 40% from the first quarter of last year.
This breadth and healthy mix is also showing up in keys, where a fee capture has remained steady.
Is actually up from Q4 levels.
Our strong product pipeline further adds to this mix and diversity and represents yet another element of our increasing momentum we continued to advance the robustness of our existing fixed income and commodities offerings as well as adding additional new products informatics and growth equities in the crypto currency.
Base earlier this month, we cross listed our European Domicile, Bitcoin ETP BTC W. In Germany, allowing for a wider audience to have easy access, which should help accelerate growth and just yesterday, we launched a physically back a theory them ETP.
HW and last month in the U S. We filed for the Wisdom tree Bitcoin Trust.
All in all we are delivering against our plan to drive growth, both today's and Tomorrow's and the results are shining through and with that I'll hand, it over to Jonathan to speak more about our larger digital assets initiatives, along with his concluding thoughts on the quarter.
Thank you Jarrett.
The takeaways from this quarter, our simple continued.
Continued growth and momentum with $1 4 billion and year to date flows and strong execution.
As I've said before wisdom tree is operating with even greater speed efficiency and inclusion in our new remote first orientation. Our results are clear evidence of this.
While we remain laser focused on the opportunities in front of US today, we are equally focused on the future.
The product activity Jarrett reviewed and bitcoin and ethereum, along with our collaboration with Onramp invest a financial technology startup focused on integrating crypto assets into model portfolios continues and further advances our efforts.
To support more mainstream adoption of these exposures and transparent and highly regulated investor friendly formats.
However, our vision for digital assets expands beyond Etp's.
Following our strategic investments in security.
Company.
Focused on blockchain based financial and regulatory technology, we participated in their $30 million series B investment round, along with global financial service leaders, including State Street U S Bank in Abu Dhabi catalyst partners. This financing was completed.
Treated earlier this week.
This is an important milestone for security.
And we are excited by the future opportunities to leverage Securities technology.
We have been consistent and clear in our belief that regulated digital assets and blockchain will have an important role in capital markets from management and financial services broadly going forward. We continue working with secured C. On innovations in these areas as them.
Constraining by a recent filing for a blockchain enabled digital short term Treasury fund.
Crypto assets in blockchain had been one of the biggest stories in financial services in 2021.
While some might have asked if we were too early in our investments over the past few years.
I feel we have made these investments and time to be strategically well position in this fast developing environment.
We know crypto and blockchain are top of mind for our clients and we want to continue to help them to understand and navigate this space.
As a bit of theory of Etp's as well as our model portfolio initiative demonstrates these efforts are very much supportive of a broader fund platform and we think these investments will continue to drive organic growth in the future.
Finally, before I open the call to questions I want to acknowledge our CFO, Amit Muni, who has decided to move on to another opportunity at the end of May.
At first came to wisdom tree to lead wisdom trees re listing on NASDAQ and has been a valuable member of the management team throughout his 13 years of service.
Amit built up a strong finance function and has developed a stellar team.
Leaves wisdom tree in a position of strength and we wish him well in his future endeavors. Thank you Amit.
Now, let's open up the call to Q&A.
As a reminder to ask a question you will need to press Star then one on your telephone keypad.
And withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from Craig Siegenthaler with credit Suisse.
I just wanted to see if you could walk us through the timeline for your U S. Bitcoin and took an ice cold product launches and regulatory approvals.
Thank you Craig.
So first with our U S.
Coined filing.
There's not much that we can say.
But we feel like.
Let's jump to the sort of the punch line, we expect to either be first are amongst the very first when they do get approved I would say that the <unk> filing being delayed wisdom tree was the clear winner in that.
But it's hard to say exactly when they will be approved.
But again, particularly because of the new leadership at the SEC, but it is moving forward, we're getting good interactions with the regulators and we're optimistic that again will either be first or amongst the FERC.
On gold, it's still positioned for later.
Tokens later, hopefully before the end of the year are working very hard on that.
As you can also see we also filed for.
Blockchain enabled.
Treasury funds, so within that space of crypto.
Blockchain digital assets. It was a very very busy sort of year to date or quarter.
That's as much as.
That as much as I can say, though Craig in light of where we are with the regulators.
I understand John and John just as my follow up can you help us think about the advantages to owning bitcoin inside of an ETF wrapper relative to own it directly in a crypto exchange.
So yes, so first of all.
The ETF was made to make.
Difficult things to access easy to trade.
So we are helping to mainstream.
Investing in crypto certainly with what we're doing in Europe, where.
Our bitcoin.
ETP.
<unk> expanded into Germany, and is now sort of expanded into selective retail.
It really our opportunity set this quarter has expanded dramatically but.
No not me.
Many were not a lot of people are comfortable with actually opening a wallet and when you think about.
The the buying of crypto through the wallet, it's a bearer instrument and if you lose it its gone.
This is for many investors and institutional investors by buying it is within a wrapper that is protected that has insurance that does custody for them I think for many at this stage of the cycle. It would be the preferred way to access these exposures.
Great. Thanks for taking my questions.
Our next question comes from Dan Fannon with Jefferies.
Good morning, guys. This is actually James Steele on for Dan.
So I just have one looking at the success you've had with your thematic products I just hope to get some color on which clients are which channels are most receptive to these and ultimately trying to get an idea of what the stickiness of these flows might be.
Thank you James.
Jeremy do you mind, taking that.
Sure.
Kurt.
What's exciting has been the breadth of our thematic success Amit talk through it's not just a single product it's across a broad platform from cloud computing AI.
So our technology the battery solutions we're.
We're seeing it across the board I think it's a combination of these are strategies that a lot of our retail does like to look at but advisors are trying to stay at the cutting edge of technology and using them in model portfolios Wisdom tree itself has launched model portfolios that include what we call a disruptive growth model that is a combination.
One of the different fanatics, and we see people, adding that as a.
A complement to their core exposure, so while I think to Matt's had been.
Our retail friendly we do see advisor adoption as well.
I think our success is coming from really strong and unique performance I mean, if you look at the cloud computing space. We were not the first fund and we always say, we're not going to just do a me too product, but when you look at the category. There was a few large billion dollar funds.
The last six months, we have taken in 100% more than 100% of the flow as to the cloud computing.
And I think Thats from just the strong performance that is resonating with the whole the whole community.
And just jumping on top this is jarrett.
Reiterating on the channel, it's all channels retail advisors, but its U S and Europe and so we also have a line of institutional interest as well.
On the stickiness.
You can refer to them as thematic, but they're becoming more core holdings as part of portfolio and model approaches. So the stickiness is actually pretty good so all channels and our expectation is sticky assets.
Alright, Thanks, guys Thats it from me.
Our next question comes from Robert Lee with <unk>.
Hi, Good morning. This is Jeff Drezner on for Rob Lee Thanks for taking my question.
First question I had was around the treasury. The blockchain you mentioned in relation to the treasury assets, but I'm curious how that.
It helps.
The short term treasury funds and what that kind of enables.
Yes.
So again I'm, a little bit limited in what I can say, but.
So we filed for digital Treasury fund that will be blockchain enabled.
<unk>.
Built on the relationship that we have with secure and see their technology is crucial to evolving the 40 Act. The open ended fund structure.
We've always been very consistent that we're trying to push the envelope in enhancing the investing experience Amit so we will be adding.
Features like peer to peer true.
<unk> interoperability between a theory stellar blockchain and improved efficiency overall, so those are some of the improved functionality and experience enhancements that we expect to come from what is really the cutting edge of.
Filings really to date in the in the market in the world.
Great and if I just follow up just considering the excitement around the crypto.
Are you surprised that the demand for the bitcoin Etfs in Europe as it's been good but maybe the book.
Modest and what maybe attribute that to.
Early in the year.
Had some profit taking and so we actually started the year.
In the negative the last couple of quarters has been growing stronger the institutions are.
Trying to find their entry points and really kicking the tires around the structure I can't stress enough that expanding into Germany with a broader mandate that allows for some retail selectively.
Proves the opportunity set dramatically going forward. So I think we have really.
Expanded the opportunity set dramatically and I am expecting faster more significant growth going forward.
Yeah.
If the exposure remains constructive from an investor sentiment standpoint.
Great. Thanks, if I could just get one more quick one in terms of model portfolios can you maybe update us on the progress.
In a quarter into 2021 mentioned on the last call that you expect meaningful flows during the year.
Jared do you want to take the.
First answer maybe with January but at least.
Yes.
Model.
Initiative on our side.
Has been.
Long term build.
It's a really it's a holistic approach, where we had to build the investment capabilities and the team on our side, which we did we had to build content.
We had to build tools.
And our job really around models is to remove barriers.
To adoption and assist with that transition to models and models continues to be one of the largest macro trends in wealth management. So.
More and more wealth managers moving towards models. So we've been right there at the start of this building with.
Our clients and we're gaining more and more traction each quarter and we had last year announced a significant step forward was the marrow partnership and having third party or our models on their third party model platform.
We've got other significant wins in the pipeline.
We'll be announcing over the coming quarters, but we're just now step by step, we're making more progress with every partner ship that we form and so we're not releasing actual numbers at this point, but what I can tell you as it were.
Gaining traction and momentum.
And we're excited and really on track with what we expected from this initiative at the start of the year.
Hey, Jeremy maybe sort of tying together the last couple of questions around digital assets.
Models, maybe you could talk a little bit about the partnership with Onramp.
Our book to.
B.
We see the traditional assets like carrier, we're talking about income oriented model people need income a key story and we're doing a lot around multi asset income models. We're really excited I think questions on how do you get exposure to bitcoin to Easter it's been a challenge because of the non approval of those structures and so what Henri.
And it's going to be providing exposure to clean some of that direct exposure and as well as then enabling advisers being what they are calling the plaid of crypto trying to connect all of the systems talking to each other.
From the custodians to the workflow to the portfolio management planning and.
So we have talked about new model initiative, a few different models from our traditional core equity core fixed income with direct bitcoin exposure and I also talked about the fanatics and we're really excited about a disruptive growth model that includes crypto.
Perhaps bitcoin and <unk> together with the sort of true <unk>, So you're going hear more from this.
We're getting these model feed it very very shortly and we expect perhaps next month to have more details to share.
It shouldn't be more excited and we think the leadership team at on ramp.
Led by CEO, and cofounder Tyrone, Ross and Eric Irvin a lot of experience working with advisors in the space and we couldn't be more excited to be working with them on that.
And Jeremy.
Just one other thing on there as well and Thats one of the really great things about models as they are more relationship based.
As a starting point.
Versus being product base, but they do allow us to tie together, what we're doing on the product side and they really allow us to tie together. Some of these other large macro themes I mean, if you think about it.
Mutual funds to Etfs Big macro theme in wealth management models, ESG and an emerging one being crypto and models, we're able to bring that altogether and so we've got the models as Jeff just talked about that we've launched already but come in not only models with crypto.
<unk>.
But ESG models as well so models are just.
Great.
Initiative for us and they remain a major push for us and again doing well so far.
Great. Thank you for that I appreciate that bell.
Our next question comes from Michael Cyprus with Morgan Stanley.
Hey, good morning, Thanks for taking the question, maybe just coming back to the U S. Bitcoin product that you guys filed for I was just hoping you could maybe elaborate on the product itself. I think you mentioned that the trust how does that differ from other etfs from a product standpoint, how does it differ from other existing ones you have seen being filed.
In the marketplace I think you had mentioned some others like Nevada product how does it differ from that and how does it differ from your European product that you already have in the marketplace.
Really we're building off of our European product.
And again. These are these are early days and so.
Not all exposures and filings are created equally and I think we really have.
Answered.
All of the concerns.
That regulators have we're showing how well it works in Europe, and bringing sort of what we believe to be best constructed best practices best execution and structuring in Europe, really which means at the moment in the world and we're bringing that expertise and similar structure here to the United States.
I don't want to go into.
Really the day.
The differences that we are aware of for competitive reasons.
But we're very optimistic that our filing.
We'll be amongst the first if not the first approved in the U S.
And then maybe just on the European side, you had mentioned the cross listing of your European Bitcoin.
<unk> that you might be able to get retail investors on board I guess, maybe you could just talk a little bit about your distribution strategy. How many platforms is this product going to be available on and what's the sort of limitations around retail being able to buy and participate in this product in Germany and also more broadly around around Europe.
So expanding into Germany opens up all of Europe.
The product is.
Institutional for sure and we're getting and those who are slightly longer sales cycle than retail sales.
We are building up a significant pipeline of interested institutional investors.
But also recently with the German expansion into Germany, we have a little more flexibility into.
Retail retail that binds the fund on their own or retail that has the support of their advisor retail is.
Able to buy our funds. So it has been an expansion of the opportunity set.
To retail which didn't exist when we first launched it in Switzerland.
It's broadly on.
It's it's.
More specific to the different institutions with some except crypto at least at this stage and some do not but we can see that beat by the quality and quantity of our conversations that the platforms are opening up the investor demand.
Is real which is not surprising.
When you think about that.
The Etfs in the very very early days.
Bitcoin.
Is to sort of the blockchain.
What the Qs were too.
T X structure brought a lot of attention to it and the kind of performance that youre seeing in the asset classes just makes it impossible to ignore I'm not saying you should put all your money into what we don't want to romanticize that we don't want to build and is it we have hundreds of exposures, but it's certainly something that has been performing extraordinarily well.
Proud and happy to support Investor access to these exposures, we see it as very.
Consistent with the way we have built the business from the very beginning this is not a change in any way.
Great and are there any additional actions you might be able to take to help broaden the access to retail ownership of the product in Europe or is this pretty much pretty much set at this point.
I believe there will be over time, as our bitcoin and crypto assets.
Get more and more regulatory.
Approvals and they just get more comfortable with these exposures operating smoothly in the marketplace I'm expecting it to continue to move forward and open up book I have to say.
I'm trying to be specific in my answer, but retail is a can now buy our European.
Etp's crypto etp's.
Great. Thank you.
Our next question comes from Brennan Hawken with UBS.
Hey, good morning, Thanks for taking my question.
I'm going to add a few more on crypto and some of these offerings.
An exciting part of the market and you guys seem to be.
On the Bossier feed here, so I'm curious.
Channel you spoke to cut the custody third party custody in the crypto assets is a key benefit for the Etfs, which makes perfect sense at a high level, but I'm curious mechanically.
What does <unk>.
Custody.
<unk>.
Block chain based asset even look like and.
When you think about and you engage with the different providers out there the various custodians.
Is there a material difference in where those providers are in their capabilities and their offerings.
Who's who's doing that well.
And.
How have you decided to partner with the custodians and what drove that decision.
So we started with.
Swiss quote.
Which was.
An important and quality and Inc.
Very well researched.
Vendor for us for custody of crypto assets, we recently announced that we've added coinbase.
Our second custodial.
Custodian for these assets.
When you think about that story about the Guy who lost his.
Password and couldn't get back into his wallet and lost her.
$100 million.
It's a different way to hold your assets and I think what we do though is the ETF ETP has mainstreamed it's extraordinarily.
<unk> people are very very comfortable accessing all exposures through this mechanism and so we've just taken away something that many mainstream investors are not yet comfortable with which is managing their own wallet. So I think that it's.
And that everyone does it the same our team has spent a few years now.
Understanding the ecosystem, and then really putting bringing all of our highest standards into bringing these exposures to the market. So investors know that they can trust the wisdom tree to watch out for their money.
Trust I think will be one of the most important factors that.
Brings investors into.
These exposures, but not all vendors are the same in this space and you really have to have the expertise to analyze this and we do.
Yes.
I don't doubt that at all which we should file funded to hear your views on it.
But is is custody quote unquote of these assets just a matter of having a third party maintained the Ts and the passports and whatnot and then having various control procedures in place.
For that I just.
Tricky part about this and understanding it trying to get your head around it is these are not like normal from securities.
And yet they're going into the ETF wrapper, which I agree with you it should improve.
Comfort for investors, so what I'm, just trying to understand mechanically how would even work and how about what are you guys follow up we should follow up off line on this but the.
If you buy the ETP you don't have to manage your key.
It's all done we write off for you I think that's the the importance here is that we're providing the insurance we're providing the custody management the key management the safety of it. So those are the things that will expand.
Broad usage to these exposures, but we can follow up in more detail.
Really want to dig in.
After the call.
That's great I'd love to learn more and then.
Switching to a more mundane topic, when we think about the year and there is an expectation that with vaccine rollouts being as successful as it's been.
<unk> is going to start to come back is that your expectation is that embedded in your.
<unk>.
Yeah.
Look forward look for expenses.
Lines through the TNT tend to flow through and how should we think about an expense ramp.
As we go from here in the back half of 2021, and then probably building into 2022.
Amit maybe you go first and Jared if he does it hit on everything or you have more to add please do.
Hey, Brian So all of our <unk> sales related spending is all in net sales and business development line.
And the guidance that we gave at the beginning of the year did incorporate.
Some level of opening up in.
In the second half of the year I wouldn't call it back to normal, but I would say a small amount we are going to be continuing to leverage the.
Efficiencies that we've learned during remote.
So.
Well some of it will have to wait to see if we see the.
Everything is sort of getting back to normal then we may have to revisit it but our but we have factored in some additional spending towards the second half of the year.
But first and foremost continuing to leverage the efficiencies that we've learned so far.
Being remote.
Yes, and just adding a little color in our own.
<unk> of the table running wisdom tree.
We found that remote first really suits us and that even when we can go back.
We're looking to go back in a different way in a remote first way.
And that cost us less money and it's more efficient and.
We've experienced it for a year and we see so many positives that we want to hold on to.
Then when I am speaking to a lot of our clients and the senior executives at those firms they're thinking the same thing that a lot of this has been better. So I don't think will be rushing back to 2019 the old way.
I agree with Amit that you have to wait and see a little bit because we're all feeling our way, but our expectation is that there is a new and better way and Thats whats in store for us and it's more efficient and part of that efficiency as it costs everybody less money.
Thanks for the color.
Our next question comes from Mike Carrier with Bank of America.
Hi, guys. This is Shaun calnan on for Mike. So just piggybacking off the earlier question on the thematic can you guys talk about some of the new thematic products on the horizon beyond crypto.
Are there going to be any additional ESG products or can we expect in infrastructure related products to be launched.
Jeremy why don't you go first but be careful about what you say because for competitive advantages.
Yes, I think you could see I mean, you have to check our filings for what's out there.
The other.
The clear trend is that.
One of the things that we're doing anything more global organization with our <unk> and informatics in particular, I mean, you see the cloud computing launched in September 2019, now about 1.89 billion globally.
We're trying to do more of that so you could look at what does Europe have what do we have how do we combine both our cyber security the same day.
And are off to a good start bearing and in our team in Europe has had strong success in AI. So we are sure studying that.
They've had strong success from battery solutions, and other things and I anticipate we're going to do more together.
In some of these disruptive technologies with interesting partners. So you definitely will see more from us.
Okay. Thanks, and then the gross margin trends have been solid even looking past the <unk> items. So can you just explain what's driving it is it simply scale or are there other factors contributing.
Amit.
Yes, Sean.
A factor as you mentioned, we had lower expenses this quarter because of some seasonal stuff that happened in Q4 of last year, but also the higher average AUM.
That helped contribute to the increase in the gross margins, but remember we're still keeping the full year guidance at 77% to 78, because we do have.
Some some seasonality intra quarter when we have re balances when we continue to launch funds. So we still feel comfortable with that full year of <unk> 77 to 78.
But I will remind you that we're up to 73 billion of AUM. So the quarter was ended at 69 and a half so.
Higher AUM.
Keep going.
Thank you.
Thank you Sean.
Our next question comes from Ryan Bailey with Goldman Sachs.
Good morning, Firstly I just wanted to start by wishing on it well into the next level.
Then I was hoping to continue along the lines of Brian's questions. So you mentioned that state Street per part and the recent funding around currency and I think in general we're seeing more interest from the trust banks and finding ways to make digital assets mainstream and kind of beyond just some of the crypto.
So I was wondering if you could speak to what wisdom <unk> competitive advantage will be both some of the larger more entrenched players in the financial system.
When it comes to digital assets, specifically and it sounds like it's beyond sort of being first to market with products.
But maybe it's not.
So I was wondering if we could start there and then the second part would just be.
How are inventories will get assess share of economics from digital asset growth.
So it's a great question. So we were very.
Early.
As the.
Lead on the series day in secure and safe.
We remained after the series B securities' largest shareholder by the quality of the institutional participation you are seeing the custody banks and other <unk>.
<unk> financial institutions.
Getting themselves oriented towards a blockchain oriented future because the.
That rail has such potential.
Globally in terms of efficiency and functionality.
But because we're coming in at.
<unk>.
Sort of regulated tokens coming in at the very earliest stage of.
How you could interact with these.
We have a very good chance to disintermediation other participants by being early.
Our first mover, having getting the network effect and also through our investments in security, which seems to being.
Gaining acceptance in there in their vision for how this world may unfold.
We're very cognizant of the fact that.
This will be very disruptive.
Going forward broadly not just in fund management, but broad financial services and we are our expectation is that we are going to see expanded economics.
These efforts over time, so I can't go into more detail to day.
Understood if I could if I could try a follow up and then to your point its business sort of infringes on competitive dynamic dynamics.
I can follow up with you separately.
I can wait I guess I'm, just wondering in terms of economics to wisdom tree.
Primary basis for that will be per.
The ownership and Securities Inc.
No I don't believe so I believe we will do but I mean, the funding round.
B was a significant improvement in valuation.
But no what I was talking about was separate from the investments in security.
Okay, Alright, thank you very much.
Thank you and very classy would be to say something nice about Amit.
Thank you Rob our next question.
Our next question comes from can you tell us some with Northcoast research.
Good morning, guys, just trying to unpack the information on the big quiet filing in the U S. I know, there's a bunch of other providers are also file as well so I guess from what your thoughts in terms of is the market big enough for the Bitcoin that you think several of you guys can succeed or do you guys have do you think is an advantage based on your experience in Europe that perhaps.
From your competitors don't have it you can whatever you can say there I know you might be limited vertical therapy valuable. Thanks.
So first of all a bitcoin is about a two trillion dollar exposure with almost no institutional and really mainstream investors because of how difficult where unconventional. It is currently to access the exposure so I think that.
There is tremendous room for the Etp's two scale very significantly I do believe we have advantages because of how the organization has immersed itself in crypto blockchain digital assets, whatever you want to call it.
So that we have clear strong opinions.
And knowledge that is permeating throughout the firm both from Europe to the United States and back. So I think we do have some advantages.
And I think our filing will be very well received but we will have to.
By the regulator, but we'll have to see again I think we have a chance to be if not first amongst the first but hopefully first in the U S with an approval.
Okay. Appreciate it thank you.
If I could just revisit a previous question in terms of the gross margins, obviously, a great quarter for gross margins.
Our up even more since then.
With your guidance it looks like your fund administration costs without but wrap up quite a bit throughout the year, which I guess come back down to net margin was there anything in this quarter that suggested a number this quarter was lower than what we'd expect for the rest of the year.
No.
One other things that we said we were going to do is.
Sure.
We talked about product launches. This year, we were targeting about 20 product launches so.
That's coming.
And we know that that will have had an effect on the gross margins as well. So that's why we're leaving room for that that's why we don't want to take we don't we think it's still the 77 to 78 is still the right number.
Okay can you remind us how much product launches like FERC, one will generate cost you guys.
Sure so in the U S and ETF generally about $135000 to launch a fund.
Our European use of funds of roughly the same.
It's a leveraging inverse fund.
It's a fraction of that is closer to like 30% or 40 about $30000 to launch an investment leverage from.
Great. Thank you.
I'm showing no further questions in queue at this time I would like to turn the call back to Jonathan Steinberg for closing remarks.
Thank you everybody for your time and attention today and we'll speak to you next quarter have a great day Bye bye everybody.
This concludes today's conference call. Thank you for participating you may now disconnect.
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