Q4 2021 Wisdom Tree Investments Inc Earnings Call

January 28, 2022

Ladies and gentlemen, thank you for standing by and walk through the Wisdom Tree Q4, 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone if you require any further assistance. Please press star zero.

I would now like to turn the call over to your host Jessica <unk> with some trees head of corporate communications you may begin.

Good morning, before we begin I would like to reference.

Available.

This presentation may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.

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 <unk> annual report on Form 10-K for the year ended December 31, 2020 and quality.

Quarterly report on Form 10-Q for the quarters ended June 32021 and September 32021.

We've been pretty assumes no duty and does not undertake to update any forward looking statement now.

My pleasure to turn the call over to <unk>, President and COO Jarrett Lilien.

Okay.

Thanks, Jess and welcome everyone I'm going to start the call today discussing the highly successful quarter and year. We just concluded the strong momentum we are riding into 2022, and some high level thoughts on our 2022 plan I will then turn it over to Brian to walk.

Through Q4 results in more detail and provide an update on 2022 expense guidance after Brian John I will provide an update on our strategic initiatives and digital assets, including wisdom tree Prime our new direct to customer mobile App and then we'll open it up.

For Q&A.

So starting with Q4.

The momentum has continued with strong organic growth in the quarter or $1 9 billion of organic flows marked our fifth consecutive quarter of inflows accentuated by tremendous breadth and depth with three times as many funds, having inflows and outflows and the momentum has continued.

<unk> into January where we have generated over $600 million of net inflows a rate that is outpacing 2021 slow levels, even in the face of a volatile market environment.

Looking at 2021 in total it was a highly successful year showcasing smart investments and growth coupled with increased efficiency and disciplined P&L management for 2021 revenues increased 22%.

<unk> margins expanded by over 30% and operating income increased by 60%.

As we look ahead to 2022 and beyond we are entering a new chapter one that leverage its core competencies and stays true to our core mission vision and values and is marked by a focus on strengthening and evolving our business leveraging existing momentum and adding additional fuel for <unk>.

Your growth.

In distribution, we will continue to invest in sales and marketing to gain even greater client mind share. We will also launch wisdom tree prime adding a new direct to client distribution channel that brings us even closer to the end customer.

Product.

We remain committed to being an industry leader and on the cutting edge of providing products and solutions in 2022, we plan to launch as many as 30, new exchange traded products globally, including our recently announced family of artificial intelligence funds. We will also gain further traction.

<unk> and our managed models business, reaching more advisers through our current partners. While also winning new mandates at the same time, we will gain further traction in transparent crypto exposures through Etp's in Europe , and direct indexing in the U S and as Johnno will <unk>.

<unk> further in a bit we will launch <unk> versions of mainstream assets.

At the same time, we will continue to find ways to leverage our increasing scale continue to exercise disciplined expense management and continued to strengthen and evolve our operating model, whether it's through Etp's and model flows or unlocking new revenue streams through token i's assets and wisdom tree.

Prime our revenue and operating income over the next several years will be stronger more diverse with better organic growth than in prior years.

Finally, we will continue to leverage invest in our talented team. In addition to the recent announcement that Harold Singleton has joined our board of directors, adding expertise and a fresh perspective.

I was proud to see us recognized for the second consecutive year as the best places to work in the U S and a great place to work in the U K all in all we had a very successful Q4 and 2021, we are executing well and carrying momentum into 2022, and we are excited about our.

Positioning in the U S and in Europe , and in our ability to differentiate generate organic growth and fuel upside and now I will turn it over to Brian to walk through the numbers.

Thank you Jarrod.

Our AUM at December 31 was 77 5 billion.

Ending the year at a record and representing an increase of 7% versus the prior quarter.

Our average AUM was 76 billion.

Fourth consecutive record quarter.

Our AUM was driven by positive market movement, and net inflows, we generated $1 9 billion of inflows during the quarter.

Flows of this magnitude represent our best quarter since 2015, and we've had five consecutive positive in flowing quarters.

Our U S business generated most of these flows and for the full year brought in 5 billion of inflows.

Our best year since 2015.

During the quarter your flows were flat.

However, we have seen favorable trends in our European UCITS products, which generated over $600 million in flows during the quarter.

One 8 billion for the year, an organic growth rate of 105%.

Our physical gold product suite revamp has also proven successful with lower fee product launched with our Etfs acquisition generating inflows and now representing 40% of our gold AUM. However, outflows from legacy cold products remain a headwind.

Our AUM currently stands at about 76 billion lower than where we ended the quarter due to negative market movement.

However, inflows in January are over $600 million and continuing the positive momentum witnessed over the course of last year.

Next slide please.

Revenues were $79 million, an increase of 1% from the prior quarter due to higher average AUM.

Set by a slightly lower fee rate.

Adjusted net income was $15 7 million or 10 cents a share.

Change from the prior quarter.

This quarter, we recognized a noncash after tax loss of $3 million for our future gold commitment payment and $1 5 million in other net nonoperating losses.

Next slide.

Our operating income margin was 29%.

A two point decline from the prior quarter due to higher expenses, which we will cover on the next slide.

Our gross margin was 85%.

Really unchanged from the prior quarter.

Next slide please.

Our operating expenses were up 5% for the quarter due to higher compensation and marketing expenses.

We experienced some seasonality in our marketing spend which tends to pick up as compared to the summer months in the third quarter.

Our compensation and discretionary spending ended the year at $88 million and $44 million respectively at.

At the lower end of our revised guidance communicated last quarter.

Next slide.

Now I'd like to provide some guidance on how we're thinking about expenses for 2022.

We are forecasting your compensation expense to range from $92 million to $102 million.

This guidance contemplates hiring for our core business and expanding our digital asset team in anticipation of our launch of wisdom tree Prime later this year.

It also includes compensation adjustments made for our current employee base, given inflationary pressures and the competitive landscape.

However, operating as the remote first company has served to mitigate these factors.

Also just a reminder, that we experienced elevated seasonality and the amount of compensation report in the first quarter.

As we recognized payroll taxes benefits and other items in connection with the payment of year end incentive compensation.

Discretionary spending ranges from 49% to $57 million, an increase from our 2021 spend of $44 million.

Some of this increase assumes that the pandemic is behind us and are spending migrates towards pre pandemic levels.

This increase is also influenced by our forecast of digital assets.

Our digital asset spend which is included in the guidance communicated.

<unk> to range from $9 million to $14 million.

This includes both compensation and discretionary spending such as professional fees marketing product development and other related expenses.

While our spend is higher than last year run rate digital asset revenue at the end of 2022 should provide adequate air cover taking into consideration our existing crypto ETP is in Europe and direct indexing revenue.

The range and spend is dependent on the timing, but we can treat prime rollout and additional products and features to be launched.

Our gross margin is anticipated to be between 80% and 81%.

Changed from 2021.

Our contractual gold payment expense is forecast to be $17 million.

Assuming gold prices remain flat at current levels.

As a reminder, this expense is based on us paying 9500 ounces of gold on an annual basis and is measured based upon monthly average gold prices.

Third party distribution expenses forecasted to be $9 5 million.

This assumes continued growth on our Latin American platform and new platforms being launched in Europe .

And our adjusted tax rate is expected to be between 21 and 22%.

Upon the mix of the earnings contribution of our U S and European businesses.

That's all I have I will now turn the call over to Jonathan.

Okay.

Thank you Brian .

Jared and Bryan did a great job showcasing our success in 2021 and the strength of our existing business today I'm going to give more details on our digital asset initiatives.

Wisdom tree has been positioning itself really for the last few years for the next big structural Revolution, not evolution, but revolution in financial services.

It's the convergence of blockchain technology with Universal smartphone ownership and tokenism nation with smart contracts that will effectively blurred the lines between savings payments and investing.

Abundant mentally changing the way consumers view and interact with their own money and assets.

This page helps illustrate our synergies and advantages in navigating and exploiting the opportunity that we've been calling responsible <unk>.

We are already in the business of providing regulated transparent liquid exposures.

We have the product manufacturing and investment capabilities.

We have the legal and compliance foundation.

The content research and marketing prowess.

Deep relationships with best in class service providers, and a well earned reputation of investor friendly innovation.

Our approach regarding digital asset is about how we can best use our synergies to most cost effectively capitalize on the coming digital transformation.

This includes leveraging the Reg tech capabilities of our partner secure and seek to provide compliant to cure and Auditable holdings with robust identity protection.

Crypto Etp's and crypto direct indexing is an exciting extension of our existing business and already generating revenues.

But crypto asset.

Just one application of the underlying blockchain technology.

So let me show you, where we are headed.

Next slide please.

I'm excited to introduce wisdom tree Prime our new financial services mobile App.

This digital wallet native to the blockchain will bring the look and feel that users are accustomed to from traditional mobile apps, while at the same time offering the benefits of the digital financial services experience built on <unk> principles.

Wisdom tree Prime is built for savings spending and investing in both native crypto assets or in Cocainize version of mainstream financial asset wisdom tree intends to be a product leader.

And that really is the key differentiator wisdom tree prime can be a customer's primary financial relationship across a wide range of assets and financial services, both simplifying the experience for customers while evolving.

<unk> business model.

We are so confident that assets will move to the blockchain because the efficiencies and enhancements are just too substantial to be ignored.

Near instant transfers and automation are embedded features and.

An investor communications globally can happen at virtually no cost.

The transformational technology is simply better than what exists today.

To me this opportunity feels very similar to where Etfs were 25 years ago.

Except that it is a much larger opportunity.

Slide please.

What does it mean for wisdom tree going forward.

Wisdom tree prime will be launching its beta test.

<unk> number of states in Q2.

With a national rollout by year end and global ambitions soon after that.

As a first mover in launching blockchain enabled funds.

Tokens, we have an opportunity to dominate the market in both beta and alpha generating strategies Lara.

Large addressable markets, where we can generate great economics scale quickly and significantly accelerate organic growth.

Additionally, wisdom tree primes role as the primary financial relationship for customers will unlock new Neo bank like revenue streams, such as payments transactions and net interest income both diversifying our topline revenue while accelerating.

Organic growth.

The cost of existing synergies as we've discussed.

We've already accomplished so much so efficiently.

We are very confident we can go after such an immense opportunity for what is really a small incremental spend.

We are the right company at the right time to make responsible <unk>.

A global reality next slide please.

As I said.

<unk> for a much larger role in financial services.

This page helps you visualize some of the features offerings and functionality we are building inside wisdom tree prime.

To some extent.

We have already seen the convergence of savings spending and investing.

But they are trying to fight Tomorrow's war with yesterday's technology.

Being native to the blockchain.

We will prove to be a differentiating advantage.

More broadly we havent seen anything close to wisdom tree holistic vision, the combination of <unk> and.

And easy to use mobile app.

That is native to the blockchain.

That can be the digital center of customers' financial lives.

The ability to save spend and invest in crypto as well as traditional mainstream asset.

And be a gateway to the digital ecosystem at large.

All with customer protections and transparency at the forefront next.

Next slide please.

Looking ahead.

We are positioned to build on the strong momentum in our existing business capturing more of the ever growing ETF pi through new and existing products and solutions.

We will continue to grow our digital assets revenue in crypto Etp's in Europe , and add crypto direct indexing.

And the work we have been doing behind the scenes in digital assets will begin to come to the forefront.

As I said wisdom tree Prime is targeting a second quarter beta test.

A select number of states, our national rollout by year end with global ambitions soon after that.

In summary, wisdom pre prime is an enhancement or evolution of today's already strong strategically well positioned growth business taken together, we expect these plants to generate significantly better organic growth along with enhanced and diversified economics.

Thank you we can now open up the call to questions.

Hello, Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered you were seeing with yourself from the queue. Please press the pound key.

And now I'd like to turn the call over to Jeremy Campbell head of Investor Relations with a few questions from the shareholders.

Thanks, Kevin and good morning, everybody.

Last quarter, we are going to start Q&A with some questions directly from our shareholders via the <unk> platform. As a reminder, we typically open up this platform a week before the call and we encourage shareholders to continue to participate and engage with us in the coming quarters as well.

So I'm going to direct our first question here too Jeremy Schwartz, our global Chief Investment Officer, and the question is how to rising rates and inflation impact your ETF products.

Well really what a timely question and it's very timely conversation infill.

Inflation and rising rates are wasting trees.

Top focus theme for 2022, when we are talking to clients.

So it's a great question I believe our diversified today with some key among the single best very best positioned asset managers in the market for inflation and so let's focus on three separate areas. Most directly for rates you had the fed meeting this week and this is going.

B a year four important change of the fed starting to hike rates and people are estimating where theyre going to hike, but they're starting to get lift off obviously euro essentially and we have the shortest duration U S. Treasury fund in the market with us So far which has just one week duration and now $2 billion of AUN.

And the last fed cycle, you had so far with the highest yielding treasury ETF in the market and we think thats likely to occur again during this cycle and so we're the clear market leader for that and it's a very exciting opportunity to be the best Treasury fund in the market.

Got it in fixed income, we have an innovative suite of duration hedged instruments for zero duration high yield and investment grade, but in short we had a great tool set for rising rates in the fixed income market, but secondly in commodities, which is one of the best inflation hedges roughly a third of our global AUN isn't commodity focused assets and.

You can see that in year to date performance, our top performing fund in the U S is our broad commodity fund.

Europe , where roughly a third of our total AUM is in commodities as a firm and you could see our market move in Europe is basically flat on the year when the S&P 500 is down almost 10% today.

So commodities, we're talking with clients very aggressively on how they could help serve as an inflation hedge and we're very very well positioned for that but finally within equities. The rising rates inflation theme has caused a major rotation away from speculative gross docs towards stocks with cash flows.

In form of dividends and buybacks and 45% or 35 of our $77 billion in value oriented quality strategies.

Our outperforming significantly during this rotation.

Perhaps the best example of many examples as TCR W wishes that dividend quality fund our largest fund in the U S say around $7 billion in the last three months when the large blend category was down 5% as of this morning, <unk> was up 1%, so making it the top 2% of the large one category.

Very exciting performing story for our biggest exposure in the U S. Showing we are very well positioned across bonds commodities and even within stocks were very well positioned for inflation and rising rates.

Great. Jeremy. This next one is also for you how do you think about the growth of your European business is it easier to launch products in Europe versus the U S and what trends are you seeing.

I am very excited about what we're seeing in Europe and for new products more generally we have an appendix slide Jeremy on slide 17 for new product launches and it shows some of the planted seeds for what I'd call. The next phase of exponential.

Growth in both Europe , and the U S.

Importantly, it is new asset classes that are diversifying revenue streams, but also broadening our potential so in Europe . We were historically very strong in commodities, but the last three years, we've shown based success in expanding to equities and diversifying on many levels. So.

And use it form our thematic exposures for things like artificial intelligence battery cloud cyber.

Our diversifying from our traditional value strategies, but they're also having a lot of success in with increased core quality strategy. We just talked about in the last question.

So the UCITS platform scaling to equities has been great. They are launching great innovative commodity strategies like carbon credits, which was perhaps one of the fastest funds to 200 million that I recall in a very short time last year and we have a strong pipeline of crypto exposures in baskets and you'll continue to see us do both tactical.

<unk>.

<unk> in Europe , and strategic use it it's been clear the new launches over the last three years have been driving flows. So we're very excited about European business.

Flexion that taken but in the U S too we've seen opening new markets and expanded opportunity sets in the U S and it may be a nuance that is underappreciated on the bottom part of slide 17, we show our efficient core suite, which has been really taking off over three years last year, we launched two funds.

That we're building on the success of our first efficient core those have to scale to $150 million of Aon quickly, but what's underappreciated. It's another unique attack on core beta which has been the dominant category for Etfs. So we are the first firm in this efficient core category could really replace core positions.

And I think you'll see us invest a lot more around these things so in short Europe , and the U S. Great new ideas to scale into new opportunities.

Great and then our final question from shareholders.

To answer this question I'd like to introduce will Peck, our head of digital assets to the call and will the question is how his wisdom tree positioning itself to capture growth in the crypto space and are you seeing adviser adoption.

Thanks, Jeremy you're absolutely I think we're very well positioned to capture growth in the crypto space over the past year I think a lot of our traditional competitors kind of waking up to the asset class and we made investments before that to really position ourselves well. This past year in growing forward. So for us. It's obviously, we've got a great suite of crypto etp's in the European market.

With a lot of momentum we've got ETF filings here in the states, we don't give no guidance on when those might be approved but we're very optimistic that ultimately spot Etfs will be approved here in the U S for bitcoin and deeper and as we discussed separately were also have <unk>.

<unk> direct indexing here in the U S, where we've seen a lot of advisor interest in adoption so far.

Finally, as John had mentioned earlier on the call wisdom tree Prime definitely plays into this we have a lot of exciting growth and innovation happening there and something we're very excited to see more of going forward.

Jeremy do you want to provide some more color on advisor interest in adoption.

For the crypto side, we're definitely seeing.

SMA is being one of the big opportunities, we're seeing our European business.

They've seen interesting the bitcoin and ethereum product as well as now a basket set of products, we're going to continue to innovate in Europe with directing campaign, but in the U S. The index options are.

Really the only way in town today, and we've got a robust indexing capability, we're continuing to innovate and try to make those available starting here in Q2 and through the end of the year.

Great. Thanks, Kevin we can now open it up to questions from our covering analysts.

Our first question comes from Dan Fannon with Jefferies.

Hi, everyone. This is actually Rick Roy filling in for Dan Fannon.

So exciting stuff you guys announced on the wisdom tree prime rollout, but taking a step back.

We've seen some fee rate degradation throughout this year and sort of based on the flow outlook and demand trends you guys.

<unk> outlined where do you kind of see the mix shift.

They're on fee rates in the next call. It 12 months to 24 months and if I could separately on the prime topic if.

If you could provide an update sort of on excuse me on regulatory approvals.

<unk> or perhaps maybe the digital banking features and then maybe for the more crypto oriented features that would be appreciated. Thank you.

So this is gino.

In terms of fee rates, it's going to be market sentiment driven.

Our fees of the existing funds had been very.

Consistent.

And there are some areas.

Where the fees are.

Lower like the floating rate treasuries, but then we also have in the zero duration bond funds.

Strong economics are higher fee captures an area that we've been seeing a lot of growth in.

<unk> has been in the emerging markets, where again, we also are capturing very strong fees. So it is hard to predict and then and then growth in our crypto Etp's would also be.

Better captures then.

40 basis points that we're averaging on the 77 billion of AUM today.

So that was your question. The next part of your question was please.

Right. So just on the wisdom tree Prime rollout this year just in terms of.

Inevitable regulatory approvals necessary for the digital banking.

Oriented features similar to the license like ally and such and then maybe if there are separate sort of.

Regulatory approvals needed for the crypto features if you could provide an update around those that'd be appreciated.

Well could you take the first crack at this.

Yes, so really we're navigating in I think a lot of people. This has been talked about a lot in the media a complex set of kind of regulation across different regulators.

And so we think we're having great dialogue with a number of different regulators I cant give us specific update on timelines for which regulator on which timeline but.

But we're feeling very optimistic in terms of the plan that John laid out in terms of beta testing in Q2 with a national rollout later this year.

Okay.

I would just add that regulatory engagement happens to be a strength of ours. So I feel pretty confident about our ability to execute on this.

Next question.

Our next question comes from Robert Lee with <unk>.

Hey, Good morning, everyone. This is Alex Murray for Rob Thanks for taking my questions I'm trying to get to.

Sense of the backdrop on the expense guidance given the rough start to the year and the market does this guidance include.

Market performance for the first couple of weeks over with this guidance determined prior to the year.

Hi.

Yes, that's me the guidance.

Current.

I wouldn't suggest that anything with respect to the recent backdrop would impact the guidance that we've given.

Okay great.

Follow up.

Think about the ramp up in flows in the model portfolio. It can we expect to see a steady build or the b like an inflection point there.

Got it.

Would you take that.

Sure.

Yes.

We've seen a steady build and we expect to continue to see a steady build and just given you.

A little color there I mean, we've been focused really on I think what are the two high opportunity channels that a lot.

March multi trillion dollar networks, such as Merrill and Morgan Stanley , where we have partnerships.

But then also on the other end of the spectrum, we provide customized models to small and mid size <unk> in IBD.

That's where we're putting our effort we've been.

Strengthening the relationships it.

That we've already closed and we've got a really good pipeline and we're adding new features and support.

So we expect short answer is we expect the traction to continue to build.

Great. Thanks for taking my questions.

Our next question comes from Brennan Hawken with UBS.

Good morning, Thanks for taking my questions.

Just like to ask a couple on the.

Crime.

You previously there was a prior question about regular regulators, but it wasn't completely clear to me, what which regulators, but whats. The plan here are you going to become a bank holding company or are you going to work with partner banks.

If you could just clarify that component of this strategy.

Why don't you start.

Becoming a bank holding company, we will work with partner banks as well as pursuing our own relevant state charters stay.

State charter and specifically, we're focused on New York right now.

Non banking charter, but something that allows us to.

Pursue different opportunities in this space, so no need to be a bank holding company.

Okay got it and then.

Maybe this is definitely wisdom tree has got a great reputation among financial advisers, you guys are viewed as innovators and absolutely have.

Had a great track record of innovation.

This seems to be though a pretty substantial shifts since.

Distribution capabilities into the financial advisor space in the wealth channel are different than direct to consumer broad financial App. So how is it that you are planning to make that tradition.

A transition sorry and.

What do you expect as far as marketing.

Spend marketing plan.

What can you add to maybe increase our understanding of the go to market strategy here.

Driving adoption.

Good question well, let me take this to start and maybe if you have anything you can add so.

First we've been.

Marketing to consumers from the direct to consumers from the very beginning though more narrowly only around investing but.

I would characterize our approach to customer acquisition for wisdom tree crime.

<unk>.

Leanne marketing principles, so test learn iterate there'll be data driven results oriented and trackable that will start small and then go aggressive cost effectively.

I'll tell you what we won't do.

We're not going to put our brand on.

Our sports stadium, we're not going to hire Mac deem it to be in our television commercials.

Now in addition to our marketing I think there'll be.

Very strong heavy emphasis.

<unk>.

Business development through partnerships. So that's another element that could be very very cost effective.

Scale is very quickly and then lastly, I would just say that we also in addition to what we're initially launching towards the direct to the consumer there is also going to be.

We envision an institutional user portal.

<unk> and four platforms, which is just another great synergy to our core business. So I think in combination we have a lot of advantages in skills and then like you said.

One way to do this more cost effectively as we have a very strong brand.

If markets incredibly well and with a great user experience, which we're committed to delivering I think we have the ability to really.

Virally market in virally grow so that's all I can share with you at this point.

That sounds good gentlemen, I'm glad I muted myself because.

When you said that about the stadiums and Matt Damon I was laughing.

Yeah.

A quick follow up on.

If I might maybe squeeze one more in.

So we've seen a filing from Graham <unk>.

Which.

Struck me is a little unusual to see.

Former leadership of a firm that had been acquired.

Express frustration.

Around.

The direction of the company.

Have you begun to have some dialogue with Graham.

Guests that you have just given the relationship there and.

Are you in a position to share at all some of the components of his frustration or what the source of his dissatisfaction.

So really we communicate often with all shareholders.

And that does include.

Mr Caldwell.

But the second part of your question you will have to discuss it directly with Mr talked about.

Yes fair enough.

Jonathan.

Thank you.

Our next question comes from Michael Cyprus with Morgan Stanley .

Hey, good morning, Thanks for taking the question, maybe just circling back to wisdom tree Prime I was hoping you could elaborate a bit more on the economics, how that will work I think you mentioned that you would expect some digital asset revenues by the end of 'twenty. Two maybe you could just elaborate a bit on what the composition you would expect that to look like more.

Near term, whereas I understand maybe more medium to longer term there could be other additive revenue pools over time.

Well why don't you start.

Yeah, absolutely I think it's a lot like what we had on the slide earlier, I'm forgetting, which page it was but some of the the same types of fees that a lot of fintech apps are able to earn so that could be like net interest income for example, various types of transaction fees like with a debit card interchange fee for example.

As well as your asset base fees or.

Blockchain enabled funds, where we might charge a management fee. So we think those are all in the paint and we're going to learn a lot with the beta test to be able to provide more guidance on that in future.

Okay.

Okay, and just maybe another follow up there on the wisdom tree prime and more broadly on the digital asset strategy can you just talk a little bit about the team that you have built out behind the digital asset strategy.

How large is the team and maybe talk a little bit about the head count ambitions that you have looking out over the next year or two for that team and maybe talk a little bit about.

Are you recruiting.

Expert talent from as well thank you.

Very exciting question for us well why don't you start.

Yes, I'm not sure we're giving specific guidance on like number of people I think we made an announcement earlier this year when a gentleman by the name of John Davidson and joined the team.

As our global head of financial crimes that were in the range of 15 that numbers higher than that now but not double then it for example, this isn't going to be like a huge mass of hundreds of people.

Ben We've got a great brand a lot of people in financial services, we'd like to work with us and we found that our story is resonating very well with technical and other talent in the market today.

Okay.

Okay. Thank you.

Our next question comes from Keith <unk> with Northcoast research.

Good morning, guys I'm going to continue that theme.

More questions about prime maybe I'm kind of naive here, because I think about the areas as a prime will be involved in it seems like the security risk because just massive in the amount of spending in your guidance, though you did increase.

The current year, it seems like that amount needs to be a lot higher I mean, you guys have partners that have allowed us security settings already in place or what's the underlying technology here that gets us comfortable that a lot more money won't be required to invest in this and what you guys are kind of disclosure here.

Well I think you should start and touch on security as well.

Yes, absolutely we're very confident guidance. We gave we did not feel like when we get to spend more than that on security and really thats from some of the great partners that we're working with obviously the currency is one of those although not the only partner that's.

Going to allow us to really focus on security here and start security remains a primary focus for us.

We think we've covered that well between the partners that we have and the spending guidance that we've given.

Okay I appreciate that and then as you kind of think about the investing here because again, it's a significant investment here I'm sure you guys have already made in 2022 is there a payback period of where you guys see where you can perhaps be profitable assuming that two or three years away from that you think.

I think thats, a little early for us to give guidance on.

We will see how quickly it ramps, but we are expecting we are building this with an eye towards very strong economics and relative strong economics relative to our ETP business.

Got you.

Just one quick more question here you guys talked a lot about like with Bitcoin fund in Europe , and the new orders you guys have released recently, but yet the uptake on those so it does not seem I guess as quick as we like to see I guess, you always want to see a quicker we'll look at it is it gives you guys the confidence that your bitcoin and crypto strategy.

Essentially take hold.

I think Jeremy can you go can you start on the customer demand I guess.

Well for sure.

Sure.

Crypto has been a very retail early adoptions. So advisers in the U S. As an example have not been able to access crypto and it remains very very difficult and that's why we think the SMA option is really the best option for advisors today as regulators had been slow to improve those strategies and we are.

To try to make our offerings in Europe ever more attractive I think we're going to continue to be at the forefront of innovation and we will be positioning those products for success there as well. So we have a multifaceted approach to a global crypto exposure than with some cream prime will give us further opportunities distribute that in our in our own.

<unk> wallet.

Great. Thanks, guys. Good luck.

And we do have a follow up question from Michael Cyprus with Morgan Stanley .

Oh, great. Thanks, I just wanted to circle back on the crypto direct indexing I know you had the partnership with on wrap as well I was just hoping you can elaborate a bit more on where those efforts stand today, how much in assets what the traction has been and maybe just elaborate a little bit on how exactly that works.

It's still very early days.

No no I was going to say Jeremy you might want to start maybe will theres. Some bite if you'd leave something off you could add on.

So please go Jeremy.

Sure.

It's very early days and there should be more opportunities.

I'd say, even though a large.

<unk> from.

Gemini coin based and some of the others. They are still building out their own functionality and youre seeing them make acquisitions in this space to further service. This market. So I think this will be a year, where youll see a lot more development, but where we are today, it's still very early days and we hope to have more updates through the course of the year.

That initial stance.

I would just add that I think the interest has been fantastic at the start I mean, we've seen it's clearly meeting a need that a lot of advisors have and we think it's been the right approach U S market, we're very optimistic about it.

Great I think we just put one final question and just on the European Crypto products, just an update on the traction that youre seeing there, particularly with the distribution platforms. Maybe you can just give us an update on how many platforms you're on right now and sort of what the outlook and the plan is we're getting more and more platforms in the next 12 months. Thank you.

Will do you want to start with Jeremy.

Got it you start yes.

I'm happy to start.

Spoke a little bit about this earlier I mean, certainly with this asset class and certainly with the types of clients that you have in Europe tend to be larger institutions Theres a long education.

And just information cycle with something like this I think we've done a very good job with that so far and we've got a great team in Europe focused on educating.

Their clients over there about this.

So we think we've done a lot of great work got a great team to do that.

Got a lot of momentum in it right now.

<unk>, we're not going to give guidance on platform relationships, or certainly which ones, but we remain very optimistic about that going into 'twenty two.

Okay.

Okay. Thank you.

And I'm not showing any further questions at this time elektron the call back over to Jonathan Steinberg Wisdom tree CEO for any closing remarks.

Thank you.

So in summary, let me just say that the existing business is growing very well we're at record AUM with the most diverse and.

Truly global that we've ever been.

The momentum with $700 million in flows in January .

Just talk to a very strong start and within with respect to the digital assets. We view this as.

Very holistic to the existing business, it's a clear extension of the existing business.

And because of that.

From your questions.

Our cost guidance has been very controlled around this and that's because we have so many.

Synergies that we're bringing to the table.

I think about.

Going back to ETF industry.

At the birth of it not going after the digital wallet and token position of funds and the assets on the blockchain not going after that opportunity would be very similar to the mutual fund companies.

Not going after Etfs.

They waited so long that they would let new brands like wisdom tree and Ishares take that opportunity, we're not going to allow that to happen.

And.

Vision is very important and we seem to be a very innovative perm in the eyes of many but tie.

Timing is everything.

And from the consumer standpoint, I would say youre at the lift off the lift off phase, meaning youre going from the early adopters to the mainstream.

And with risk and with respect to wisdom tree in the industry doing this our timing really is perfect.

Going from crypto currencies on the blockchain.

<unk>.

Dr Chin enabled fixed income and equities and commodities.

An area that we're really strong on.

And with respect to some of the early.

The early entrants into digital wallets as well as into neo banks.

You can't be too early.

And by that I mean.

Many have created these mobile apps.

But are using the old rails, so theyre not native to the blockchain and I can't stress enough that starting now.

Being native to the blockchain will prove to be one of the great differentiating advantages.

So I'll end the call there, but we look forward to updating you on our progress on future calls. Thank you everybody for your interest.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

[music].

Okay.

[music].

Ladies and gentlemen, thank you for standing by and walked through the Wisdom tree Q4, 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to turn the call over to your host Jessica its a little with some trees.

Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the WisdomTree Q4 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Jessica Zalew, WisdomTree's Head of Corporate Communications. You may begin. Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation.

Corporate Communications you may begin good morning, before we begin I would like to reference our legal.

Available if at all.

This presentation may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Speaker 1: This presentation may contain four looking statements within the meaning of the private security litigation reform act of 1995.

Speaker 1: 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 risk set forth in this presentation, and in the risk factor section of the Wiginsreep Annual Report on Form 10K for the year ended December 31st, 2020. In quarter of the report on Form 10Q for the quarter ended June 30th, 2021, and September 30th, 2021.

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 tree all our report on Form 10-K for the year.

31 2020, according to the report on Form 10-Q for the quarters ended June 30th 2021 and September 32021.

Speaker 1: We've been pretty assumed no duty and does not undertake to update any forward looking statement. Now, it is my pleasure to turn the call over to We're going to present and see you all in the next video.

We can treat assumes no duty and does not undertake to update any forward looking statements no. It isn't.

My pleasure to turn the call over to listen to your President and C O L. Jarrett lilien.

Okay.

Thanks, Jess and welcome everyone I'm going to start the call today discussing the highly successful quarter and year. We just concluded. This strong momentum we are riding into 2022, and some high level thoughts on our 2022 plan I will then turn it over to Brian to walk.

Speaker 2: Thanks, Jess, and welcome, everyone. I'm going to start the call today discussing the highly successful quarter and year we just concluded, the strong momentum we are riding into 2022, and some high-level thoughts on our 2022 plan. I will then turn it over to Brian to walk through Q4 results in more detail and provide an update on 2022 expense guide.

Talk through Q4 results in more detail and provide an update on 2022 expense guidance after Brian John and I will provide an update on our strategic initiatives and digital assets, including wisdom tree Prime our new direct to customer mobile App and then we'll open it up.

Speaker 2: After Brian , John will provide an update on our strategic initiatives and digital assets, including wisdom tree prime, our new direct to customer mobile app, and then we'll open it up for Q&A. So starting.

For Q&A.

So starting with Q4.

Speaker 2: The momentum has continued with strong organic growth in the quarter. Our $1.9 billion of organic flows marked our fifth consecutive quarter of inflows accentuated by tremendous breadth and depth with three times as many funds having inflows and outflows.

Speaker 2: And the momentum has continued into January , where we have generated over 600 million of net inflows, a rate that is outpacing 2021 flow levels, even in the face of a volatile market environment.

You'd into January where we have generated over $600 million of net inflows a rate that is outpacing 2021 slow levels, even in the face of a volatile market environment.

Speaker 2: Looking at 2021 in total, it was a highly successful year showcasing smart investments and growth coupled with increased efficiency and disciplined P&L management. For 2021, revenues increased 22%, operating margins expanded by over 30%, and operating income increased by 60%.

Looking at 2021 in total it was a highly successful year showcasing smart investments and growth coupled with increased efficiency and disciplined P&L management for 2021 revenues increased 22% operating margins expanded by over 30%.

And operating income increased by 60%.

Speaker 2: As we look ahead to 2022 and beyond, we are entering a new chapter, one that leverages core competencies and stays true to our core mission vision and values and is marked by a focus on strengthening and evolving our business, leveraging existing momentum and adding additional fuel for future growth.

As we look ahead to 2022 and beyond we are entering a new chapter one that leverages, our core competencies and stays true to our core mission vision and values and is marked by a focus on strengthening and evolving our business leveraging existing momentum and adding additional fuel for future.

It's your growth.

Speaker 2: In distribution, we will continue to invest in sales and marketing to gain even greater client mindshare. We will also launch WisdomTree Prime, adding a new direct-to-client distribution channel that brings us even closer to the end customer.

I am product.

Speaker 2: We remain committed to being an industry leader and on the cutting edge of providing products and solutions. In 2022, we planned a launch as many as 30 new exchange-traded products globally, including our recently announced family of artificial intelligence funds.

Speaker 2: We will also gain further traction in our managed models business, reaching more advisors through our current partners while also winning new mandates. At the same time, we will gain further traction in transparent crypto exposures through ETPs in Europe and direct indexing in the U.S. And as Janna will unpack further in a bit, we will launch tokenized versions of mainstream assets.

<unk> and Amit manage models business, reaching more advisers through our current partners. While also winning new mandates at the same time, we will gain further traction and transparent crypto exposures through Etp's in Europe , and direct indexing in the U S and as John <unk>.

<unk> further in a bit we will launch <unk> versions of mainstream assets.

Speaker 2: At the same time, we will continue to find ways to leverage our increasing scale, continue to exercise disciplined expense management, and continue to strengthen and evolve our operating model.

Speaker 2: Whether it's through ETPs and model flows or unlocking new revenue streams through tokenized assets and wisdom tree prime, our revenue and operating income over the next several years will be stronger, more diverse with better organic growth in in prior years.

Prime our revenue and operating income over the next several years will be stronger more diverse with better organic growth than in prior years.

Speaker 2: Finally, we will continue to leverage and invest in our talented team.

Speaker 2: In addition to the recent announcement that Harold Singleton has joined our Board of Directors adding expertise and a fresh perspective.

Speaker 2: I was proud to see us recognized for the second consecutive year as the best places to work in the U.S. and a great place to work in the U.K.

I was proud to see us recognized for the second consecutive year as the best places to work in the U S and a great place to work in the UK.

Speaker 2: All in all, we had a very successful Q4 in 2021.

All in all we had a very successful Q4 and 2021, we are executing well and carrying momentum into 2022, and we are excited about our positioning in the U S and in Europe and in our ability to differentiate generate organic growth and fuel upside and now I will turn.

Speaker 2: We are executing well and carrying momentum into 2022, and we are excited about our positioning in the US and in Europe , and in our ability to differentiate, generate organic growth and fuel up size.

Speaker 2: And now, I'll turn it over to Brian to walk through the numbers.

It over to Brian to walk through the numbers.

Thank you Jarrod.

Speaker 3: Our AUM at December 31st was 77.5 billion.

Our AUM at December 31 was 77 5 billion.

Speaker 3: ending the year at a record and representing an increase of 7% versus the prior quarter. Our average AUM was $76 billion.

Ending the year at a record and representing an increase of 7% versus the prior quarter.

Our average AUM was 76 billion.

Fourth consecutive record quarter.

Speaker 3: Our AUM was driven by positive market movement and netting.

Our AUM was driven by positive market movement, and net inflows, we generated $1 9 billion of inflows during the quarter.

Speaker 3: We generated 1.9 billion of inflows during the quarter.

Flows of this magnitude represent our best quarter since 2015, and we had five consecutive positive in flowing quarters.

Speaker 3: flows of this magnitude represent our best quarters in 2015. And we've had five consecutive positive inflowing quarters.

Our U S business generated most of these flows and for the full year brought in $5 billion of inflows.

Speaker 3: Our US business generated most of these flows and for the full year brought in 5 billion of inflows. Our best year since 2015.

Our best year since 2015.

During the quarter Europe flows were flat.

Speaker 3: However, we've seen favorable trends in our European use of products, which generated over 600 million in flows during the quarter, were 1.8 billion per year, an organic growth rate of 105%.

However, we've seen favorable trends in our European UCITS products, which generated over $600 million in flows during the quarter.

One 8 billion for the year, an organic growth rate of 105%.

Our physical gold product suite revamp has also proven successful with lower fee products launched in 30, Etfs acquisition generating inflows and now representing 40% of our gold AUM.

Speaker 3: Our physical gold product suite revamp has also proven successful with lower fee products launched since our ETF acquisition generating inflows and now representing 40% of our gold AUM. However, outflows from legacy gold products have increased.

Never outflows from legacy gold products remain a headwind.

Speaker 3: Our AUM currently stands at about $76 billion, lower than where we ended the quarter due to negative markets.

Our AUM currently stands at about 76 billion lower than where we ended the quarter due to negative market movement.

Speaker 3: However, inflows in January are over 600 million and continuing the positive momentum witnessed over the course of last year.

However, inflows in January are over $600 million and continuing the positive momentum witnessed over the course of last year.

Next slide please.

Revenues were $79 million, an increase of 1% from the prior quarter due to higher average AUM.

Speaker 3: Revenues were $79 million, an increase of 1% from the prior quarter due to higher average AUM offset by a slightly lower fee rate.

Offset by a slightly lower fee rate.

Speaker 3: Adjusted net income was $15.7 million, or $0.10 a share, unchanged from the prior quarter.

Adjusted net income was $15 7 million or 10 cents a share.

<unk> from the prior quarter.

Speaker 3: This quarter we recognize the non cash after tax loss of 3 million for our future goal commitment.

This quarter, we recognized a noncash after tax loss of $3 million for our future gold commitment payment and $1 $5 million and other net nonoperating losses.

Speaker 3: and 1.5 million in other net non-operating losses. Next slide. It's time for a single net non-operating losses.

Next slide.

Our operating income margin was 29%.

A two point decline from the prior quarter due to higher expenses, which we will cover on the next slide.

Speaker 3: 2 point declines from the prior quarter due to higher expenses which we will cover on the next slide. Our growth margin was 80.5%.

Our gross margin was 85%.

Largely unchanged from the prior quarter.

Next slide please.

Our operating expenses were up 5% for the quarter due to higher compensation and marketing expenses.

Speaker 3: Our operating expenses were up 5% for the quarter due to higher compensation and marketing expenses. We

We experienced some seasonality in our marketing spend which tends to pick up as compared to the summer months in the third quarter.

Speaker 3: which tends to pick up is compared to the summer months in the third quarter.

Speaker 3: Our compensation and discretionary spending ended the year at $88 million and $44 million respectively.

Our compensation and discretionary spending ended the year at $88 million and 44 million respectively.

Speaker 3: at the lower end of our revised guidance communicated last quarter.

At the lower end of our revised guidance communicated last quarter.

Next slide.

Now I'd like to provide some guidance on how we're thinking about expenses for 2022.

Speaker 3: Now I'd like to provide some guidance on how we're thinking about expenses for 2022.

Speaker 3: We are forecasting our compensation expense to range from $92 to $102 million.

We are forecasting your compensation expense to range from $92 million to $102 million.

This guidance contemplates hiring for our core business and expanding our digital asset team in anticipation of our launch of wisdom tree Prime later this year.

Speaker 3: This guidance contemplates hiring for a core business and expanding our digital assets.

Speaker 3: an anticipation of our launch of wisdom tree prime later this year.

Speaker 3: It also includes compensation adjustments made for our current employee base, given inflationary pressures and the-

It also includes compensation adjustments made for our current employee base, given inflationary pressures and the competitive landscape.

Speaker 3: However, operating as a remote first company is served to mitigate these factors.

However, operating as the remote first company has served to mitigate these factors.

Also just a reminder, that we experienced elevated seasonality and the amount of compensation that we report in the first quarter as.

Speaker 3: Also, just a reminder that we experience elevated seasonality in the amount of compensation we report in the first quarter as we recognize payroll taxes, benefits, and other items in connection with the payment.

As we recognize payroll taxes benefits and other items in connection with the payment of year end incentive compensation.

Speaker 3: Scressionary spending ranges from 49 to 57.

Discretionary spending ranges from 49% to $57 million, an increase from our 2021 spend of $44 million.

Speaker 3: an increase from our 2021 standard 44

Speaker 3: Some of this increase assumes that the pandemic is behind us and are spending migrates towards pre-pandemic levels.

Some of this increase assumes that the pandemic is behind us and are spending migrates towards pre pandemic levels.

Speaker 3: This increase is also influenced by our forecasted digital access.

This increase is also influenced by our forecast the digital assets.

Our digital asset spend which is included in the guidance just communicated is anticipated to range from $9 million to $14 million.

Speaker 3: Our digital assets spend, which is including the guidance just communicated, is anticipated to range from 9 to 14 million.

Speaker 3: This includes both compensation and discretionary spending.

This includes both compensation and discretionary spending such as professional fees marketing product development and other related expenses.

Speaker 3: professional fees, marketing, product development, and other related expenses.

Speaker 3: While our spend is higher than last year, run rate digital asset revenue at the end of 2022 should provide adequate air cover taking into consideration our existing crypto ETPs in Europe and direct index.

While our spend is higher than last year run rate digital asset revenue at the end of 2022 should provide adequate air cover taking into consideration our existing crypto etp's in Europe and direct indexing revenue.

Speaker 3: The range and spend is dependent on the timing of the WisdomTree Prime rollout and additional products and features to be launched.

The range and spend is dependent on the timing of the wisdom tree prime rollout and additional products and features to be launched.

Speaker 3: Our growth margin is anticipated to be between 80 and 81 percent, unchanged from...

Our gross margin is anticipated to be between 80 and 81%.

Unchanged from 2021.

Speaker 3: Our contractual gold payment expenses forecasted to be $17 million. Assuming gold prices remain flat.

Our contractual gold payment expense is forecasted to be $17 million.

<unk> gold prices remain flat at current levels.

Speaker 3: As a reminder, this expense is based on us paying 9,500 ounces of gold on an annual basis and is measured based upon monthly average gold price.

As a reminder, this expense is based on us paying 9500 ounces of gold on an annual basis and is measured based upon monthly average gold prices.

Speaker 3: Third-party distribution expense is forecasted to be 9.5.

Third party distribution expense is forecasted to be $9 5 million.

Speaker 3: This assumes continued growth on our Latin American platform and new platforms being launched in Europe .

This assumes continued growth in our Latin American platform and new platforms being launched in Europe .

And our adjusted tax rate is expected to be between 21 and 22%.

Speaker 3: and our adjusted tax rate is expected to be between 21 and 22%.

Speaker 3: faced upon the mix of the earnings contribution of our US and European businesses. That's all I have.

Based upon the mix of the earnings contribution of our U S and European businesses.

That's all I have I'll now turn the call over to Jonathan.

Speaker 4: Thank you, Brian . Jared and Brian did a great job showcasing our success in 2021 and the strength of our existing business.

Thank you Brian .

Jared and Bryan did a great job showcasing our success in 2021 and the strength of our existing business today I'm going to give more details on our digital asset initiatives.

Speaker 4: Today I'm going to give more details on our digital assets.

Speaker 4: WisdomTree has been positioning itself really for the last few years for the next big structural revolution, not evolution, but revolution in financial services.

Wisdom tree has been positioning itself really the last few years for the next big structural Revolution, not evolution, but revolution in financial services.

Speaker 4: It's the convergence of blockchain technology with universal smartphone ownership and tokenization with smart contracts that will effectively blur the lines between savings, payments, and investments.

Speaker 4: fundamentally changing the way consumers view and interact with their own money and assets.

Fundamentally changing the way consumers view and interact with their own money and assets.

Speaker 4: This page helps illustrate our synergies and advantages in navigating and exploiting the opportunity that we've been calling Responsible DeFi.

This page helps illustrate our synergies and advantages in navigating and exploiting the opportunity that we have been calling responsible <unk>.

We are already in the business of providing regulated transparent liquid exposures.

Speaker 4: We are already in the business of providing regulated, transparent liquid exposure.

Speaker 4: We have the product manufacturing and investment capabilities. We have the legal and compliance foundation.

We have the product manufacturing and investment capabilities.

We have the legal and compliance foundation.

Content research and marketing prowess.

Speaker 4: deep relationships with best-in-class service providers and a well-earned reputation of investor-friendly innovation.

Deep relationships with best in class service providers, and a well earned reputation of investor friendly innovation.

Our approach regarding digital asset is about how we can best use our synergies to most cost effectively capitalize on the coming digital transformation.

Speaker 4: Our approach regarding digital assets is about how we can best use our centers.

Speaker 4: to most cost effectively capitalized on the coming digital transformation.

Speaker 4: This includes leveraging the RegTech capabilities of our partner, SecureNC.

This includes leveraging the Reg tech capabilities of our partner secure and seek to provide compliant secure and Auditable holdings with robust identity protection.

Speaker 4: provide compliant, secure and audible holdings with robust identity protection.

Crypto Etp's and crypto direct indexing is an exciting extension of our existing business and already generating revenues.

Speaker 4: and crypto direct indexing is an exciting extension of our existing business and already generating revenue.

Speaker 4: but crypto assets are just one application of the underlying blockchain technology. So let me show you where we are.

But crypto asset.

Just one application of the underlying blockchain technology.

So let me show you, where we are headed.

Next slide please.

Speaker 4: I'm excited to introduce Wisdom 3 Prime, our new financial services mobile app.

I'm excited to introduce wisdom tree Prime our new financial services mobile App.

Speaker 4: This digital wallet, made as to the blockchain, will bring the look and feel that users are accustomed to from traditional mobile apps. While at the same time offering the benefits of the digital financial services experience built on DeFi print.

Speaker 4: Wisdom Tree Prime is built for saving, spending, and investing in both native crypto assets or in tokenized versions of mainstream financial assets where Wisdom Tree intends to be a product leader.

Wisdom tree Prime is built for savings spending and investing in both native crypto asset or in Cocainize versions of mainstream financial assets, where wisdom tree intends to be a product leader.

Speaker 4: and that really is a key differentiator wisdom free prime

Speaker 4: across a wide range of assets and financial services, both simplifying the experience for customers while evolving WisdomTree's business model.

<unk> business model.

Speaker 4: We are so confident that assets will move to the blockchain because the efficiencies and enhancements are just too substantial to be ignored.

We are so confident that assets will move to the blockchain because of the efficiencies and enhancements are just too substantial to be ignored.

Near instant transfers and automation are embedded features and.

Speaker 4: Near instant transfers and automation are embedded.

Speaker 4: and investor communications globally can happen at virtually no cost.

An investor communications globally can happen at virtually no cost.

Speaker 4: The transformational technology is simply better than what exists today.

The transformational technology is simply better than what exists today.

Speaker 4: To me, this opportunity feels very similar to where ETFs were 25 years ago, except that it is a much larger opportunity.

To me this opportunity feels very similar to where Etfs were 25 years ago.

Except that it is a much larger opportunity.

Slide please.

What does it mean for wisdom tree going forward.

Speaker 4: WisdomTree Prime will be launching its beta test in a select number of states in Q2, with a national rollout by year-end and global availability by year-end.

Wisdom tree prime will be launching its beta test.

<unk> number of states in Q2.

With a national rollout by year end and global ambitions soon after that.

As a first mover in launching blockchain enabled funds.

Speaker 4: As a first mover in launching, blockchain enabled fun.

Speaker 4: tokens, we have an opportunity to dominate the market in both beta and alpha generating strategies.

And tokens, we have an opportunity to dominate the market in both beta and alpha generating strategies.

Speaker 4: large addressable markets where we can generate great economics, scale quickly, and significantly accelerate organic growth.

Large addressable markets, where we can generate great economics scale quickly and significantly accelerate organic growth.

Speaker 4: Additionally, WisdomTree Prime's role as the primary financial relationship for customers will unlock new neo-economic opportunities.

Speaker 4: such as payments, transactions, and net interest in...

Speaker 4: both diversifying our top-line revenue while accelerating organic growth.

Organic growth.

Speaker 4: Because of existing synergies, as we've discussed, we've already accomplished...

The cost of existing synergies as we've discussed we've.

We've already accomplished so much so efficiently.

Speaker 4: We are very confident we can go after such an immense opportunity for what is really a small incremental spend.

We're very confident we can go after such an immense opportunity for what is really a small incremental spend.

Speaker 4: We are the right company at the right time to make responsible DeFi a global reality. Next.

We are the right company at the right time to make responsible defy a.

A global reality next slide please.

As I said.

Speaker 4: playing for a much larger role in financial service.

We're playing for a much larger role in financial services.

Speaker 4: This page helps you visualize some of the features, offerings, and functionality we are building inside WisdomTree Prime.

This page helps you visualize some of the features offerings and functionality we are building inside wisdom tree prime.

Speaker 4: To some extent, we have already seen the convergence of savings, spending, and investment.

To some extent.

We have already seen the convergence of savings spending and investing.

Speaker 4: But they are trying to fight tomorrow's war with yesterday's technology. Being native to the blockchain will be a challenge.

But they are trying to fight Tomorrow's war with yesterday's technology.

Being native to the blockchain.

Will prove to be a differentiating advantage.

Speaker 4: More broadly, we haven't seen anything close to WisdomTree's holistic vision, the combination of an easy-to-use mobile app.

More broadly we havent seen anything close to wisdom tree holistic vision, the combination of <unk> and.

And easy to use mobile app.

Thats native to the blockchain.

Speaker 4: that can be the digital center of a customer's financial life.

That can be the digital center of our customers' financial lives with.

Speaker 4: with the ability to save, spend, and invest in crypto, as well as traditional mainstream apps.

The ability to save spend and invest in crypto as well as traditional mainstream asset.

And be a safe gateway to the digital ecosystem at large.

Speaker 4: and be a safe gateway to the digital ecosystem at large.

Speaker 4: all with customer protections and transparency at the forefront.

All with customer protections and transparency at the forefront.

Next slide please.

Looking ahead.

We are positioned to build on the strong momentum in our existing business capturing more of the ever growing ETF pi through new and existing products and solutions.

Speaker 4: We are positioned to build on the strong momentum in our existing business, capturing more of the ever-growing ETF pie through new and existing products and solutions.

Speaker 4: We will continue to grow our digital assets revenue in crypto ETPs in Europe and add crypto direct.

We will continue to grow our digital assets revenue and crypto Etp's in Europe , and add crypto direct indexing.

Speaker 4: and the work we have been doing behind the scenes in digital assets will begin to come to the forefront.

And the work we have been doing behind the scenes in digital assets will begin to come to the forefront.

Speaker 4: As I said, WisdomTree Prime is targeting a second quarter beta test in a select number of states, a national rollout by year end with global ambition soon after that.

As I said wisdom tree Prime is targeting a second quarter beta test.

A select number of states, our national rollout by year end with global ambitions soon after that.

Speaker 4: In summary, WisdomTree Prime is an enhancement or evolution of today's already strong, strategically well-positioned growth business. Taken together, we expect these plants to generate significantly better organic growth along with enhanced and diversified economics. Thank you.

In summary, wisdom tree Prime is an enhancement or evolution of today's already strong strategically well positioned growth business taken together, we expect these plans to generate significantly better organic growth along with enhanced and diversified economics.

Thank you we can now open up the call to questions.

Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.

Speaker 5: Well, ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. And now I'd like to turn the call over to Jeremy Campbell, head of investor relations, with a few questions from the shareholders.

And now I'd like to turn the call over to Jeremy Campbell head of Investor Relations with a few questions from the shareholders.

Speaker 6: Thanks, Kevin, and good morning, everybody. Similar to last quarter, we're going to start Q&A with some questions directly from our shareholders via the Stay platform. As a reminder, we typically open up the platform a week before the call, and we encourage shareholders to continue to participate and engage with us in the coming quarters as well.

Thanks, Kevin and good morning, everybody.

Similar to last quarter, we're going to start Q&A with some questions directly from our shareholders via the state platform. As a reminder, we typically open up this platform a week before the call and we encourage shareholders to continue to participate and engage with us in the coming quarters as well.

Speaker 6: So I'm going to direct our first question here to Jeremy Schwartz, our Global Chief Investment Officer. The question is, how do rising rates and inflation impact your EPS products?

So I wanted to direct our first question here too Jeremy Schwartz, our global Chief Investment Officer, and the question is how to rising rates and inflation impact to your ETF products.

Speaker 7: Well really, what a timely question and a very timely conversation. Inflation and rising rates are wisdom trees.

Well really what a timely question and it's very timely conversation infill.

Inflation and rising rates are wasting trees.

Speaker 7: top focus theme for 2022 when we are talking to clients.

Top focus theme for 2022, when we are talking to clients.

Speaker 7: And so it's a great question. I believe our diversified AUM today has Winsome Tree among the single best or very best positioned asset managers in the market for inflation. And so let's focus on three.

And so it's a great question I believe our diversified <unk> today has wisdom tree among the single best their very best positioned asset managers in the market for inflation and so let's focus on three separate areas. Most directly for rates you had the fed meeting this week and this is going.

Speaker 7: separate areas. Most directly for rates, you had the Fed meeting this week and this is going to be a year for important change of the Fed.

B a year four important change of the fed starting to hike rates and people are estimating where theyre going to hike, but they're starting to get lift off of zero essentially and we have the shortest duration U S. Treasury fund in the market with U S. Thus far which has just one week duration and now $2 billion.

Speaker 7: starting to hike rates, and people are guesstimating where they're going to hike, but they're starting to get lift-off off zero, essentially. And we have the shortest duration U.S. Treasury fund in the market with USFR, which has just one week duration and now $2 billion of AUM. In the last Fed cycle, USFR was the highest yielding Treasury.

And the last fed cycle, you had so far was the highest yielding treasury ETF in the market and we think thats likely to occur again during this cycle and so we're the clear market leader for that.

Speaker 7: in the market and we think that's likely to occur again during this cycle. And so we're the clear market leader for that and it's a very exciting opportunity to be the best.

Very exciting opportunity to be the best Treasury fund in the market that's not it in fixed income we have an innovative suite of duration hedged instruments for zero duration high yield and investment grade, but in short we have a great tool set for rising rates in the fixed income market, but secondly in commodities, which is one of the best inflation hedge.

Speaker 7: treasury fund in the market, but that's not it in fixed income. We have an innovative suite of duration-hedged instruments for zero-duration, high-yield and investment-grade, but in short, we have a great tool set for rising rates in the fixed-income market.

Speaker 7: But secondly, in commodities, which is one of the best inflation hedges, roughly a third of our global A&M is in commodity-focused assets. And you can see that in your-to-date performance, our top performing fund in the US is our Broad Commodities Fund in Europe .

Is it roughly a third of our global AUN isn't commodity focused assets and you can see that in year to date performance our top performing fund in the U S is our broad commodity fund.

Speaker 7: where roughly a third of our total AUM is in commodities as a firm. You can see our market move in Europe is basically flat on the year when the S&P 500 is down almost 10% today. And so commodities, we're talking with clients very aggressively on how they could help serve as an inflation hedge, and we're very, very well positioned for that. But finally, within equities, the rising rates inflation theme has caused a major rotation away from speculative growth stocks

Europe , where roughly a third of our total AUM is in commodities as a firm and you could see our market move in Europe is basically flat on the year when the S&P 500 is down almost 10% today.

Speaker 7: stocks with cash flows in form of dividends and buybacks, and 45% or 35 of our $77 billion is in value-oriented quality strategies that are outperforming significantly during this rotation. Perhaps the best example of many examples is DGRW, which is the Dividend Quality Fund, our largest fund in the U.S. today, around $7 billion. In the last three months,

In form of dividends and buybacks and 45% or 35 of our $77 billion in value oriented quality strategies.

Our outperforming significantly during this rotation.

Perhaps the best example of many examples as TCR W wishes that dividend quality fund our largest fund in the U S. Today around 7 billion in the last three months when the large blend category was down 5% as of this morning, <unk> was up 1%, so making it the top 2% of the large one category.

Speaker 7: When the large Glenn category was down 5% as of this morning, the GRW was up 1%, so making it the top 2% of the large Glenn category, a very exciting performance story for our biggest exposure in the US, showing we are very well positioned across bonds, commodities, and even within stocks, we are very well positioned for inflation and rising rates.

Very exciting performance story for our biggest exposure in the U S. Showing we are very well positioned across bonds commodities and even within stocks were very well positioned for inflation and rising rates.

Speaker 6: Great. Jeremy, this next one is also for you. How do you think about the growth of your European business? Is it easier to launch products in Europe versus the U.S.? And what trends are you seeing?

Great. Jeremy. This next one is also for you how do you think about the growth of your European business is it easier to launch products in Europe versus the U S and what trends are you seeing.

Speaker 7: I am very excited about what we're seeing in Europe , and for new products more generally. We have an appendix slide, Jeremy, on slide 17 for new product launches, and it shows some of the planted seeds for what I'd call the next phase of exponential growth in both Europe and the U.S.

Growth in both Europe , and the U S.

Speaker 7: new asset classes that are diversifying revenue streams, but also broadening our potential. So in Europe , we were historically very strong in commodities, but the last three years we've shown big success in expanding to equities.

Speaker 7: And that's diversifying on many levels. So in use of form are thematic exposures for things like artificial intelligence, battery,

And use it form our thematic exposures for things like artificial intelligence battery cloud cyber those are diversifying from our traditional value strategies, but they're also having a lot of success in with increased core quality strategy. We just talked about in the last question.

Speaker 7: cloud, cyber, those are diversifying from our traditional value strategies, but they're also having a lot of success in WisdomTree's core quality strategy we just talked about in the last question.

Speaker 7: And so the usage platform scaling to equities has been great.

So the UCITS platform scaling to equities has been great, they're launching a great innovative commodity strategies like carbon credits, which was perhaps one of the fastest funds to 200 million that I recall in a very short time last year and we have a strong pipeline of crypto exposures in baskets and you'll continue to see us do both tactical.

Speaker 7: They're launching a great innovative commodity strategies like carbon credits, which was

Speaker 7: perhaps one of the fastest funds to $200 million that I recall in a very short time last year. And we have a strong pipeline of crypto.

Speaker 7: Exposures and baskets and you're continue to see us do both tactical

Paul.

Speaker 7: ETPs in Europe and strategic usage, it's been clear the new launches over the last three years have been driving flows, so we're very excited about European business and the inflection that's taking place.

<unk> in Europe , and strategic you said, it's been clear the new launches over the last three years have been driving flows. So we're very excited about European business.

Speaker 7: But in the U.S. too, we've seen opening new markets and expanded opportunity sets in the U.S. And it may be a nuance that is underappreciated. On the bottom part of slide 17, we show our Efficient Core suite, which has been really taking off over three years. Last year, we launched two funds that were building on the success of our first Efficient Core. Those have scaled to $150 million today and quickly.

They were building on the success of our first efficient core those have to scale to 150 million a day of them quickly, but what's underappreciated. It's another unique attack on core beta which has been the dominant category for Etfs. So were the first firm in this efficient core category to really replace core positions.

Speaker 7: But what's underappreciated is it's another unique attack on core beta, which has been the Dominic category for ETF. So we're the first firm in this efficient core category to really replace core positions.

Speaker 7: And I think you'll see us invest a lot more around these things. So, so in short, Europe and the U.S.

And I think you'll see us invest a lot more around these themes. So so in short Europe and the U S great new ideas to scale into new opportunities.

Speaker 7: Great new ideas to scale and to do opportunities.

Speaker 6: Great. And then our final question from shareholders to answer this question. I'd like to introduce Will Peck, our head of digital assets to the call. And will the question is, how is wisdom free positioning itself to capture growth in the crypto space? And are you seeing advisor adoption? Thanks, Jeremy.

Great and then our final question from shareholders.

Speaker 6: capture growth in the crypto space. Over the past year I think a lot of our traditional competitors kind of waking up to the asset class and we made investments before that to really position ourselves well this past year and growing forward.

Speaker 6: So for us, it's obviously we've got a great suite of crypto ETPs in the European market with a lot of momentum. We've got ETF filings here in the States.

Speaker 6: You know, we don't have no guidance on when those might be approved, but we're very optimistic that ultimately SPOT ETFs will be approved here in the U.S. for Bitcoin and Ether. And as we discussed separately, we also have SMAs, direct indexing here in the U.S., where we've seen a lot of advisor interest and adoption so far.

<unk> direct indexing here in the U S, where we've seen a lot of advisor interest in adoption so far.

Speaker 6: And finally, as Jono mentioned earlier on the call, WisdomTree Prime definitely plays into this. We have a lot of exciting growth and innovation happening there and something we're very excited to see more of going forward.

And finally as John mentioned earlier on the call Wisdom tree Prime definitely plays into this we have a lot of exciting growth and innovation happening there and something we're very excited to see more of going forward.

Speaker 6: So Jeremy, do you want to provide some more color on advisor interest and adoption?

So Jeff do you want to provide some more color on advisor interest in adoption.

Speaker 7: For the crypto side, we're definitely seeing, for SMAs, be one of the big opportunities. We're seeing our European business.

Or the crypto side, we're definitely seeing.

For SMA being one of the big opportunities, we're seeing our European business.

Speaker 7: They've seen interest in the Bitcoin and Ether products, as well as now a basket set of products. We're going to continue to innovate in Europe with direct ETPs, but in the U.S., the index options are really the only way in town today. And we've got a robust indexing capability. We're going to continue to innovate and try to make those available, starting here in Q2 and through the end of the year.

<unk> seen interest in the bitcoin and ethereum product as well as now a basket set of products, we're going to continue to innovate in Europe with directing campaign, but in the U S. The index options are.

Really the only way in town today, and we've got a robust indexing capability, we're continuing to innovate and try to make those available starting here in Q2 and through the end of the year.

Speaker 5: Great, thanks. Kevin, we can now open it up to questions from our covering analysts. Our first question.

Great. Thanks, Kevin we can now open it up to questions from our covering analysts.

Our first question comes from Dan Fannon with Jefferies.

Hi, everyone. This is actually Rick Roy filling in for Dan Fannon.

Speaker 6: Hi, everyone. This is actually Rick Roy filling in for Dan Fannin. So exciting stuff you guys announced on the WisdomTree Prime rollout. But taking a step back, we've seen some fee rate degradation throughout this year. And, you know, sort of based on the flow outlook and demand trends you guys have just outlined, you know, where do you kind of see the makeshift there on fee rate in the next, call it, 12 to 24?

So exciting stuff you guys announced on the wisdom tree prime rollout, but taking a step back.

We've seen some fee rate degradation throughout this year and sort of based on the flow outlook and demand trends you guys.

I've just outlined.

Where do you kind of see the mix shift there on fee rate in the next call. It 12 months to 24 months.

Speaker 8: that they could separately on the prime topic uh... if you could provide update for the month on

Separately on the prime topics.

If you could provide an update sort of on excuse me.

Speaker 8: on regulatory approvals, particularly for perhaps maybe digital banking features and then maybe for the more crypto-oriented features that

On regulatory approvals, particularly or perhaps maybe the digital banking features and then maybe for the more crypto oriented features that would be appreciated. Thank you.

Speaker 4: Um, so this is Jono. You know, in terms of fee rates, it's going to be market sentiment driven. Um, you know, our fees of the existing funds have been very, um, consistent. Um, and there are some areas, um, where the fees are, uh...

So this is John .

In terms of fee rates, it's going to be market sentiment driven.

Our fees of the existing funds had been very.

Consistent.

And there are some areas.

Where the fees are.

Lower like the floating rate treasuries, but then we also have in the zero duration bond funds.

Speaker 4: lower like the floating rate treasuries, but then we also have in the zero duration bond funds, you know, strong economics or higher fee captures, an area that we've been seeing a lot of growth in.

Strong economics are higher fee captures an area that we've been seeing a lot of growth in.

Speaker 4: has been in the emerging markets where again we also are capturing very strong fees. So it's hard to predict and then growth in our crypto ETPs would also be better in captures than the 40 basis points that were averaging on the 77 billion of AUM today. So that was your few question. The next part of your question was...

Has been in the emerging markets, where again, we also are capturing very strong fees. So it's hard to predict and then and then growth in our crypto Etp's would also be.

Better captures than the 40 basis points that we're averaging on the 77 billion of AUM today.

So that was your question.

Next part of your question was please.

Speaker 8: Right, so just on the wisdom tree primeral out this year, just in terms of, you know, inevitable regulatory approvals necessary for the digital banking oriented features, similar to the likes of like Ally and such, and then maybe if they're separate sort of, you know, regulatory approvals needed for the crypto features, you could provide that data around those that'd be appreciated.

Right. So just on the wisdom tree Prime rollout this year just in terms of.

Inevitable regulatory approvals necessary for the digital banking.

Oriented features similar to the like for like Al and such and then maybe if there are separate sort of.

Regulatory approvals needed for the crypto features if you could provide an update around those that would be appreciated.

Well could you take the first crack at this.

Speaker 6: Yeah. So, you know, really we're navigating, and I think a lot of people, this has been talked about a lot in the media, a complex set of kind of regulation across different regulators. And so we think we're having great dialogue with a number of different regulators. I can't give a specific update on, you know, timelines for which regulator on which timeline, but we're feeling very optimistic in terms of the plan that Jono laid out in terms of beta testing in Q2 with a national rollout later this year.

Yes, so really we're navigating in I think a lot of people. This has been talked about a lot in the media a complex set of kind of regulation across different regulators.

And so we think we're having great dialogue with a number of different regulators I cant give us specific update on timelines for which regulator on which timeline.

But we're feeling very optimistic in terms of the plan that John laid out in terms of beta testing in Q2 with a national rollout later this year.

Speaker 4: Okay. And I would just add that regulatory engagement happens to be a strength of ours, so I feel pretty confident about our ability to execute on this. Next question? Okay.

Okay.

I would just add.

That regulatory engagement happens to be a strength of ours, so I feel pretty confident about our ability to execute on this.

Next question.

Our next question comes from Robert Lee with <unk>.

Speaker 5: Hey, good morning, everyone. This is Alex Murray for Rob. Thanks for taking my questions. Trying to get a sense of the backdrop on the expense guidance. You know, given the rough start to the year in the market, does this guidance include market performance for the first couple weeks, or was this guidance determined prior to the year?

Hey, Good morning, everyone. This is Alex Murray for Rob Thanks for taking my questions I'm trying to get to.

A sense of the backdrop on the expense guidance given the rough start to the year and the market does this guidance include <unk>.

Performance.

First couple of weeks over with this guidance determined prior to the year.

Speaker 3: Yeah, that's me. The guidance is current. I mean, I wouldn't suggest that anything with respect to the recent backdrop would impact the guidance.

Hi, Brian .

Yes. That's me the guidance is the guidance is current.

I wouldn't suggest that anything with respect to the <unk>.

Absent backdrop would impact the guidance that we had given.

Speaker 5: Okay, great. And then quick follow up. Probably guys think about the ramp up in slow and the model portfolio. It could be expected to see a steady build or the probability like an inflection point there.

Okay, Great and then quick follow up.

Alright, good things about the ramp up in flows in the model portfolio. It can we expect to see a steady build or would it be like an inflection point there.

Jaret.

Would you take that.

Speaker 2: Sure. Yeah, we've seen a steady build, and we expect to continue to see a steady build. And just giving you a little color there, I mean, we've been focused really on, I think, what are the two high-opportunity channels, the large multi-trillion-dollar networks such as Merrill and Morgan Stanley , where we have partnerships.

Sure.

Yes, we've seen a steady build and we expect to continue to see a steady build and just given you.

A little color there I mean, we've been focused really on I think what are the two high opportunity channels.

Large multi trillion dollar networks, such as Merrill and Morgan Stanley , where we have partnerships.

Speaker 2: But then also on the other end of the spectrum we provide customized models to small and mid-size RAAs and IBDs.

But then also on the other end of the spectrum, we provide customized models to small and mid size <unk> in IBD.

Speaker 9: That's where we're putting our effort. We've been strengthening the relationships that we've already closed, and we've got a really good pipeline, and we're adding new features in support. So we expect short answer as we expect the traction to continue to build. Great, thanks for taking my question.

That's where we're putting our effort we've been.

Strengthening the relationships it.

That we've already closed and we've got a really good pipeline and we're adding new features and support.

So we expect short answer is we expect the traction to continue to build.

Great. Thanks for taking my questions.

Our next question comes from Brennan Hawken with UBS.

Speaker 9: Good morning, thanks for taking my questions. I just like to ask a couple on the prime.

Good morning, Thanks for taking my questions.

Just like to ask a couple on the.

Prime.

Speaker 9: You previously, there's a prior question about regulators, but it wasn't completely clear to me which regulators. But what's the plan here? Are you gonna become a bank holding company? Or are you gonna work with partner banks if you could just clarify that component of the strategy? Yeah.

If you could just clarify that component of the strategy.

Well why don't you start.

Speaker 6: Not becoming a bank holding company, we will work with partner banks as well as pursuing our own relevant state charters. State charters specifically were focused on New York right now for a non-banking charter, but something that allows us to pursue different opportunities in this space, so no need to be a bank holding.

Becoming a bank holding company, we will work with partner banks as well as pursuing our own relevant state charters.

Charter and specifically, we're focused on New York right now.

Non banking charter, but something that allows us to.

Pursue different opportunities in this space, so no need to be a bank holding company.

Okay got it and then.

Speaker 9: Okay, got it. And then maybe if you, this is definitely, Wisentry's got a great reputation among financial advisors. You know, you guys are viewed as innovators and absolutely have.

Maybe if this is definitely wisdom tree has got a great reputation among financial advisers, you guys are viewed as innovators and absolutely have.

Speaker 9: had a great track record of innovation. This seems to be though a pretty substantial shift since distribution capabilities into the financial advisor space and the wealth channel are different than direct-to-consumer broad financial app. How is it that you're planning to make that transition and what do you expect?

Had a great track record of innovation.

This seems to be though a pretty substantial shifts since.

Distribution capabilities into the financial advisor space in the wealth channel are different than direct to consumer broad financial App. So how is it that youre planning to make that tradition.

I'll transition sorry, and.

What do you expect as far as marketing.

Speaker 9: As far as marketing spend, marketing plan, what can you add to maybe increase our understanding of the go-to-market strategy here and driving adoption?

Spend marketing plan.

What can you add to maybe increase our understanding of the go to market strategy here and driving adoption.

Speaker 4: Good question. Will, let me take this to start and maybe if you have anything you can add. So, you know, first we've been marketing to consumers from the direct to consumers from the very beginning, though more narrowly only around investing. But I would characterize our approach to customer acquisition for WisdomTree Prime as

Good question well, let me take this to start and maybe if you have anything you can add so.

First we've been.

Marketing to consumers from the direct to consumers from the very beginning the more narrowly only around investing but.

I would characterize our approach to customer acquisition for wisdom tree crime.

<unk>.

Speaker 4: lean marketing principles. So test, learn, iterate, it'll be data driven, result oriented, intractable. So we'll start small and then go aggressive cost effectively. I'll tell you what we won't...

Leanne marketing principles, so test learn iterate there'll be data driven results oriented and trackable that will start small and then go aggressive cost effectively.

I'll tell you what we won't do.

Speaker 4: We're not going to put our brand on a sports stadium. We're not going to hire Matt Damon to be in our TV commercials. Now, in addition to our marketing, I think there'll be a very strong, heavy emphasis to business development, to partnerships. So that's another element that could be very, very cost-effective and scale us very quickly.

We're not going to put our brand on.

Our sports stadium, we're not going to hire Mac deem it to be.

Commercials.

Now in addition to our marketing I think there'll be a V.

Very strong heavy emphasis.

<unk>.

This development through partnerships. So that's another element that could be very very cost effective.

Scale us very quickly and then lastly would you say that we also in addition to what we are initially launching towards the direct to the consumer there is also going to be.

Speaker 4: And then lastly, I would just say that we also, in addition to what we're initially launching towards the direct to the consumer, you know, there's also going to be, we envision an institutional user portal for RIAs and for platforms, which is just another great synergy to our core business. So I think in combination, we have a lot of advantages and skills and stats, and like you said.

We envision an institutional user portal.

<unk> and four platforms, which is just another great synergy to our core business. So I think in combination we have a lot of advantages in skills and then like you said.

Speaker 4: You know, one way to do this more cost effectively is we have a very strong brand.

One way to do this more cost effectively as we have a very strong brand.

Speaker 4: I think it markets incredibly well. And with a great user experience, which we're committed to delivering, I think we have the ability to really...

Get it markets incredibly well and with a great user experience, which we're committed to delivering I think we have the ability to really.

Virally market in virally grow so that's all I can share with you at this point.

Speaker 4: virally market and virally grow. So that's all I can share with you.

Speaker 9: That sounds good, John . I'm glad I muted myself, because when you said that about the stadiums and Matt Damon, I was laughing. I couldn't help but laugh out loud. A quick follow-up on, if I might maybe squeeze one more in, so we've seen a filing from Graham Tuckwell, which is, you know,

That sounds good gentlemen, I'm glad I muted myself because.

You said that about the stadiums and Matt Damon I was laughing I couldnt.

Yes.

A quick follow up on.

If I might maybe squeeze one more in.

So we've seen a filing from Graham Tugwell.

Which.

Speaker 9: struck me as a little unusual to see former leadership of a firm that had been acquired express frustrations.

Struck me is a little unusual to see.

Former leadership of a firm that had been acquired.

Express frustration.

Speaker 9: around the direction of the company. Have you begun to have some dialogue with Graham? I guess that you have just given the relationship there and are you in a position to share at all some of the components of his frustration or what the source of his dissatisfaction is?

Around.

The direction of the company.

Have you begun to have some dialogue with Graham.

Guests that you have just given the relationship there and.

Are you in a position to share at all some of the components of his frustration or what the source of his dissatisfaction.

Speaker 4: So really, we communicate often with all shareholders, and that does include.

So really we communicate often with all shareholders.

And that does include.

Mr Caldwell.

Speaker 9: Talkwell. But for the second part of your question, you'll have to discuss it directly with Mr. Talkwell. Yeah, fair enough. Thanks John . Thank you.

But the second part of your question, you'll have to discuss it directly with Mister well.

Yes fair enough.

Thanks, Jonathan.

Thank you.

Our next question comes from Michael Cyprus with Morgan Stanley .

Speaker 8: Hey, good morning. Thanks for taking the question. Maybe just circling back to WisdomTree Prime, I was hoping you could elaborate a bit more on the economics, how that will work. I think you mentioned that you'd expect some digital asset revenues by the end of 2022. Maybe you could just elaborate a bit on what the composition you'd expect that to look like more near-term, whereas I understand maybe more medium to longer term there could be other additive revenue pools over time.

Term, whereas I understand maybe more medium to longer term there could be other additive revenue pools over time.

Well why don't you start.

Yeah, absolutely I think it's a lot like what we had on the slide earlier, I'm forgetting, which page it was but some of the the same types of fees that a lot of.

Speaker 6: Yeah, absolutely. I think it's a lot like what we had on the slide earlier. I'm forgetting which page it was, but some of the same types of fees that a lot of fintech apps are able to earn. So that could be like net interest income, for example, various types of transaction fees, like with a debit card interchange fee, for example, as well as asset-based fees for

Fintech apps are able to earn so that could be like net interest income for example, various types of transaction fees like with a debit card interchange fee for example.

As well as your asset base fees for.

Speaker 6: you know, blockchain-enabled funds where you might charge a management fee. So we think those are all on the page, and we're going to learn a lot with the beta test and be able to provide more guidance on that in the future.

Blockchain enabled funds, where he might charge a management fee. So we think those are all in the paint and we're going to learn a lot with the beta tests and be able to provide more guidance on that in future.

Speaker 10: Okay, and just maybe another follow-up there on the WisdomTree Prime and more broadly on the digital asset strategy. Can you just talk a little bit about the team that you have built out behind the digital asset strategy? How large is the team? And maybe talk a little bit about the headcount ambitions that you have looking out over the next year or two for that team. And maybe talk a little bit about where you're recruiting this expert talent from as well. Thank you.

How how large is the team and maybe talk a little bit about the head count ambitions that you have looking out over the next year or two for that team and maybe talk a little bit about.

Where you're recruiting.

Expert talent from as well thank you.

Speaker 4: Very exciting question for us. Will, why don't you start?

Very exciting question for us well why don't you start.

Speaker 6: Yeah, you know, I'm not sure we're giving like specific guidance on like number of people. I think you can, you know, we made an announcement earlier this year when a gentleman by the name of John Davidson joined the team as their global head of financial crimes that we were in the range of 15. That number is higher than it now, but not double than it, for example. This isn't going to be like a huge mass of hundreds of people. We've just been, we've got a great brand. A lot of people in financial services would like to work with us.

Yes, I'm not sure we're giving specific guidance on like number of people I think we made an announcement earlier this year when a gentleman by the name of John Davidson and joined the team.

As our global head of financial crimes that were in the range of 15 that numbers higher than now, but not double then it for example.

This isn't going to be like a huge mass of hundreds of people. We've just been we've got a great brand a lot of people in the financial services, we'd like to work with US and we found that our story is resonating very well with technical and other talent in the market today.

Speaker 6: And we found that our story is resonating very well with technical and other talent in the market today.

Okay.

Okay. Thank you.

Our next question comes from Keith <unk> with Northcoast research.

Hey, good morning, guys I'm going to continue the theme of asking more questions about prime maybe I'm kind of naive here because as I think about the areas as a prime will be involved in it seems like the security risk because just massive in the amount of spending in your guidance, though you did increase.

Speaker 7: good morning guys um... you know i'm a container of you know asking more questions about prime you know maybe i'm kind of naive here because i think about you know the areas that the prime will be involved in it seems like the security risk is just massive amount spending in your guidance though you did increase you know what you're

Speaker 6: seeing the current year, it seems like that amount needs to be a lot higher. I mean, do you guys have partners that have a lot of those security settings already in place? Or what's the underlying technology here that gets us comfortable that a lot more money won't be required to invest in this than what you guys are trying to disclose in here?

Seeing the current year, it seems like that amount needs to be a lot higher I mean, you guys have partners that have allowed us securities, but it was already in place or what's the underlying technology here that gets us comfortable that a lot more money it won't be required to invest in this and what you guys are kind of disclosure here.

Speaker 4: Will, I think you should start and touch on security as well.

Well I think you should start and touch on security as well.

Speaker 6: Yeah, absolutely. We're very confident the guidance we gave, we do not feel like we need to spend more than that on security. And really that's from some of the great partners that we're working with. Obviously, securrency is one of those, although not the only partner that's going to allow us to really focus on security here and from the start, security remains a primary focus for us. And we think we've covered that well between the partners that we have and the spending guidance of the...

Yes, absolutely.

Very confident guidance, we gave we did not feel like we're going to spend more than that on security and really thats from some of the great partners that we're working with obviously the currency is one of those although not the only partner.

Yes.

Going to allow us to really focus on security here and start security remains a primary focus for us and.

We think we've covered that well between the partners that we have and the spending guidance that we've given.

Speaker 4: Okay, I appreciate that. And then as you kind of think about the investment here, because again, it's an investment here, I'm sure you guys are already made in 2022. Is there a payback period where you guys see where you can perhaps be profitable in this unit? Are you two or three years away from that, you think?

Okay I appreciate that and then as you kind of think about the investing here because again, it's a significant investment here I'm sure you guys have already made in 2022 is there a payback period of where you guys see where you can perhaps be profitable. This year that are two or three years away from that you think.

Speaker 4: I think that's a little early for us to give guidance on. We'll see how quickly it ramps, but we are expecting, we're building this with an eye toward very strong economics and strong economics relative to our EPP.

I think thats, a little early for us to give guidance on.

We will see how quickly it ramps, but we are expecting we are building this with an eye toward very strong economics and relative strong economics relative to our ETP business.

Speaker 6: Gotcha. If I can squeeze one quick more question in here. You guys talk a lot about the Bitcoin fund in Europe and the new ones you guys have released recently, but yet the uptake on those, it does not seem, I guess, as quick as we like to see. I guess you always want to see it quicker. But what gives you guys the confidence that your Bitcoin and crypto strategy is going to eventually take hold?

Got you.

One more question here you guys talked a lot about bitcoin.

In Europe , and the new orders you guys have released recently, but yet.

<unk> does not seem I guess as quick as we like to see I guess, you always want to see a quicker but look at it is it gives you guys the confidence that your bitcoin and crypto strategy.

Essentially take hold.

I think Jeremy can you go can you start on the customer demand I guess.

Speaker 4: I think, Jeremy, can you go? Can you start on the customer demand, I guess?

So for sure.

Okay.

Speaker 7: Crypto has been a very retail, early adoption, so advisors in the U.S., as an example, have not been able to access crypto, and it remains very, very difficult. And that's why we think the SMA option is really the best option for advisors today as regulators have been.

In the crypto has been a very retail early adoption until advisers in the U S. As an example have not been able to access crypto and it remains very very difficult and that's why we think the SMA option is really the best option for advisors today as regulators had been slow to approve those strategies.

Speaker 7: low to approve those strategies and we're continuing to try to make our offerings in Europe ever more attractive. I think we're going to continue to be at the forefront of innovation and we will be positioning those products for success there as well. So we have a multi-faceted approach to a global crypto exposure and then WisdomTree Prime will give us further opportunities to distribute that in our own native wallet.

We're continuing to try to make our offerings in Europe ever more attractive I think we're going to continue to be at the forefront of innovation and we will be positioning those products for success there as well. So we have a multifaceted approach to a global crypto exposure then within prime Prime will give us further opportunity to distribute that in our in our <unk>.

Native wallet.

Great. Thanks, guys. Good luck.

Speaker 11: And we do have a follow-up question from Michael Cypress with Morgan Sands.

And we do have a follow up question from Michael Cyprus with Morgan Stanley .

Speaker 10: Okay, thanks. I just wanted to circle back on the crypto direct index thing. I know you had the partnership with OnRap as well. It's just hoping you can elaborate a bit more on where those efforts stand today, how much an asset, what the traction has been, and maybe just elaborate a little bit on how exactly that works. It's still very...

Oh, great. Thanks, I just wanted to circle back on the crypto direct indexing I know you had the partnership with <unk> as well I was just hoping you can elaborate a bit more on where those efforts stand today, how much in assets what the traction has been and maybe just elaborate a little bit on how exactly that works.

It's still very early days.

Okay.

Speaker 4: No, no, I was going to say, Jeremy, you might want to start. Maybe Will, there's some, if he leaves something off, you could.

No no I was going to say Jeremy you might want to start maybe we'll there's somebody if you'd leave something off you could add on.

So please go Jeremy.

Speaker 7: are. So it's very early days and there should be more opportunities. I'd say even the large...

Sorry.

It's very early days and there should be more.

Communities.

Even the large custodians from.

Speaker 7: from, you know, we're Gemini Coinbase and some of the others, they're still building out their own functionality and you're seeing them make acquisitions in this space to further and service this market. So I think this will be a year where you'll see a lot more development but where we are today is still very early days and we hope to have more updates through the course of the year on where that initiative stands.

Gemini coin based and some of the others. They are still building out their own functionality and youre seeing them make acquisitions in this space to further and service. This market. So I think this will be a year, where youll see a lot more development, but where we are today, it's still very early days and we hope to have more updates through the course of the year on where.

That initial stance.

I would just add that I think the interest has been fantastic at the start I mean, we've seen it's clearly meeting a need that a lot of advisers has and we think it's been the right approach U S market, we're very optimistic about it.

Speaker 6: I would just add that I think the interest has been fantastic at the start. I mean, we've seen it's clearly meeting a need that a lot of advisors have, and we think it's been the right approach for the U.S. market. We're very optimistic about it.

Speaker 10: Great. I think you just put one final question in just on the European crypto products. Just an update on the traction that you're seeing there, particularly with the distribution platforms. Maybe you can just give us an update on how many platforms you're on right now and sort of what the outlook and client is. We're getting more platforms in the next 12 months. Thank you.

Great. Thank you just put one final question and just on the European Crypto products, just an update on the traction that youre seeing there, particularly with the distribution platforms. Maybe you can just give us an update on how many platforms. You are on right now and sort of what's the outlook in cloud is we're getting more and more platforms in the next 12 months. Thank you.

Will do you want to start with Jeremy why don't you start.

Speaker 6: Will, do you want to start or Jeremy? Will, why don't you start? Yeah, I'm happy to start. You know, I spoke a little bit about this earlier. I mean, it's certainly with the FAFSA class and certainly with the types of clients that you have in Europe , you know, tend to be larger institutions. There's a long education and just, you know, information cycle with something like this. I think we've done a very good job with that so far. And, you know, we've got a great team in Europe that's focused on educating their clients over there.

I'm happy to start.

Spoke a little bit about this earlier I mean, it's certainly with this asset class and certainly with the types of clients that you have in Europe tend to be larger institutions Theres a long education.

Information cycle with something like this I think we've done a good job with that so far we've got a great team in Europe focused on educating the clients over there about this so we think we've done a lot of great worked up a great team to do that and we've got a lot of momentum in it right now.

Speaker 6: So, we think we've done a lot of great work, built a great team to do that, and we've got a lot of momentum in it right now, and we expect, you know, we're not going to be putting this on platform relationships or, you know, certainly which ones.

We expect you know, we're not giving guidance on platform relationships, or certainly which ones, but we remain very optimistic about that going into 2022.

Speaker 6: but remain very optimistic about that going into 2022.

Hi.

Okay. Thank you.

And I'm not showing any further questions at this time electric the call back over to Jonathan Steinberg with <unk> CEO for any closing remarks.

Speaker 11: And I'm not showing any further questions at this time. I'll turn the call back over to Jonathan Steinberg, with some tree CEO for any closing remarks.

Speaker 4: Thank you. So, in summary, let me just say that the existing business is growing very well. We're at record AUM. We're the most diverse and truly global that we've ever been. You know, the momentum with 700 million in flows in January , you know, we're just off to a very strong start. And within, with respect to the digital assets, we view this as

Thank you.

So in summary, let me just say that the existing business is growing very well we're at record AUM with the most diverse and.

Truly global that we've ever been.

The momentum with $700 million in flows in January .

We're just off to a very strong start and within with respect to the digital assets. We view this as.

Very holistic to the existing business, it's a clear extension of the existing business.

Speaker 4: very holistic to the existing business. It's a clear extension of the existing business. Because of that, and from your questions, our cost guidance has been very controlled around this. That's because we have so many synergies that we're bringing to the table. I think about

And because of that.

From your questions.

Our cost guidance has been very controlled around this and that's because we have so many.

Synergies that we're bringing to the table.

I think about.

Going back to your ETF industry.

Speaker 4: at the birth of it, you know, not going after the digital wallet and tokenization of funds and assets on the blockchain, not going after that opportunity would be very similar to the mutual fund.

At the birth of it not going after the digital wallet and token position of funds and the assets on the block chain not going after that opportunity would be very similar to the mutual fund companies.

Speaker 4: not going after ETFs. They waited so long that they let new brands like Wisdom Tree and I shares take that opportunity. We're not gonna allow that to happen, you know? And...

Not going after Etfs.

They waited so long that they would let new brands like wisdom tree and Ishares take that opportunity, we're not going to allow that to happen.

And.

Speaker 4: vision is very important and you know we we we seem to be a very innovative firm in the eyes of many but

Vision is very important and we seem to be a very innovative perm in the eyes of many but tie.

Timing is everything.

Speaker 4: And from the consumer standpoint, I would say, you're at the lift off phase, meaning you're going from the earlier adopters.

And from the consumer standpoint, I would say youre at the lift off the lift off phase, meaning youre going from the early adopters.

The main screen and.

Speaker 4: And with respect to wisdom tree and the industry doing this, our timing really is perfect. You know, you're going from cryptocurrencies on the block.

And with respect to wisdom tree in the industry doing this our timing really is perfect.

Going from crypto currencies on the blockchain.

Speaker 4: to blockchain-enabled fixed income and equities and commodities, an area that we're.

<unk>.

Dr Chin enabled fixed income and equities and commodities.

An area that we're really strong on <unk>.

Speaker 4: And with respect to some of the early...

And with respect to some of the early.

The early entrants into digital wallets as well as into neo banks.

Speaker 4: early entrance into digital wallets as well as into neo banks. You can be too early.

You can be too early.

And by that I mean.

Many have created these mobile apps.

Speaker 4: Many have created these mobile apps.

Speaker 4: but are using the old rails so they're not native to the block.

But are using the old rails, so theyre not native to the blockchain and I can't stress enough that starting now.

Speaker 4: And I can't stress enough that starting now.

Speaker 4: to the blockchain will prove to be one of the great differentiating advancements.

Being native to the blockchain will prove to be one of the great differentiating advantages.

Speaker 4: So, I'll end the call there, but we look forward to, you know, updating you on our progress on future calls. Thank you, everybody, for your attention.

So I'll end the call there, but we look forward to updating you on our progress on future calls. Thank you everybody for your interest.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker 11: Ladies and gentlemen, this is our concludes today's presentation. You may now disconnect and have a wonderful day.

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