WisdomTree(WT) - 2023 Q4 - Annual Report

Financial Performance - Operating revenues for the year ended December 31, 2023, were $349.0 million, representing a 15.8% increase from $301.5 million in 2022, driven by higher average AUM and increased other income[29] - Total operating expenses rose by 8.4% to $261.5 million, primarily due to increased stock-based compensation, headcount, and various operational costs, partially offset by the termination of deferred consideration obligations[29] - Net income for the year ended December 31, 2023, was $102.5 million, up from $50.7 million in 2022, indicating strong profitability growth[29] Assets Under Management (AUM) - As of December 31, 2023, the global AUM of ETPs reached $11.6 trillion, with the company ranking as the fourteenth largest ETP sponsor globally[31] - Total AUM of U.S. Equity products was $29.2 billion as of December 31, 2023[64] - Total AUM of Commodity & Currency products was $21.3 billion as of December 31, 2023[65] - Total AUM of Fixed Income products was $21.2 billion as of December 31, 2023[66] - Total AUM of International Developed Market Equity products was $15.1 billion as of December 31, 2023[67] - Total AUM of Emerging Market Equity products was $10.7 billion as of December 31, 2023[68] - Total AUM of Leveraged & Inverse products was $1.8 billion as of December 31, 2023[69] - Total AUM of cryptocurrency products was $0.4 billion as of December 31, 2023[70] - Total AUM of Alternative products was $0.4 billion as of December 31, 2023[71] Market Trends - From January 1, 2021, to December 31, 2023, equity ETFs saw positive inflows of approximately $1.9 trillion, while long-term equity mutual funds experienced outflows of about $830 billion, highlighting a significant shift towards ETFs[33] - The company anticipates continued growth in the ETP market driven by factors such as increased investor awareness, a shift to fee-based models, and innovative product offerings[36] Product Development and Innovation - The company is focused on developing next-generation digital products and structures, including Digital Funds and tokenized assets, to enhance its market position[44] - The company aims to leverage its proprietary WisdomTree indexes to minimize third-party licensing fees and enhance profitability while speeding up product development[44] - The company aims to expand its product line through innovative digital assets offerings and blockchain technology[88] - The company has introduced 13 Digital Funds that utilize blockchain technology for asset allocation, fixed income, and equity exposures[9] - The company emphasizes the importance of innovative products in traditional ETPs and digital asset exposures to maintain competitive advantage[89] Regulatory Environment - The evolving regulatory landscape for digital assets presents both challenges and opportunities, with the company committed to responsible practices in this space[38] - The company is actively engaging with U.S. federal and state regulators to secure necessary regulatory approvals for various business initiatives, including a limited purpose trust company and money services business[92] - Compliance costs related to federal and state laws and regulations have increased and will continue to impact the company's operational expenses[94] - The company’s subsidiaries are registered as investment advisers and must adhere to numerous obligations under the Investment Advisers Act of 1940[94] - The company’s digital assets business is subject to complex and evolving global policy frameworks, requiring compliance with various international regulations[96] - The company operates a money services business registered with FinCEN and faces compliance challenges due to varying state regulations across the U.S.[97] - The company’s U.S. listed ETFs are subject to the Investment Company Act and must comply with operational, fee, and governance requirements[94] - The company’s common stock is listed on the New York Stock Exchange, subjecting it to corporate governance listing standards and federal securities laws[96] - The company’s international operations are subject to regulatory systems comparable to those in the U.S., requiring compliance with local laws and regulations[96] Employee Engagement and Culture - The employee retention rate was approximately 93.4% in 2023, with a 99% participation rate in the global employee engagement survey[62] - The company was named a "2023 Best Places to Work in Money Management" for the fourth consecutive year and ranked second among managers with 100-499 employees[62] - The company has invested significant resources in marketing, research, and sales, with close to 40% of employees dedicated to these areas[48] Strategic Initiatives - The company is pursuing a strategy of selective acquisitions to strengthen its business and expand its product offerings[53] - The company has a team of 77 sales professionals globally as of December 31, 2023[75] Financial Risks - Market risk is primarily driven by fluctuations in securities or commodity prices, foreign currency exchange rates, and interest rates, impacting the value of ETPs and underlying AUM[377] - The company does not currently hedge against fluctuations in commodity and cryptocurrency prices linked to certain ETPs, which could adversely affect AUM and revenues[383] - The advisory fees earned on European listed ETPs are predominantly in U.S. dollars, while corporate overhead expenses are generally incurred in British pounds, exposing the company to currency translation risks[381] - WMAI's Convertible Notes bear fixed interest rates of 5.75% and 3.25% for the 2023 and 2021 Notes, respectively, with no direct financial statement risk associated with changes in interest rates[380] Compliance and Governance - WMAI is subject to various regulatory requirements, including compliance with the Companies Act and the Prospectus Regulation, ensuring proper governance and financial reporting[116] - The Base Prospectus has been approved by multiple European financial supervisory authorities, allowing WMAI to make public offers in EEA Member States[113] - WisdomTree's Base Prospectus has been approved by the Central Bank and the FCA, ensuring compliance with the Prospectus Regulation for ETP Securities[112] - WisdomTree Management Limited has been producing Key Information Documents (KIDs) for its ETCs since January 1, 2018, and for UCITS since January 1, 2023, enhancing investor transparency[111] - The Sustainable Finance Disclosure Regulation (SFDR) requires WisdomTree to disclose how ESG factors are integrated into its decision-making, with Level 1 requirements effective from March 1, 2021, and Level 2 from January 1, 2023[111]