President & COO
Q2 2022: WisdomTree’s Strong Execution in Focus
On our Q2 earnings call this morning, we had an opportunity to discuss how well WisdomTree is executing in this volatile market. Similar to last quarter, I wanted to unpack our vision in a little more detail with you all - our clients, our stockholders, our employees, and our broader partner network.
At WisdomTree, our perpetual focus is on growth (both today’s and tomorrow’s), efficiency, and team. We know that if we can take care of these, the results will take care of themselves. And although the markets are out of our control, we always make a concerted effort to control what we can to execute and deliver strong results.
I’m pleased that our consistent focus on execution has paid off again in Q2 2022, with the 7th consecutive quarter of organic growth, and that the momentum has continued through July despite volatile markets. WisdomTree now has $5.7 billion of net inflows year-to-date and a best-in-class annualized organic growth rate of about 13% at a time when many of our peers are experiencing outflows.
This momentum has been building for several years, client engagement remains strong, and we expect sustainable growth in the future in both the core ETP franchise as well as in digital assets.
Our two-pronged managed model strategy continues to deliver.
First, we are focused on partner platforms such as Merrill Lynch and Morgan Stanley, among others. Second, we are focused on RIAs and the independent broker-dealer space, strengthened by our recent launch of the WisdomTree Portfolio & Growth Solutions platform. Engagement on models and solutions remains high, and, as we know, once you win advisor mindshare, model flows are recurring in nature and stackable on top of our current inflow profile. We remain excited about the trajectory of our models franchise and see a long growth runway ahead.
Our product lineup and outperformance have set the foundation for continued success.
Roughly 82% of our US AUM is surpassing Morningstar benchmarks, and over 70% of our global AUM is levered to highly relevant themes like value rotation, rising rates, and inflation hedging. Our AUM has never been so well diversified, and product performance and positioning have yielded breadth and depth of flows across our product suite.
Our digital asset rollout remains on track, with opportunities in this “Crypto Winter.”
Our straightforward digital assets vision is to bring crypto exposures into the mainstream, through ETPs and crypto direct indexing, while also bringing existing mainstream financial assets into the digital ecosystem, through blockchain-enabled funds and tokenized assets. We anticipate that digital assets will be the best structured and most transparent product in the future, making it a natural extension of our business model. We remain disciplined, leveraging all the efficiencies of our core ETP franchise, including our trusted brand, strong risk management, and vast regulatory knowledge and experience - all key advantages versus competitors.
Efficiency is as important as growth, and there is a lot of leverage in the WisdomTree business model.
We have built an ETP business that is extremely scalable and delivers robust incremental margins. Over the past several years, we have made many operational improvements and now have incremental margins well over 50%. This means that as markets normalize and we continue to execute on our growth strategy, we will be able to do it on expanding margins, with a vision and goal of having best-in-class operating margins as we scale.
A big thanks to the best team in asset management. I am, of course, biased, but I believe we have the best and most productive team in the industry. Our overall AUM and revenue per employee is well above industry average, and our sales team outpunches our competition, as evidenced by our best-in-class organic growth. Great results require a great team, and at WisdomTree, we have a fantastic team that prides itself in executing well and delivering results.
Our focus on growth, efficiency, and team is paying off. We are executing and delivering outstanding results in all areas under our control. With strong sustainable growth today, coupled with momentum and our digital asset initiative to drive future growth, on top of scalable infrastructure driving exciting incremental margins, we remain enthusiastic and optimistic about the future.