Access the Growth of Platform Companies with an ETF

WisdomTree is known as a dividend and value investing shop. This reputation stems from our roots, launching indexes that rebalanced away from market capitalization, and toward fundamentals, such as dividends and earnings, in an attempt to guard against speculative bubbles.

But we are always looking for innovative baskets that offer the potential to outperform the market, whether it’s from rules-based rebalancing, an active combination of factors or other themes that can add value over time.

Here’s an example that’s come to fruition: We believe there’s a compelling, long-term market opportunity created by the evolution of platform business models. We’re excited to announce the launch of the WisdomTree Modern Tech Platforms Fund (PLAT), which provides exposure to these technology-driven platform companies. WisdomTree defines a modern technology platform as a company with a non-linear, multi-sided business model focused on creating value by facilitating interactions between two or more interdependent groups through technology.

Successful platform-based businesses create large, scalable networks that facilitate transactions between interdependent groups of consumers and producers. While the traditional business model creates value through linear supply chain production, a platform business is a non-linear¹, asset-light model that creates value through connections. Many are gaining market share at the expense of traditional linear businesses, and doing so with better economies of scale and long-term profitability figures.

At a certain size, the benefit of further scale can be limited for a linear business but remains unlimited for a platform. Platform businesses can benefit from network effects, as networks become increasingly valuable to users as they grow. Put another way, the marginal cost of adding an additional user approaches zero as a platform scales; conversely, a linear model reaches a point where the marginal cost outweighs the benefit.

The structural advantages of the platform-based businesses we seek to invest in are reflected in financial metrics as solid revenue growth, margin expansion, substantial free cash flow generation and strong returns on capital.

Relative to the companies in the S&P 500 Index, the constituents of the WisdomTree Modern Tech Platforms Index (WTMDPL) have generated greater revenue growth and consistent mid-teens earnings growth.²

WTMDPL Median Sales and Earnings Growth

These businesses have penetrated many sectors of the economy. There are nine distinct platform models, defined by the type of transaction being coordinated through a company’s network.

WTMDPL Platform and Sector Exposures

Investment Methodology

To build this new Index, WisdomTree licensed data from Applico, a platform consulting business. Applico’s founder and CEO, Alex Moazed, and principal, Nicholas Johnson, researched platform models extensively to write Modern Monopolies, an Amazon best seller, detailing the characteristics of different platforms.

WTMDPL is an equally weighted Index composed of mid- and large-cap companies. The WisdomTree Modern Tech Platforms Fund seeks to track the price and yield performance, before fees and expenses, of WTMDPL.

Modernizing Your Portfolio

PLAT provides exposure to U.S., Asian and European equities with strong past and prospective fundamental growth and could be a suitable candidate to complement or replace growth-oriented investment strategies.

Index Holdings and Statistics

¹Linear business models create value downstream through a supply chain; non-linear business models do not create value downstream through a supply chain.

²1- and 3-year median sales growth for WTMDPL and the S&P 500 Index are calculated as the median value of each constituent’s 1- and 3-year annualized sales growth metrics. 1- and 3-year median earnings growth for WTMDPL and the S&P 500 Index are calculated as the median value of each constituent’s 1- and 3-year annualized net income, adjusted for unusual items, growth metrics.