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spk07: ListenTree's first quarter earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, then 1 on your telephone keypad. Please be advised that today's conference may be recorded. If you require operator assistance, please press star, then 0. I'd now like to hand the conference over to your speaker today, Jessica Saloom, ListenTree's Head of Corporate Communications.
spk01: Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including but not limited to the risks set forth in this presentation and in the risk factors section of the Wisentries Annual Report on Form 10-K for the year ended December 31st, 2020. Wisentries assumes no duty and does not undertake to update any forward-looking statements. Now, it is my pleasure to turn the call over to Wisentries CFO, Amit Meuni.
spk05: Amit Meuni Thank you, Jess, and good morning, everyone. I'll walk through the highlights for the quarter, then turn the call over to our President, Jarrett Lillian, who will provide some perspective on our successes this quarter and then to Jono for his closing remarks before we open the lines for Q&A. So, beginning on slide two, this was one of our best quarters as reflected by our strong operating and financial results. We ended the quarter with assets under management of $69.5 billion, up 3 percent from positive inflows and market movement. We generated $1.3 billion of net inflows in the quarter. Continuing upon its success from last quarter, our ex-state-owned strategy products generated 1.5 billion of inflows. Also continuing its strong trend, we had inflows of 648 million into our thematic products encompassing cloud computing, artificial intelligence, battery solutions, and our newly launched cybersecurity ETFs. The AUM and our thematic ETFs have now grown 20% to 2.6 billion at the end of the quarter. Our European listed Bitcoin fund took in 36 million in the quarter and now stands at just under 400 million in AUM, doubling in size since the beginning of the year. On the commodity side, we saw some mixed results as we experienced strength in our silver and other precious metal products, which were offset by outflows in gold and oil due to negative market sentiment. Looking at Q2 so far, the strong momentum continues, and we have now raised over 200 million, bringing our AUM to near $73 billion. Now turn to our financial results on slide three. Revenues increased 9% to $73 million for the quarter due to higher average AUM from our strong inflows. Adjusted net income was $12.5 million, or $0.08 a share, up 36% from the fourth quarter. This quarter, we took a non-cash after-tax gain of $2.8 million, for our future goal commitment payments and 200,000 and other non-operating items. Turning to margins on the next slide. Our operating margin expanded to 25.5 percent, reflecting higher average AUM and a flat expense quarter over quarter. Gross margins also increased to 78.7 percent in the quarter. Along with higher average AUM this quarter, the fourth quarter of last year reflected costs for rebalancing on our U.S. listed products, as well as the final Brexit-related expenses for our European listed products. There is no change to our guidance of 77 to 78 percent gross margins for the full year, but we will have fluctuations intracorder. On the next slide, you can see the change in our expenses. Our operating expenses were essentially flat at $54 million. Compensation costs increased due to the seasonally higher payroll taxes and headcount-related costs. Based on our strong results so far this quarter, we anticipate full-year compensation costs to be at the high end of our $75 to $85 million guidance range. We also incurred higher product development costs related to our digital asset initiative, offset by lower marketing and sales-related spending, and fund costs that I referred to on the previous slide. Our gold royalty payments declined due to lower gold prices and we exited our London lease. Our discretionary spending remained well-controlled at $10.5 million this quarter, and our full-year guidance remains at approximately $49 million for the full year. Thank you, and now I'd like to turn the call over to Jarrett.
spk14: Thank you, Amit. Last quarter, I outlined some of the key focus areas for 2021. I talked about accelerating our momentum through targeted investments in both today's growth and tomorrow's. I talked about continued progress with our model portfolio offering. I talked about new global product launches with a focus on core tactical, thematic, and ESG exposures. I talked about maintaining our leadership position in crypto ETPs while also establishing ourselves as a leader in digital assets. and how this last initiative holds the promise for WisdomTree to tap additional revenue streams, further accelerating organic growth in what we see as the next chapter in financial services. As our Q1 results make clear, we are executing well on all fronts. We have momentum and are generating strong organic growth. Overall, top-line growth led to a very strong all-around quarter with inflows driving record AUM and strong revenues, and expanding operating margins and net income. Our team remains focused and dedicated to strong execution, and this and the breadth and diversified mix of our business gives us confidence that our momentum will continue. Regarding organic growth, we are enthusiastic about global flows, industry-driven gold outflows notwithstanding. We have the broadest range of gold ETCs available, and our success in industrial metals, copper, and silver shows that there is a wider opportunity for us to capture. Further, thematics have been a strong success where we strive for differentiated and thoughtful exposures through a combination of our internal research and collaboration with deep subject matter experts. Our thematic suite, including cloud computing, artificial intelligence, battery technology, and cybersecurity, saw strong inflows across both our U.S. and European platforms. In the U.S., our model portfolio initiative also continues to stand out. We are converting on previously announced successes, like our third-party model mandate with Merrill, and through collaborations, such as TaxSmart portfolios with 55 IT. In the first quarter, we launched our model adoption center, the MAC, which provides holistic support and solutions for advisors to leverage our portfolio analytics and investment capabilities for their end clients. Overall, our model portfolio initiative is gaining more traction and it's facilitating deeper client relationships larger client relationships, and stickier, more diversified flows. In the coming quarters, we anticipate announcing additional major model partnerships and leveraging additional collaborations, such as our recently discussed relationship with OnRamp Invest, a financial technology startup which will allow us to incorporate crypto assets into RIA workflows and into our models for RIAs. In terms of mix and breadth, our emerging markets ex-state-owned enterprise fund, XSOE, was a key one-star, with its sister ex-state-owned China fund, CSXE, also contributing. Following the implementation of additional ESG screens during the quarter, we're excited about our strong position in the strategically important categories of both emerging markets and ESG investing. But the quarter was really marked by the overall diversity and breadth of our flows. In the U.S., a growing percentage of our funds are seeing inflows, while a declining percentage of our funds are seeing outflows. Further, a third of our U.S. funds hit new all-time AUM highs, and globally we now have 32 funds with AUM over $500 million and 20 over $1 billion. This diversity and breadth is fueling our momentum, where, including April, the U.S. now has 10 consecutive months of inflows, the best such streak in six years. In Europe, we're building on two consecutive years of record organic growth, and in April, we're also seeing positive flows. Group run rate revenue based on current AUM levels is now at 300 million, up nearly 40 percent from the first quarter of last year, and this breadth and healthy mix is also showing up in fees where our fee captures remain steady and is actually up from Q4 levels. Our strong product pipeline further adds to this mix in diversity and represents yet another element of our increasing momentum. We continue to advance the robustness of our existing fixed income and commodities offerings, as well as adding additional new products in thematics and growth equities. In the cryptocurrency space, Earlier this month, we cross-listed our European domiciled Bitcoin ETP, BTCW, in Germany, allowing for a wider audience to have easy access, which should help accelerate growth. And just yesterday, we launched a physically backed Ethereum ETP, ETHW, and last month in the U.S., we filed for the Wisdom Tree Bitcoin Trust. All in all, We are delivering against our plan to drive growth both today's and tomorrow's, and the results are shining through. And with that, I will hand it over to Jono to speak more about our larger digital assets initiatives along with his concluding thoughts on the quarter.
spk02: Thank you, Jarrett. The takeaways from this quarter are simple. Continued growth and momentum with $1.4 billion in year-to-date flows and strong execution. As I said before, WisdomTree is operating with even greater speed, efficiency and inclusion in our new remote first orientation. Our results are clear evidence of this. While we remain laser focused on the opportunities in front of us today, we are equally focused on the future. The product activity Jarrett reviewed in Bitcoin and Ethereum along with our collaboration with OnRamp Invest, a financial technology startup focused on integrating crypto assets into RIA model portfolios, continues and further advances our efforts to support more mainstream adoption of these exposures in transparent and highly regulated investor-friendly formats. However, our vision for digital assets expands beyond ETPs. Following our strategic investment in Securrency, a company focused on blockchain-based financial and regulatory technology, we participated in their $30 million Series B investment round, along with global financial service leaders, including State Street, US Bank, and Abu Dhabi Catalyst Partners. This financing was completed earlier this week. This is an important milestone for Securrency, and we are excited by the future opportunities to leverage Securrency's technology. We have been consistent and clear in our belief that regulated digital assets and blockchain will have an important role in capital markets, fund management, and financial services broadly going forward. We continue working with Securrency on innovations in these areas as demonstrated by our recent filing for a blockchain enabled digital short-term treasury fund. Crypto assets and blockchain have been one of the biggest stories in financial services in 2021. While some might have asked if we were too early in our investments over the past few years, I feel we have made these investments in time to be strategically well positioned in this fast developing environment. We know crypto and blockchain are top of mind for our clients, and we want to continue to help them to understand and navigate this space. As our Bitcoin and Ethereum ETPs, as well as our model portfolio initiative demonstrates, these efforts are very much supportive of our broader fund platform, and we think these investments will continue to drive organic growth in the future. Finally, before I open the call to questions, I want to acknowledge our CFO, Amit Muni, who has decided to move on to another opportunity at the end of May. Amit first came to WisdomTree to lead WisdomTree's relisting on NASDAQ, and has been a valuable member of the management team throughout his 13 years of service. Amit built up a strong finance function and has developed a stellar team. He leaves WisdomTree in a position of strength, and we wish him well in his future endeavors. Thank you, Amit. Now, let's open up the call to Q&A.
spk07: As a reminder, to ask a question, you'll need to press star, then 1 on your telephone keypad. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Craig Siegenthaler with Credit Suisse.
spk10: I just wanted to see if you could walk us through the timeline for your U.S. Bitcoin account and tokenized gold product launches and regulatory approvals?
spk02: Thank you, Craig. So first with our U.S. Bitcoin filing, you know, there's not much that we can say, but we feel like first let's jump to the sort of the punchline. We expect to either be first or amongst the very first when they do get approved. I would say that the VanEck filing being delayed, WisdomTree was the clear winner in that. But it's hard to say exactly when they will be approved. But again, particularly because of the new leadership at the SEC, but it is moving forward. We're getting good interactions with the regulators and we're optimistic that again, we'll either be first or amongst the first. On gold, it's still positioned for later, gold tokens later, hopefully before the end of the year. We're working very hard on that. As you can also see, we've also filed for a blockchain-enabled treasury fund. So within that space of crypto, blockchain, digital assets, it was a very, very busy sort of year-to-date or quarter. About as much as I can say, though, Craig, in light of where we are with the regulators.
spk10: I understand, Jono. And, Jono, just as my follow-up, can you help us think about the advantages to owning Bitcoin inside of an ETF wrapper relative to own it directly at a crypto exchange?
spk02: So, yes. So, first of all, the ETF was made to make difficult things to access easy to trade. And so we are helping to mainstream investing in crypto, certainly with what we're doing in Europe, where our Bitcoin ETP just expanded into Germany and is now sort of expanded into selective retail. It really, our opportunity set this quarter has expanded dramatically. But, you know, not... many or not a lot of people are comfortable with actually opening a wallet. And when you think about the buying of crypto through the wallet, it's a bearer instrument. And if you lose it, it's gone. This is for many investors and institutional investors by buying it is within a wrapper that is protected, that has insurance, that does custody for them. I think for many, at this stage of the cycle, it would be the preferred way to access these exposures.
spk10: Great. Thanks for taking my questions.
spk07: Our next question comes from Dan Fannin with Jefferies.
spk12: Morning, guys. This is actually James Steele on for Dan. So I just have one. Looking at the success you've had with your thematic products, I just hope to get some color on which clients or which channels are most receptive to these and ultimately trying to get an idea of what the stickiness of these flows might be.
spk02: Thank you, James.
spk12: Jeremy, do you mind taking that?
spk04: Sure, I'll start there. What's exciting has been the breadth of our thematic success. Amit talked through, you know, it's not just a single product. It's across a broad platform from cloud computing, AI, the sort of technology, the battery solutions. We're seeing it across the board. I think it's a combination of these are strategies that a lot of retail does like to look at, but advisors are trying to stay at the cutting edge of technology and using them in model portfolios. WisdomTree itself has launched model portfolios that include what we call a disruptive growth model that is a combination of the different thematics, and we see people adding that as a complement to their core exposure. So while I think somatics have been, you know, retail-friendly, we do see advisor adoption as well. And, you know, I think our success is coming from really strong, unique performance. I mean, if you look at the cloud computing space, we were not the first fund, and we always say, you know, we're not going to just do a Me Too product. But when you look at the category, there was a few large, few-billion-dollar funds, In the last six months, we've taken in 100%, more than 100% of the flows to the cloud computing. And I think that's from just the strong performance that's resonating with the whole community.
spk14: And just jumping on top, this is Jarrett reiterating on the channels. It's all channels, retail, advisors, but it's U.S. and Europe. And so we also have a lot of institutional interest as well. And on the stickiness, you know, you can refer to them as thematics, but they're becoming more core holdings as part of portfolio and model approaches. So the stickiness is actually pretty good. So all channels and, you know, our expectation is sticky assets.
spk12: All right. Thanks, guys. That's it for me.
spk07: Our next question comes from Robert Lee with KBW.
spk08: Hi, good morning. This is Jeff Treznor on for Rob Lee. Thanks for taking my question. The first question I had was around the treasury, the blockchain you mentioned in relation to the treasury assets, and I'm curious how that helps the short-term treasury funds and what that kind of enables.
spk02: So, again, I'm a little bit limited in what I can say, but... So we filed for a digital treasury fund that will be blockchain-enabled. It's built on the relationship that we have with Securrency. Their technology is crucial to evolving the 40 Act, the open-ended fund structure. We've always been very consistent that we're trying to push the envelope in enhancing the investing experience. And so we'll be adding features like peer-to-peer transfers, inter-optability between Ethereum and Stellar blockchains, and improved efficiency overall. So those are some of the improved functionality and experience enhancements that we expect to come from what is really the cutting edge of filings really to date in the market in the world.
spk08: Great. And let me just follow up. Just considering the excitement around the crypto, are you surprised at the demand for the Bitcoin ETF in Europe? It's been good, but maybe a bit more modest. And what maybe you attribute that to?
spk02: So we, you know, early in the year, we had some profit taking. And so we actually started, you know, the year in the negative. The last couple of quarters have been, you know, growing stronger. The institutions are trying to find their entry points and really kicking the tires around the structure. I can't stress enough that expanding into Germany with a broader mandate that allows for some retail selectively improves the opportunity set dramatically going forward. So I think we have really – expanded the opportunity set dramatically, and I am expecting faster, more significant growth going forward if the exposure remains, you know, constructive from an investor sentiment standpoint.
spk08: Great, thanks. If I could just get one more quick one. In terms of model portfolios, can you maybe update us on the progress as we're, you know, quarter into 2021? You mentioned in the last call that you expect meaningful flows during the year.
spk02: Jarrett, do you want to take this first answer?
spk14: And maybe with Jarrett, but at least... Yeah, you know, the model initiative on our side, you know, has been a long-term build. You know, it's a really, it's a holistic approach where we had to build the investment capabilities in the team on our side, which we did. We had to build content. We had to build tools. And our job really around models is to remove barriers to adoption and assist with that transition to models. And models continues to be one of the largest macro trends in wealth management. So more and more wealth managers moving towards models. So we've been right there at the start of this building with our clients. And we're gaining more and more traction each quarter. And, you know, we had last year, you know, announced a significant step forward was the Merrill partnership and having third-party, our models on their third-party model platform. We've got other significant wins in the pipeline that we'll be announcing over the coming quarters. But we're just, you know, now, you know, step by step, we're making more progress with every partnership that we form. And so, you know, we're not releasing actual numbers at this point. But what I can tell you is that we're gaining traction and momentum. And we're excited and really on track with what we expected from this initiative at the start of the year.
spk02: Hey, Jeremy, maybe sort of tying together the last couple of questions around digital assets and to models, maybe you could talk a little bit about the partnership with OnRamp.
spk04: Yeah, I'd love to. We certainly see the traditional assets, like Jeremy was talking about, income-oriented models, people need income, a key story, and we're doing a lot around these multi-asset income models. You know, we're really excited as these questions on how do you get exposure to Bitcoin to Ether. It's been a challenge because of the non-approval of those structures. And so what OnRamp is going to be providing exposure to is some of that direct exposure as well as then enabling advisors being what they're calling the plaid of crypto, trying to just connect all the systems talking to each other from the custodians to the workflow to the portfolio management, planning. And so we have... talked about the new model initiative, a few different models from our traditional core equity, core fixed income with direct Bitcoin exposure. And I also talked about the thematics, and we're really excited about a disruptive growth model that includes crypto, perhaps Bitcoin and Ether together with the sort of true thematic. So you're going to hear more from this. We're getting these models seeded very, very shortly. and we expect perhaps next month to have more details to share. But we couldn't be more excited. We think the leadership team at OnRamp is led by CEO and co-founders Tyrone Ross and Eric Irvin, a lot of experience working with advisors in the space, and we couldn't be more excited to be working with them on that.
spk14: Thank you, Jeremy. And just one other thing on there as well. I mean, that's one of the really great things about models is they are more relationship-based, you know, as a starting point. versus being product-based, but they do allow us to tie together what we're doing on the product side, and they really allow us to tie together some of these other large macro themes. I mean, if you think about it, you know, mutual funds to ETFs, big macro theme in wealth management models, ESG, and an emerging one being, you know, crypto, And in models, we're able to bring that all together. And so, you know, we've got the models, as Jer just talked about, that we've launched already, but coming not only models with crypto, but, you know, ESG models as well. So models are just, you know, a great initiative for us, and they remain a major push for us, and again, doing well so far.
spk08: Great. Thank you for that. Appreciate the help.
spk07: Our next question comes from Michael Cypress with Morgan Stanley.
spk11: Hey, Marty. Thanks for taking the question. Maybe just coming back to the US Bitcoin product that you guys filed for, I was just hoping you could maybe elaborate on the product itself. I think you mentioned it's a trust. How does that differ from other ETFs from a product standpoint? How does it differ from other existing ones that you have seen being filed? in the marketplace? I think you had mentioned some others, like the VanEck product. How does it differ from that? And how does it differ from your European product that you already have in the marketplace?
spk02: Really, we're building off of our European product. And again, these are early days. And so not all exposures and filings are created equally. I think we really have answered all of the concerns that regulators have. We're showing how well it works in Europe and bringing sort of what we believe to be best constructed, best practices, best execution in structuring in Europe really, which means at the moment in the world. And we're bringing that expertise and similar structure here to the United States. I don't want to go into really the differences that we are aware of for competitive reasons. But we're very optimistic that our filing will be amongst the first, if not the first, approved in the U.S.
spk11: And then maybe just on the European side, you had mentioned the cross-listing of your European Bitcoin product and that you might be able to get retail investors on board. I guess maybe you could just talk a little bit about your distribution strategy. How many platforms is this product going to be available on? And what's the sort of limitations around retail? being able to buy and participate in this product in Germany and also more broadly around around Europe?
spk02: So expanding in through Germany opens up all of Europe. The product is institutional for sure. And we're getting and those are slightly longer sales cycle than retail. So we're building up a significant pipeline of interested institutional investors. But also recently with the German expansion into Germany, we have a little more flexibility into retail. Retail that finds the fund on their own or retail that has the support of their advisor, retail is able to buy our fund. So it has been an expansion of the opportunity set to retail, which didn't exist when we first launched it in Switzerland. And it's broadly on, you know, it's more specific to the different institutions. Some accept crypto at this stage and some do not. But we can see that by the quality and quantity of our conversations that the platforms are opening up. The investor demand is real, which is not surprising. You know, when you think about the ETFs in the very, very early days, Bitcoin is to sort of the blockchain what the cues were to the ETF structure. It brought a lot of attention to it. And the kind of performance that you're seeing in the asset classes just makes it impossible to ignore. I'm not saying you should put all your money into it. We don't want to romanticize it. We don't want to villainize it. We have hundreds of exposures. But it's certainly something that has been performing extraordinarily well, and we're proud and happy to support investor access to these exposures. We see it as very consistent with the way we have built the business from the very beginning. This is not a change in any way.
spk11: Great. Are there any additional actions you might be able to take to help broaden the access to retail ownership of the product in Europe, or is this pretty much it at this point?
spk02: i think um i believe there will be over time as uh bitcoin and crypto assets um get more and more uh regulatory um approvals and they just get more comfortable with these exposures operating smoothly in the marketplace i'm expecting it to continue to move forward and open up but i have to say i'm trying to be specific in my uh answer but retail can now buy our European ETPs, crypto ETPs. Great. Thank you.
spk07: Our next question comes from Brennan Hawking with UBS.
spk13: Hey, good morning. Thanks for taking my question. I'm going to have a few more on crypto and some of these. offerings. It's an exciting part of the market, and you guys seem to be on the balls of your feet here. So I'm curious, Jono, you spoke to the custody, the third-party custody of the crypto assets as a key benefit for the ETFs, which makes perfect sense at a high level. But I'm curious, mechanically, what does custody of a blockchain-based asset even look like? And when you think about and you engage with the different providers out there, the various custodians, you know, is there a material difference in where those providers are in their capabilities and their offerings? You know, who's doing that well and, you know, how have you decided to partner with with the custodians and what drove that decision?
spk02: So we started with SwissQuote, which was an important and a quality and a very well-researched vendor for us for custody of crypto assets. We recently announced that we've added Coinbase as a second custodian for these assets. When you think about, you know, there's that story about the guy who lost his password and couldn't get back into his wallet and lost, you know, $100 million. You know, it's a different way to hold your assets. And I think, you know, what we do know is the ETF, ETP has mainstreamed. It's extraordinarily efficient. people are very, very comfortable accessing all exposures through this mechanism. And so we've just taken away something that many mainstream investors are not yet comfortable with, which is managing their own wallet. So I think that it's, um, um, you know, and not everyone does it the same. Our team has spent a few years now, um, understanding the ecosystem, and then really bringing all of our highest standards into bringing these exposures to the market so investors know that they can trust WisdomTree to watch out for their money. And trust, I think, will be one of the most important factors that brings investors into these exposures. But not all vendors are the same in this space, and you really have to have the expertise to analyze this, and we do.
spk13: Yeah, no, I don't doubt that at all, which is why I wanted to hear your views on it. But is custody, quote-unquote, of these assets just a matter of having a third party maintain the keys and the passports and whatnot, and then having various control procedures in place for that? I just... The tricky part about this and understanding it, trying to get your head around it, is these are not like normal securities, and yet they're going into the ETF wrapper, which I agree with you, it should improve comfort for investors. I'm just trying to understand mechanically how it would even work.
spk02: We should follow up offline on this, but if you buy the ETP, you don't have to manage a key. It's all done. We do it all for you. I think that's the importance here is that we're providing the insurance. We're providing the custody management, the key management, the safety of it. So those are the things that will expand broad usage to these exposures. But we can follow up in more detail if you really want to dig in after the call.
spk13: That's great. I'd love to learn more. And then... Switching to a more mundane topic, when we think about the year and there's an expectation that with vaccine rollouts being as successful as they've been, T&E is going to start to come back. Is that your expectation? Is that embedded in your, you know, forward look for expenses? What lines did the T&E tend to flow through and how should we think about an expense ramp as we go from here into back half of 2021 and then probably building into 2022.
spk02: Amit, maybe you go first, and Jared, if he doesn't hit on everything or you have more to add, please do.
spk05: Hey, Brian. So all of our T&E sales-related spending is all in that sales and business development line, and the guidance that we gave at the beginning of the year did incorporate some level of opening up in the second half of the year. I wouldn't call it, you know, back to normal, but I'd say a small amount. We are going to be continuing to leverage, you know, the efficiencies that we've learned during remote. So some of it will have to wait to see. If we see the, you know, everything sort of getting back to normal, then we may have to revisit it, but we have factored in some additional spending towards the second half of the year. But first and foremost, continuing to leverage the efficiencies that we've learned so far in being remote.
spk14: Yeah, and just adding a little color. I mean, in our own, you know, side of the table running WisdomTree, you know, we found that remote first really suits us and that even when we can go back, we're looking to go back in a different way, in a remote first way. and that costs us less money, and it's more efficient. And we've experienced it for a year, and we see so many positives that we want to hold on to. And then when I'm speaking to a lot of our clients and the senior executives at those firms, they're thinking the same thing, that a lot of this has been better So I don't think we'll be rushing back to 2019, you know, the old way. I agree with Amit that you have to wait and see a little bit because we're all feeling our way. But our expectation is that there's a new and better way, and that's what's in store for us. And it's more efficient, and part of that efficiency is that it costs everybody less money. Thanks for the color.
spk07: Our next question comes from Mike Carrier with Bank of America.
spk00: Hi, guys. This is Sean Kalman. I'm for Mike. So just piggybacking off the earlier question on thematics, can you guys talk about some of the new thematic products on the horizon beyond crypto? Are there going to be any additional ESG products, or can we expect an infrastructure-related product to be launched?
spk02: Jeremy, why don't you go first, but be careful about what you say because of the competitive advantages.
spk04: Yeah, I think you could see, I mean, you have to check our filings for what's out there. I think the, I mean, the clear trend is that one of the things that we're doing is being more global of a organization with our, and in thematics in particular. I mean, you see the cloud computing launched in September of 2019 is now, you know, about 1.89 billion globally. And we're trying to do more of that. So you could look at what does Europe have What do we have? How do we combine? We both launched cybersecurity the same day and are off to a good start there. And our team in Europe has had strong success in AI, so we are sure studying that. And they've had strong success in battery solutions and other things. And I anticipate we're going to do more together in some of these disruptive technologies with interesting partners. So you definitely will see more from us.
spk00: Okay, thanks. And then the gross margin trends have been solid, even looking past the 4Q items. So can you just explain what's driving it? Is it simply scale, or are there other factors contributing?
spk05: Amit? Yeah, Sean, it's a factor, as you mentioned. We had lower expenses this quarter because of some seasonal stuff that happened in Q4 of last year, but also the higher average AUM. That helped contribute to the increase in the gross margins. But Remember, we're still keeping the full year guidance at 77 to 78 because, you know, we do have some seasonality intra-quarter when we have rebalances when we continue to launch funds. So we still feel comfortable with that full year, 77 to 78.
spk02: But I will remind you that we're up to $73 billion of AUM. So the quarter ended at 69.5. So higher AUM. Keep going.
spk00: That's all I had. Thank you. Thank you, Sean.
spk07: Our next question comes from Ryan Bailey with Goldman Sachs.
spk09: Good morning. First, I just wanted to stop by wishing on well in the next endeavor. Then I was hoping to continue along the lines of Brennan's questions. So you mentioned that State Street took part in the recent funding round for Securrency. And I think in general, we're seeing more interest from the trust banks and finding ways to make digital assets mainstream. And that's kind of beyond just some of the crypto. So I was wondering if you could speak to what wisdom trees competitive advantage will be for some of the larger, more entrenched players in the financial system when it comes to digital assets specifically. And it sounds like it's beyond sort of being forced to market with products. But maybe it's not. So I was wondering if we could stop there and the second part would just be how WisdomTree will get its fair share of economics from digital asset growth.
spk02: So it's a great question. So we were very early as the lead on the Series A in Securrency. We remained after the Series B, Securrency's largest shareholder, by the quality of the institutional participation of you are seeing the custody banks and other financial institutions getting themselves oriented towards a blockchain-oriented future because that rail has such potential globally in terms of efficiency and functionality. But because we're coming in at sort of regulated tokens coming in at the very earliest stage of how you could interact with these, we have a very good chance to disintermediate other participants by being early, a first mover, getting the network effect, and also through our investment in Securrency, which it seems to be, you know, gaining acceptance in their vision for how this world may unfold. So we're very cognizant of the fact that this will be very disruptive going forward broadly, not just in fund management, but broad financial services. And we are Our expectation is that we are going to see expanded economics on these efforts over time. But I can't go into more detail today.
spk09: Understood. If I could try a follow-up, and to your point, if this sort of infringes on competitive dynamics, I can follow up with you separately or I can wait. I guess just wondering, in terms of economics to WisdomTree, the primary basis for that will be through the ownership and security?
spk02: No, I don't believe so. I believe all do. I mean, the funding round of B was a significant improvement in valuation. But, no, what I was talking about was separate from the investment in security.
spk09: I see. Okay. All right. Thank you very much.
spk02: Thank you. And very classy of you to say something nice about Ahmed.
spk05: Thank you, Ryan.
spk07: Our next question comes from Keith Hosom with North Coast Research.
spk03: Good morning, guys. Just trying to unpack the information on the Bitcoin filing in the U.S. I know there's a bunch of other providers that have also filed as well. So I just want your thoughts in terms of is the market big enough for the Bitcoin that you think several of you guys can succeed, or do you guys have what you think is an advantage based on your experience in Europe that perhaps some of your competitors don't have? Whatever you can say there. I know it might be limited, but whatever you can say would be valuable. Thanks.
spk02: So, first of all, Bitcoin is about a $2 trillion exposure with almost no institutional and really mainstream investors because of how difficult or unconventional it is currently to access the exposure. So I think that there is tremendous room for the ETPs to scale very significantly. I do believe we have advantages because of how The organization has immersed itself in crypto, blockchain, digital assets, whatever you want to call it, so that we have clear, strong opinions and knowledge that is permeating throughout the firm, both from Europe to the United States and back. So I think we do have some advantages, and I think our filing will be very well received by the regulators, but we'll have to see. Again, I think we have a chance to be, if not first, amongst the first, but hopefully first in the U.S. with an approval.
spk03: Okay. I appreciate it. Thank you. If I can just revisit a previous question in terms of the gross margins. Obviously, a great quarter for gross margins. Each asset are up even more since then. With your guidance, it looks like your fund administration costs would have to wrap up quite a bit throughout the year to, I guess, come back down in that margin. Was there anything in this quarter that suggested the number of this quarter was lower than what we'd expect for the rest of the year?
spk05: No. You know, one of the things that we said we were going to do is, you know, we talked about product launches. This year we were targeting about 20 product launches, so that's coming. and we know that that will have an effect on the gross margins as well. So that's why we're leaving room for that. That's why we don't want to take – we think still the 77 to 78 is still the right number.
spk03: Okay. Can you remind us how much product launches for a fund will generally cost you guys?
spk05: Sure. So in the U.S., an ETF generally about $135,000 to launch a fund. Our European use of funds are roughly the same. If it's a leverage and inverse fund, it's a fraction of that. It's closer to like $30,000 to launch an inverse and leverage fund.
spk03: Great. Thank you.
spk07: I'm showing no further questions in queue at this time. I'd like to turn the call back to Jonathan Steinberg for closing remarks.
spk02: Thank you, everybody, for your time and attention today, and we'll speak to you next quarter. Have a great day. Bye-bye, everybody.
spk07: This concludes today's conference call. Thank you for participating. You may now disconnect.
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