Thank you for standing by, and welcome to the WisdomTree Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Jessica Zaloom, Head of Corporate Communications and Public Relations. Please go ahead.

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 WisdomTree's annual report, on Form 10-K for the year ended December 31, 2021, as amended, and quarterly report on Form 10-Q for the quarter ended June 30, 2022. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now it's my pleasure to turn the call over to WisdomTree's CFO, Bryan Edmiston.

Thank you, Jessica, and welcome, everyone. I'll begin by reviewing the results of the third quarter, and we'll then turn the call over to Jarrett Lilien for additional updates on our business. We've been operating against an incredibly challenging market backdrop with interest rate increases occurring at a pace not seen in decades to combat surging inflation and concerns over an imminent recession. Broad-based equity markets dropped into bear market territory during the quarter, contributing to a decline in our AUM from negative market movement. That said, our results have been remarkable considering the market conditions, as we have generated $1.7 billion of flows during the quarter and $8.7 billion year-to-date for October. Fixed income has been the primary contributor of our success with our Floating Rate Treasury product, USFR, generating over $2.8 billion of flows during the quarter and almost $9.7 billion year-to-date. However, not to be overlooked is the 13% annualized organic growth of our U.S. Equity product suite, which brought in $1.2 billion during the quarter and $2.5 billion year-to-date. Notwithstanding the challenges we are experiencing in our commodity suite, we are delivering best-in-class annualized organic growth of 14% across our AUM with sustained momentum as evidenced by eight consecutive positive flowing quarters. Our AUM currently stands at $74.6 billion, an increase of 5% from the end of September, as our momentum continues, having generated almost $1.8 billion of flows in October and having benefited from positive market movement. Revenues were $72.4 million, a decrease of 6% from the prior quarter due to the impact of negative market movement on our AUM. Our average advisory fee also declined 1 basis point due to changes in our AUM mix. Adjusted net income was $9.3 million or $0.06 a share. Our non-GAAP results exclude a noncash after-tax gain of $78 million for our future gold commitment payments, resulting from an increase to the discount rate used to compute the present value of the annual payment obligations. Our non-GAAP results also exclude $6 million in other net non-operating losses. Our adjusted operating expenses were down 3% for the quarter. This decrease was largely due to lower incentive compensation accruals as well as lower marketing and sales-related expenses. Now a few updates regarding our expense guidance. As a reminder, last quarter, we had tightened the high end of our compensation guidance range by $3 million as we tempered our hiring plans. Our compensation guidance remains at $96 million to $99 million. Our discretionary spending guidance is being reduced and now ranges from $50 million to $51 million as we continue to balance expense management against our investments for growth. We had previously communicated a range of $51 million to $53 million. We currently anticipate gross margins of 78% to 79% for the year at current AUM and flow levels, an update from the 79% communicated last quarter. Our contractual gold payments guidance remains unchanged at about $17 million for the year, while our third-party distribution guidance was reduced to $8.5 million, given the impact of market volatility on the AUM on our platforms. And our adjusted tax rate was approximately 26% for the quarter. This included the impact of adjustments identified when finalizing our 2021 income tax returns. Going forward, we anticipate a normalized income tax rate of 22%, the high end of our prior guidance of 21% to 22%. That's all I have. I will now turn the call over to Jarrett.

Thanks, Bryan. I will focus my comments on what have become consistent themes, our strong organic growth in ETFs and models, our strong operating leverage, and our progress and potential in digital assets and blockchain-enabled finance. Starting with growth, Q3 extended our quarterly net inflow streak to eight quarters and counting. In total, we have gathered over $8.8 billion of inflows year-to-date, an industry-leading 14% organic growth rate. This is a noteworthy streak, but the breadth and depth of our flows and strong product performance might be even more noteworthy as they position us for continued growth. Looking at flows, more than $9 billion of year-to-date fixed income inflows are only part of the story. In this past quarter and year-to-date, we have had inflows in six of eight of our major product categories. In addition to fixed income, our U.S. equity products have gathered over $2.5 billion in year-to-date net inflows, representing 13% annualized growth in this suite alone. In addition, our product performance continues to be outstanding, with over 80% of our U.S. AUM beating benchmarks and over 40% of our AUM in 4- and 5-star funds, while less than 7% is in 1 and 2-star funds. Contributing to our best-in-class organic growth is our Managed Models business. Our strategy is succeeding on two levels. First, with our platform partners such as Merrill Lynch and Morgan Stanley. And second, with our RIA and independent broker-dealer partners through our WisdomTree Portfolio and Growth Solutions offering. With our platform partners, engagement and activity remain high at both Morgan Stanley, where we just hit the 1-year anniversary of winning that mandate, and at Merrill Lynch, where we are a top-performing and flowing manager with our multi-asset income mandate. In fact, I'm pleased to announce that we've been able to leverage our success at Merrill to win an additional opportunity to launch three additional models within our multi-asset income mandate that are expected to go live soon on their platform, subject to final due diligence. When we won new mandates in the past, we've said it typically takes 12 to 24 months before we start to see material flows. Given we are already on the platform and have high engagement with Merrill Advisors, I expect that timeline will be greatly accelerated. We are seeing equal success with our RIA and independent broker-dealer partners. Our easy button solution that helps implement trade and rebalance model portfolios clears the major hurdle for RIA and IBD model adoption. Currently, that pipeline for this segment is 40 deep, and we are adding to it every day. As important as growth is operational efficiency. We have built a global ETP and models business that is extremely scalable and delivers robust incremental margins. Over the past several years, we've made many operational improvements and now have incremental margins well above 50%. And this means, as markets normalize, WisdomTree will be one of the only asset managers with both a margin improvement story and an inflow story. We are also executing and delivering on our digital assets business. WisdomTree's core DNA is to provide best structured access to various asset classes. We seek to make hard-to-access and sometimes hard-to-trade exposures easy to access and easy to trade. Today's best structures are ETFs and ETPs, but the next evolution in asset management is the blockchain-enabled digital wrapper. Attacking this digital assets opportunity is consistent with our DNA. It's a natural extension of what we do today, and it will be an important contributor and driver of future growth. As we have discussed before, our approach is to bring crypto mainstream and to bring mainstream exposures like fixed income, equities, and commodities into the digital world through blockchain-enabled funds and tokenized assets. Regarding crypto, we have already broken ground with the launch of our crypto and crypto basket ETPs in Europe and our early direct index offering in the U.S. Regarding digital assets, again, we are working to provide tomorrow's best structured access to mainstream asset classes. ETFs are today's best structure. Blockchain-enabled digital assets are tomorrow's best structure. We've already minted gold in U.S. dollar tokens. We recently hit a key milestone with SEC approval for our digital treasury fund, and we are building out a full digital fund suite that includes recent filings for several fixed income funds as well as equity-focused strategies from large captive thematic, basically everything a customer needs to build an entire portfolio. Taken together, our vision is fast becoming a reality. These are the first bricks in the foundation that will allow us to lead in the coming evolution in financial services, laying claim to the deepest exposures in the digital wrapper and positioning us to lead in an even larger opportunity, our expansion in blockchain-enabled finance or spending, saving, and investing as one. All in all, our steady march continues. We continue to produce best-in-class organic growth on a platform with strong operating leverage and a vision that is fast becoming a reality, which will allow us to lead the next evolution in financial services. With that, let me now turn it over to Jon.

Thank you, Jarrett. As we've said before, ETFs are the best structured, transparent products that exist today, and I'm very pleased with the success of our ETF franchises, having faced a difficult macro environment. It is a fact that WisdomTree is one of the few providers with net inflows year-to-date. Jarrett did a great job showcasing how our success in solutions and models is improving the consistency and quality of our inflows. I'm thrilled with the expanded model lineup we've earned at Merrill, where our momentum is accelerating. Equally exciting is our early success from our expanded RIA outsourced CIO offering. Jarrett mentioned, but it's worth repeating, that our high-quality pipeline is growing quickly. I think our results now prove that WisdomTree has successfully evolved from individual ticker sales, though still important, to being a true solutions provider. Our confidence has never been higher regarding future model success. We've also made exciting progress towards the best structured transparent products of tomorrow. We recently received SEC approval of our first blockchain-enabled fund, the short-term digital treasury fund. We've minted a dollar token, a gold token, and the product roadmap does not end there. I realized about four years ago how WisdomTree strengths are uniquely aligned with what would be needed to succeed in blockchain financial services. I knew that it was in our DNA; our deep knowledge of regulation, our trusted brand, our special culture, our strength in compliance, and our leadership in product innovation has driven this cost-effective early success. Our efficiency and effectiveness in implementing our digital asset strategy has been noteworthy. It's been reported that Facebook spent around $300 million attempting to bring a regulated, branded digital wallet with exposures to market, and they failed. Since the start of our digital asset journey several years ago, WisdomTree has spent less than $20 million on tokenization and WisdomTree Prime, our digital wallet. As we've discussed on prior calls, WisdomTree Prime is currently in beta testing and remains on track for a national rollout towards the end of Q1 next year. Additionally, I want to repeat what I said last quarter. Digital assets will begin generating revenue in 2023 without a significant uptick in cost compared to 2022 levels. I'm very excited about where WisdomTree is headed. We have a tremendous and holistic opportunity ahead in both ETFs, models, and Advisor Solutions business, as well as being an early mover in digital assets and blockchain-enabled financial services. So a week ago, we announced that WisdomTree is changing its name to WisdomTree Inc. and changing our ticker symbol to WT. By dropping investments from our name and dropping ETFs from our ticker, we are expanding our mission and recognizing the importance of this moment. This brand enhancement is less limiting and a natural evolution for the company. Our momentum remains strong, and I look forward to sharing our ongoing success in the coming quarters. With that, operator, can you turn the call over to our Head of Investor Relations, Jeremy Campbell to take some questions from our shareholders.

Certainly, I'd like to hand the program over to Jeremy Campbell, Head of Investor Relations. Please go ahead, sir.

Thanks, Jonathan, and good morning, everybody. Similar to prior quarters, we are going to take a couple of questions from our direct shareholders of the UCITS platform. So the first question here is, how is WisdomTree thinking about the spot bitcoin approval process at this point? What is the next step? And what is the realistic path to getting a spot bitcoin ETF approved and launched?

Will Peck, Head of Digital Assets, will you take this question?

Yeah, happy to, Jon. So there have been some recent headlines regarding the spot bitcoin ETF. I think it's important to note that this is for the U.S. We already have this product live in ETP format today in Europe. So in the U.S., look, our objective has always been to work productively with regulators. There's been a lot of news; some other providers are in the process of suing the SEC, or other things like that. That's certainly not part of our plan at all. We want to work productively with them, and we expect to be first or among the first to ultimately get there. I don't have an exact timeline on what that might be right now. Clearly, the SEC still has concerns. But for us, it's important to be working with them productively to try and address those concerns. On another note, we actually did get a very important approval from the SEC this past quarter for the WisdomTree Short-term Treasury Digital Fund. I know that was mentioned earlier in the remarks. For us, that's been one of the most important developments this year. Yes, senior people at the SEC have recently flagged that as one of the innovation-friendly things that they've been focused on. So we're focused on engaging with them productively on lots of things. A Bitcoin ETF is included in that, and we think we'll get there someday, but there is no immediate timeline on that right now, and we're focused on a number of other initiatives in digital assets with them. And Jarrett, I think you wanted to add a couple of points.

Yeah. Let me jump in as well. I think it's very important to distinguish between Bitcoin and blockchain-enabled finance, and a lot of people confuse the two. For us, crypto is interesting, but it's really only a use case for what can be done on the blockchain. A lot of people talk about crypto winter. Again, that may impact crypto, but the march towards blockchain-enabled finance, the much more exciting opportunity, is unwavering. We think blockchain-enabled finance is a place where we are leading, and it will change the way financial services are conducted. And really here, this is about the future. We have the opportunity to lay claim to the deepest exposures in the next evolution in asset management. This is a huge opportunity, and that one is completely on track.

Great. Question number two is about a couple of topics that are somewhat related. The first topic is whether you have noticed an increase in interest in dividend products as equity markets have declined, with investors looking for yield. The second topic is how have fixed income products performed in the current higher interest rate environment?

I'm going to begin with fixed income since it's been an outstanding year for WisdomTree's fixed income team. We've achieved $10 billion in fixed income flows year-to-date, highlighting our excellence in product development and innovation. About eight years ago, we saw the chance to introduce a beta instrument with Floating Rate Treasuries, which has become the top-performing asset class this year as rates have risen. We are capturing this with the 1-week treasury yielding 4%, attracting more buyers for that vehicle. What's particularly exciting for the fixed income team is that, for the first time in a decade, there's income back in fixed income. In the high-yield sector, yields exceed 8% while maintaining a quality screening process. Five years ago, WisdomTree launched a proprietary quality screen for high-yield and investment-grade ETFs. Our high-yield ETF, WSHY, has outperformed traditional beta ETFs since its launch, even without a significant credit cycle to showcase the advantages of our quality focus. This sets up well for future performance and flows in the high-yield sector, which now offers 8% yields. We also have strong core investment-grade fixed income. AGGY is a yield-enhanced aggregate fund with over $1 billion in assets and higher duration compared to the traditional aggregate bond index and ETF. Should money shift back to higher duration assets, our overall success in fixed income this year positions us well for cross-selling other bond ETFs, benefiting our long history in this area. Moving to equity, we've seen $2.5 billion of equity inflows year-to-date in U.S. equities, equating to a 13% annualized rate. After a 15-year period where growth stocks outperformed value stocks, this trend has now reversed. Value strategies concentrating on dividends have performed exceptionally. We've had 20 ETFs in the U.S. rank in the top deciles of Morningstar peer groups, and 75% of our U.S.-listed AUM is in the top quartile. This strategy is yielding strong performance, driving substantial inflows. In the 16-year history of our original dividend suite, two ETFs are experiencing their best flow year ever. DLN, which focuses on large-cap dividends, has secured $500 million this year, marking its highest year since inception. DHS, a high-dividend ETF, has shown positive performance this year, even as the S&P 500 has dropped 20%, underscoring strong relative performance. Globally, this strategy, available in both UCITS and ETF formats, has also attracted $500 million this year. Overall, from fixed income to equities, our improved track record and the favorable macro environment are poised to support sales in the upcoming quarters.

Great. And the last question from our UCITS platform is, where do you see the opportunity to gather assets going forward and continue organic growth?

Jarrett, why don't you start there?

Great. All right. I see really three main areas for continued organic growth, and those would be digital assets, our ETF lineup, and managed models. Just taking those one at a time, digital assets, we just covered it. But really, again, a huge opportunity to own the deepest exposures and what we see as the next evolution in asset management, so a very large opportunity. In terms of our ETF lineup, Jonathan also just covered that. But I'd just reiterate, we've got best-in-class organic growth. We've got breadth and depth of our flows. We've got outstanding fund performance, and that gives us momentum that we see continuing. In the third quarter, we had net inflows of $1.75 billion. October already has net inflows of $1.9 billion. So momentum is there, and it's continuing. Managed models. We also spent a little time talking about that in the prepared remarks, but let me go into that a little more because this is also very exciting. It's one of the most important macro trends in all of wealth management. And again, as I said earlier, our strategy is succeeding on two levels: first, with platform partners, such as Merrill Lynch and Morgan Stanley, but then second, with RIAs and independent broker-dealer partners and through our portfolio and growth solutions offering. Here, we help implement trade and rebalance model portfolios, and growth for all of that is really threefold. We want to get to have more partners. So we want more wealth management partners. We want more of our models on those platforms with our partners. And then we want to grow our mind share with the advisors that are on all of those platforms. Those are the three areas of focus. Touching on our pipeline, it's robust and it's growing every day. We mentioned in the prepared remarks at Merrill, we've got new models being launched there later this year. So that's an example of an existing relationship where we're doing well. We're adding additional models. Yesterday, we had a press release on a new partnership with Private Advisor Group. We're a preferred partner for their 750 advisors and $29 billion in assets. We got to be a preferred partner after a rigorous due diligence process where they evaluated our investment management capabilities, our technology, and our distribution support. So again, another piece of evidence of our great success. In our Portfolio and Growth Solutions offering, we've got a pipeline of 40 firms, generally between the size of $100 million to $750 million, where there we have a different approach and get a large, meaningful portion of those firms' assets. So all in all, this is working. We've got a long runway for growth. An important point is model inflows are recurring in nature. As you establish these relationships, new money comes in, it builds in the models. It's stackable on existing flows, and it's also sticky. It tends to stick around. So very excited about organic growth. Again, through those 3 areas: digital assets, our ETF lineup, and managed models.

Thanks, Jarrett. Jonathan, feel free to open it up for some questions from our sell-side analysts.

Our first question comes from Dan Fannon from Jefferies. Please go ahead with your question.

Thanks. Good morning. To follow up on the managed model discussion, can you provide the current AUM in this channel? You've mentioned some large firms. How are discussions progressing with other major platforms? Is there a limitation on joining additional platforms due to existing relationships?

Jarrett, do you want to take that first?

Sure. In the past, we've talked about asset levels and ratios of new flows being around 12%. Those ratios and asset levels are holding. In terms of the partner opportunities, yes, we have other partner opportunities. So I was saying a second ago that the pipeline across the board is pretty robust, and there are no restrictions as so far as we are on one platform; there are no restrictions on being in another. A big area where we are expecting to see it continue to contribute to our growth. If I didn't mention it, we had on our AUM levels, we were at zero in this initiative early in 2020. We're now over $2 billion today.

Thank you. Next question?

Certainly. And our next question comes from the line of Brennan Hawken from UBS. Your question, please?

Good morning. Thank you for taking my question. Will's comments suggested that the spot bitcoin ETF efforts are not finished. So could you help us understand what your next steps here are? Have you received feedback from the SEC? And can you share any of that? And why are the concerns that bitcoin is not considered a security that is traded on an exchange, a structural impediment to a spot ETF in the U.S.?

Will, why don't you take that?

I think it's important to reiterate the concerns regarding the spot bitcoin ETF approval in the U.S. The SEC's primary worry has been the possibility of market manipulation. In their rejection letters, they pointed out that price discovery in the bitcoin spot market occurs on platforms that lack regulatory oversight, which could lead to manipulation. There are numerous examples we could discuss, including how price discovery takes place in the futures markets. However, as I mentioned earlier, we do not intend to participate in any lawsuits; instead, we want to maintain a productive relationship with the SEC. In previous media interviews, I've highlighted that this issue cannot be tackled by WisdomTree alone; it requires a collaborative ecosystem approach. Our next steps involve ongoing discussions with SEC members and the broader Washington D.C. community on this issue. Additionally, this situation has not hindered our efforts in the digital asset sector, as demonstrated by our work with WTSY, where we found the SEC and regulators receptive to innovative approaches in different formats.

Yeah. And let me just add one thing. The Bitcoin ETP has nothing related to WisdomTree Prime launching. So that's not going to be a deterrent from our launching that product. I just wanted to get that out there that they're unrelated.

Yeah. And where I wanted to jump in again, let's not miss the forest for the trees. Crypto is interesting. But the real opportunity is blockchain-enabled finance. That's what WisdomTree Prime is about. So holdups on the crypto ETF approval don't do anything to the opportunity that we're working on for blockchain-enabled finance. We've got the one fund approved. We've got nine more filed. We've got great momentum here, and it's a mistake to confuse crypto, which is a use case for the blockchain, with the broader opportunity that we're really pursuing in blockchain-enabled finance, and that's WisdomTree Prime.

Yeah, they're clearly separate. One's a functional rail and the other is sort of an asset class thing. Anyway, on that point, though, I'd love to ask another. You have your first blockchain-enabled fund that's received SEC approval. Are you now in a position where you might be more comfortable to try to explain the benefits of using those rails? I think it's interesting and at least ironic, if not more significant than that, that treasuries are one of the most traditional asset classes, and yet it's being administered on one of the most innovative and new platforms. How should we think about potential operational or efficiency improvements and benefits that you can garner through this unusual administration?

Will or Jarrett, if you want to start on this one? I may come in over the top, of course, but do you guys want to start?

Let me begin by highlighting some features of ETFs that we believe make them superior to mutual funds. ETFs offer greater liquidity, transparency, and standardization. They provide more liquidity than mutual funds, full visibility into the underlying holdings, and a consistent structure. Whether you are a major institution or a day trader, the experience remains largely the same; anyone with a brokerage account can access ETFs. These advantages are further amplified by the opportunities presented by tokenization and digital assets. To elaborate on liquidity, when Bitcoin was initially introduced, many viewed it as a gold-like asset. However, those knowledgeable about market structure recognized its unique ability for near-instantaneous peer-to-peer settlement at any time throughout the year. This capability represents a significant shift in how value is exchanged, moving us from a heavily intermediated system with T plus two settlement times to one with much shorter timelines. This transition enables broader participation in financial markets, increases financial inclusion, and reduces costs. This is the essence of what we are aiming to achieve through the tokenization of digital assets, starting with WTSY, which serves as our initial effort to unlock various use cases and showcase this potential. With WTSY, one immediate application is the ability to transfer assets directly between accounts, which is currently a cumbersome process few would consider. Simplifying this for a short-term treasury fund's peer-to-peer transfers is a noteworthy advancement. Another improvement will be the integration of payments and brokerage services, which currently operate on separate technology platforms. Transferring value between these areas can take up to a week, making it impractical. In the future, we envision a unified tech framework that facilitates quicker value exchanges, bringing savings and payments closer to investments. This transformation will reduce costs and improve user efficiency. These are just a few examples of the innovations we’re witnessing. I’ve discussed some of this in my blog, and we plan to share more as we increasingly launch our initiatives on a national scale later in the first quarter.

Jarrett, did you have more to add or was that good?

Just a couple of things. I mean, I think it's important that this is compelling for the end customer. Will covered it all. But you look at our first digital treasury fund, it's at zero expense ratio. So there's just immediate value to the consumer, but also the utility, the fact that you can spend, save, and invest in basically the same asset is new. It's a profound difference in the financial services experience where the consumer directly benefits. Then there's, of course, the benefit on our side. We cut out a lot of middlemen, we cut out a lot of unnecessary expense, and we diversify our revenue streams. So it enables us to succeed and thrive in a world where there's today fee pressure. So compelling for the consumer, compelling for WisdomTree.

Thanks, Jarrett. Jeremy, do you want to give us the next question?

Certainly. And our next question comes from the line of Keith Housum from Northcoast Research. Your question, please.

Good morning. I would like to hear more about the beta version of Prime, specifically any statistics regarding the number of beta users and transactions. Can you help us understand how confident we can be that Beta Prime is on track for a national rollout in the first quarter?

Okay. Will, you want to start?

Yes, sure. So we're not disclosing any metrics at this point in time on beta. Everything is on track for the Q1 launch. The WTSY regulatory approval was a great hurdle that we cleared. So we're quite excited about that. So no specific color on the beta testing beyond it's been successful so far, and we're on track for our broader rollout in Q1.

Okay. Understood. Appreciate it. In terms of, I guess, the European versus the U.S. ETF portfolios, I think there are two different trends here. We're seeing great funding flows to the U.S. in part because of the USFR. But obviously, Europe is not doing so well, probably more because of commodity exposure. Is there the opportunity to do more of the European treasury-type fixed income funds out there? Are you trying to have a success? How do we think about that economy between the two different segments?

Will or Jeremy who wants to start?

This is Jeremy. I'll begin. When we acquired the ETF Securities platform, we were thrilled because they were recognized as a leader in commodities, which we still value in an environment of rising inflation over the next few years. Gold, however, has faced some difficulties this year due to the strong dollar and increasing real interest rates. We anticipate a more favorable environment for their significant gold exposure as the Fed shifts away from aggressive interest rate hikes, which could be something we see in the latter half of next year. They have been diversifying beyond commodities and are experiencing positive inflows into products like our largest U.S. ETF, DGRW, which focuses on quality dividend growth. This trend is also gaining traction in Europe. The high dividend ETF I mentioned earlier is well-received in Europe, and we have been emphasizing thematic investments there. We see long-term opportunities as sectors evolve towards more targeted strategies, and we have a solid range of thematic offerings worldwide, especially emerging from Europe. This diversification strategy benefits the firm. We are maintaining our focus on various asset classes, including equity, fixed income, commodities, and crypto, ensuring a comprehensive global portfolio for different market conditions.

Great. Thank you.

Jarrett, you just want to add? I guess not. Next question?

Certainly. And our next question comes from the line of Michael Cyprys from Morgan Stanley.

Good morning. Thanks for taking my question. On the blockchain-enabled digital treasury fund, I was hoping you could talk a little bit about the distribution strategy. How you plan to go about getting customers to invest in this digital wrapper? What do you envision as the customers here? Are these retail customers or are these advisors? How different is the customer set from those that you have sold products to in the past?

Good question. I think Will and Jarrett, why don't you guys field this?

Yeah. I'm happy to start again. Initially, the customers for the digital funds will only be available through WisdomTree Prime as infrastructure, and that's with a requirement for the direct-to-consumer wallet application that we've been referring to over time, and I think this could happen fairly quickly. We expect distribution opportunities to grow outside of WisdomTree Prime, but there is no current immediate timeline on that happening. However, over time, we see a lot of assets migrating into the structure, and we're going to be very well placed to serve them. So whether that's with financial advisors, institutions, and the like, that's all on the road map, and we think we're particularly well-suited for that given our existing distribution.

I'd just add, if you look back just trying to size the opportunity a little bit and talk about distribution. We launched our first ETF 16 years ago. We were innovators; we were considered pioneers, but we were nonetheless 13 years late to the party. Therefore, others got to claim the deepest exposures in the new wrapper, being ETFs. Today, it's a much different story. We're actually a little early to the party. But we are claiming the deepest exposures in this new wrapper, but being early to the party, some of the world needs to catch up with us. So right now, as securities, others need to be regulated to be able to sell our product. As Will said in the beginning, it will be through our wallet. Now I think marketing will have a big role in how we sell, but the compelling value also, I think, will sell. If you think about it in today's world, a lot of people, and Will touched on these comments earlier, but you sit in cash in a brokerage account earning zero, or you sit in a checking account at a bank earning close to zero. When you want to move that money around, you physically have to move it from one environment to another. One of the exciting things about blockchain-enabled finance is those worlds are merged or unified. You look at something like our Digital Treasury yielding 3.5%, 4%, that can be your source of spending. That can be your source of investing. You no longer have to sit there in a different account, in a different environment earning next to zero. This is going to, I hope, sell itself because the value proposition is so compelling. Certainly, as the rest of the world catches up, as regulation catches up, we'll broaden how we distribute. It's also being early gives us a nice opportunity to do business development to platforms and institutional investors as well.

Okay. Thank you.

Thank you. And our final question for today. One moment for our final question. Comes from the line of Michael Brown from KBW. Your question, please.

Hi, good morning. Thanks for taking my question. You clearly have an early-mover advantage in the digital and blockchain front here. I just wanted to hear how you anticipate the competitive landscape to evolve. I guess I can't help but think about some of the bigger players here with large investment budgets that seem determined to catch up could likely throw some money at a digital initiative to try and catch up to what you've already been building out and to continue to roll out. So what are you seeing from competitors at this time? And how do you expect that competitive landscape to evolve?

So I'll take this. I certainly expect over time that there will be more competitors, and this is because it is so compelling. I'm expecting financial services broadly to move on to the blockchain. So far, we've seen more from broad competitors. They're more in an exploratory mode. I think that they're investigating. They have to come up with their own use cases and business models and how they'll exploit the new technology. So it's not quite so easy because there's a blurring of definitions. It takes a little bit of creativity, but we're not expecting to be alone, and we are pleased that we seem to be early, if not among the very earliest. We're also excited that many who are discussing this now seem to be coming to conclusions that we came to maybe three years ago, and we've been very quickly with our conclusions, starting to create our use cases and putting those ideas into motion. Let's see if these other firms can navigate their legacy issues. There's a significant amount of disruption coming to existing business models. It takes a lot of conviction to tackle this with energy.

Yeah. Just really quickly and mostly reiterating what you said. But this isn't as simple as developing an app. WisdomTree Prime is our app, and that does take time. As you've heard, there was over three years of efforts with regulators. We've been building an operational ecosystem of partners with people like Stride Bank and Galileo. So there's work on product, you've seen us launch a product. We've got nine more filed. There's functionality and client experience. This is a real effort that we've undertaken. We've been working on it for really three-plus years, leveraging very well our existing infrastructure and people, but this isn't something that can be repeated quickly.

And just to double-click on that last point of Jarrett's. We have roughly 25 people in digital assets and 250 people in the ETF business. But what the 250 people do is of great relevance to the digital asset efforts. Without them, you wouldn't be able to accomplish nearly as well or as quickly and cost-effectively. We keep saying that this is holistic, but we mean it. We're well-positioned to be the company to try to exploit this opportunity. Any more questions?

I'll leave it there. Thank you.

No further remarks. We just want to thank you for your support and attention, and we'll talk to you next quarter. Have a great day, everybody.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.