Operator: Good day, ladies and gentlemen, and welcome to the WisdomTree first quarter earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, WisdomTree. You may begin.

Jason Weyeneth: 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 December 31, 2016. 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, Amit Muni.

Amit Muni: Thank you, Jason, and good morning, everyone. Since most of our operating data is already known, I'll quickly go through the important items for the quarter. I'll then turn the call over to Jono to discuss how we see technology changing various parts of the asset management industry with several trends accelerating the adoption of ETFs and how we plan to deepen relationships with our clients helping grow their business with the end goal of accelerating and diversifying our asset growth. Beginning on Slide 3. This quarter we reported solid financial results despite the flow challenges.

Our AUM grew to $41.9 billion at the end of the first quarter, primarily due to positive market movement. As the middle charts reflect, continued negative flow momentum to Europe offset positive flows in our other product categories. But as you can see in the chart on the right, the outflows are starting to slow. Turning to the next slide, we can dig a little deeper into our flows. Following the strong performance track record, our MidCap Dividend fund, DON, continues to gather assets posting its best flow quarter ever with just under $300 million, which represented nearly 20% of the flows in the industry's MidCap value category.

Our Quality Dividend Growth fund, DGRW, also continues to have solid momentum with $138 million of inflows.
Despite flattening of the yield curve, our High-Yield Zero Duration ETF, HYZD, gained strong market share in a category we believe has excellent growth outlook.
And lastly, in fact, our recently launched liquid alts funds are slowly gaining traction. As evidenced, WisdomTree remains at the forefront of ETF product innovation. Despite the record level of industry inflows this quarter, based on our conversation with clients, we believe there doesn't appear to be much conviction to the money that has been recently allocated.

The post-election rally has been very fast and many advisers were caught off guard and not well positioned. Much of the money that flowed into the market was playing catch up and the easy allocation in that scenario is low-fee beta. Over time, as markets normalize and convictions strengthen, we expect broader demand for alpha-generating strategies to reemerge. Now turning to the financials on Slide 5. Net income was $6.9 million for the quarter or $0.05 per share.

This quarter, we took a noncash tax charge of $1 million as a result of adopting new accounting rules around stock-based compensation, which I discussed on our last call. We also had a onetime reimbursement for approximately $800,000 for prior period fund-related costs. Turning to the next slide. Expenses were down slightly from the fourth quarter after adjusting for the goodwill impairment charge. Declines in marketing and sales-related spending is more timing driven, and we expect them to increase in the second quarter in line with our previous guidance.

Compensation as a percent of revenues for our U.S. business was approximately 29% for the quarter. Guidance for the full year is between 28% to 31%. Given our results so far this quarter, we would be at the low end of the range; however, the number is slightly higher due to seasonal payroll taxes this quarter. Turning to Slide 7.

You can see margins have improved. Gross margins increased to 82% due to higher average AUM, lower transactional fees as well as the onetime reimbursement. We expect gross margins to be in the 81% to 82% range, so up slightly from our previous guidance. Pretax margins improved to 27% on a consolidated basis and 34% for our U.S. business due to higher revenues.

Turning to Slide 8. We can review the highlights of our non-U.S. business. We experienced solid growth this quarter with AUM up 30% to $1.4 billion. The majority of the flows were balanced between our UCIT and Boost product sets, which had record inflows this quarter.

Our distribution arrangements in Latin America and Israel both contributed to flows in our use of funds. We are also continuing to build out our team in Canada. As a reminder, we are targeting breakeven for our European business to be between $4 billion to $5 million of AUM and $1 billion to $2 billion of AUM for Canada. Turning to the next Slide. We can review our operating results so far this quarter.

As of yesterday, our AUM was up slightly to $42.7 billion with outflows in DXJ offsetting flows in our other product categories.
Thank you, and now let me turn the call over to Jono.

Jonathan Steinberg: Thank you, Amit. Good morning, everyone. The evolution, maybe even revolution of the asset management and wealth management industries is accelerating.

Several trends in market forces are converging. The shift of fee-based accounts has been accelerated by likely regulatory changes. Adviser utilization of asset allocation models is rapidly expanding. It is now viewed as a best practice for end clients and a more scalable business model for advisers. More broadly, technology is changing the industry up and down the value chain.

Historical business models and value propositions are collapsing. At WisdomTree, we see all of the above as huge positives. We love these trends. First of all, these trends are accelerating ETF adoption across all liquid asset classes because of the inherent superiority of the structure. As we look to the next 10 years, we believe the acceleration of the ETFs will continue.

The industry is on pace to exceed the best year ever for mutual funds, which was $393 billion in 2009. Based on the recent pace, ETF flows in 2017 should exceed $500 billion, which would be almost double last year's performance, which was our best year ever. And if the new administration is successful with tax reform and other pro-growth policies, flows in 2018 should be even stronger. If the policies fall into place, I think we should start to expect our first $1 trillion flow year all within the next few years. This is the opportunity WisdomTree has invested against for years.

Over the first 10 years, WisdomTree had products in the marketplace. The focus was on building the team, cementing the firm as a leader in product innovation and planting flags in the world's largest ETF markets. Our distribution focus on research and ETF education helped the firm growing over 2% to the nearly $2 trillion in U.S.-listed ETF flows. At the same time, we've proved the power of our self-indexing and outsourced business model. One of the keys to achieving greater market share over the next decade will be to deepen our wallet share with financial advisers.

We believe technology-enabled services will be a key differentiator for us. By building upon our low-cost alpha-generating ETFs with portfolio construction services, asset allocation services, with enhanced practice management resources and a leading technology solution in AdvisorEngine, we expect the combination of the above to grow our market share with advisers. This will translate into accelerated ETF asset growth for WisdomTree. AdvisorEngine will be an important component of our efforts to grow ETF market share and 5 months into the relationship, we are increasingly confident in the investments we have made and the platform being built. The feedback we have been getting from those who've demoed the product is that it is the best-technology solution they have seen to address the end consumer, the financial adviser and the home office, the 3 constituents that matter.

The AdvisorEngine platform help advisers digitize and grow their business by marrying leading technology with value-added services. Just yesterday, AdvisorEngine announced the acquisition of Kredible, a company focused on helping advisers better position their business for growth by ensuring they have a strong online presence. We are specializing in adviser-enabling technology. Also as previously discussed, WisdomTree will be the core provider of asset allocation services through our model portfolios, although the platform is open architecture. While it is still very early days, we expect AdvisorEngine to emerge as an important distribution channel for a broad range of WisdomTree ETFs.

We believe WisdomTree is amongst the most levered to the industry changes with our product set business model and strategy lining up incredibly well with the secular shifts taking place. But it is important to recognize, and we have not lost sight of the fact that our recent results have been challenged and it is our duty to create shareholder value. That said, we have built a great foundation through our investments over the past decade in people, products and geographies, and we have conviction in the technology investments we're making. We can clearly see the path toward accelerated growth ahead.
Thank you for your interest in WisdomTree, and we would be happy to take your questions now.

Operator: [Operator Instructions] And our first question comes from Craig Siegenthaler from Crédit Suisse.

Craig Siegenthaler: So a much smaller competitor of yours in Europe was just sold for a nice multiple of revenues despite not really having -- a margin near 0, not really have any earnings power. So this transaction seems to indicate that is a wide discount between your current public market valuation and what a buyer would pay. So how do you remain public and address this at the same time? And do you see any key differences between your business and the ETF manager that was just acquired that would warrant a large evaluation discount?

Jonathan Steinberg: I'll take this one. Thanks, Craig.

So yes, we see lots of differences. I think it's important to remember how Source was created. 6 large investment banks came together to launch Source and it was a very disjointed strategy from the very, very beginning. That's one point. The second is Invesco, which I think made a very smart acquisition for themselves, was buying from a distressed seller.

Warburg on their own didn't have the scale and could not figure out a strategy to get to profitability. When we looked at the products, we were very uncomfortable with their product strategy and WisdomTree's product strategy is much more narrow than Invesco's. But from our standpoint, we were very uncomfortable with Source's IP strategy, very uncomfortable with their pricing strategy and the way they structured their ETFs, with much of them being synthetic. So -- and I think there really are some great distinctions between us. Some other

obvious distinctions: one, we are a predominantly U.S.-focused platform versus their European platform.

We do have scale and profitability and very strong margin; they haven't. And then -- and also there is now greater scarcity value. So I think -- net-net of it all, I think it bodes very well for WisdomTree and there are, I would think, great distinctions between us and them.

Craig Siegenthaler: And then since the U.S. election, we initially saw a big increase in interest rates.

I think some of us were hopeful this would be good for your rising rate suite. Yet it didn't really take in size of your inflows. Why do you think that was? Do you think the track record wasn't long enough? Do you think the interest rates didn't go up high enough? Like, why do you think the suite really didn't garner a significant amount of flows there?

Jonathan Steinberg: Let me start here. From a tactical trading standpoint, the market has been disjointed. So you had great expectations of rate increases and then healthcare failed and great expectations softened.

So we saw a real break in some of the momentum that we were seeing in the interest rate hedge products. So I think from that standpoint, we were looking for a little bit more consistency in some of the tactical themes that we hope will emerge.

Operator: And our next question comes from Michael Cyprys from Morgan Stanley.

Michael Cyprys: So Jono, you talk about shifts up and down the value chain and it seems that you are evolving the firm here to provide a bit more service with asset allocation and focusing a bit more on the customer in that sense. So I guess, just taking a step back and kind of thinking about all the changes happening over the next, say, 5 or 10 years, where do you think within the value chain will be most sustainable to extract rent, because you talk about the opportunity to kind of grow your ETF assets as well and that seems to be the case and that you could get more management fees certainly from those higher ETF AUM levels, but where do you think it's ultimately going to be more sustainable just given there's overall fee rates -- fee pressure on the manufacturing side?

Kurt MacAlpine: It's Kurt MacAlpine, WisdomTree's Head of Global Distribution.

So if you think about the value chain today and where we think it is going to evolve, I would say that the manufacturing piece of the overall value chain is the most attractive piece in the value chain today. And as you've mentioned, we are pursuing initiatives to collaborate with firms and through our partnership with AdvisorEngine, participate in other areas of the value chain as well. Similar to how there is fee pressure around commoditized data and active strategies that don't have performance, we are seeing fee pressure on the wealth management industry as well through the implementation of Robo-advisers and disruptive models there as well. So I think the theme around fee consciousness across the value chain will be present. I personally believe that there will be less fee pressure on the manufacturing side than the distribution side going forward.

Jonathan Steinberg: And just an observation of sort of what I have seen or what I have sort of learnt over the last 10 years, and one of the things I'm most proud of is we launch products with a real eye towards -- we had real product strategy 10 years ago. When you look at the results that we have created, our after-fee returns really create value. And the way we structured the business, as Kurt mentioned, we do have much of the best economics within the total value chain. But when you look at some of the changes taking place, we approach it primarily from the standpoint of the asset manager. But if you look at it from the standpoint of the distributor, investments alone are not enough for them to extract their value proposition.

So what I used to call sort of the golden age of advice is more broadly, if I'm being really clear, it's a golden age of investing experience and a lot of that is built around the technology and we see a clear role for WisdomTree to partner with the financial institutions to be one of their go-to partners on that journey toward this golden age of investment experience, yes, investment experience. And we have an eye toward doing this not as a charity. We do this really as an eye towards getting our models on to more platforms and taking a greater market share with advisers. And I think because of the results of the first 10 years from an individual product performance, we really do have an opportunity to take a significant increase in the next 10 years with some advisers in the ecosystem that we're building around WisdomTree and our technologies that we'll see with certain advisers much larger market share of WisdomTree funds in their portfolios. So the combination, I think, of all of the regulatory change, the change in product and the need for technology to fulfill your obligation as an adviser is all coming together, and we see ourselves being able to play a very central role in all of that.

Michael Cyprys: Great. And if I could just ask a follow-up question just on the retirement channel, if you could maybe talk to how you see the opportunity set there in the retirement channel, particularly 401(k) and some of the initiatives that you're contemplating and rolling out?

Kurt MacAlpine: Absolutely. It's Kurt here again. So just as a reminder, our historical institutional efforts have been focused on identifying institutional buyers of ETFs, so traditional institutional buyers and retirement platforms, which had only enabled us to compete for a small percentage of the overall assets that exist in the institutional marketplace, which are dominated by collective trust in retirement in separate accounts as well. So over the past several months, we had pursued an effort to put our intellectual property in a structure that's more friendly for the institutional marketplace for their strategic allocations.

And as of the first quarter, we have a collected trust platform that is now built and the strategies are capable for funding. In regards to the sales processed around collective trust, as you know, it's a very different process from selling ETFs. The team has made great progress in uploading our strategy information to all the relevant databases, been interacting with them, having our strategies reviewed by asset consultants, been interacting directly with plan sponsors and platforms. So the institutional sales cycle itself is longer than the sales cycle in retail, but I believe due to foundation we built around the collective trust platform, the institutional team we have in place and the process we are following that we are very well positioned to compete given our differentiated products and approach.

Operator: And our next question comes from Bill Katz with Citi.

Ryan Bailey: This is actually Ryan Bailey filling in for Bill this morning. Just had a quick question on the outlook for product launches this year and whether you'll be targeting any specific geographies?

Amit Muni: Ryan, it's Amit. So we said at the beginning of the year there'll be a handful of products that will launch somewhere from 3 to 4 products here in the U.S. I think we're on pace for that this year. As we look overseas and Canada, obviously, since we recently launched the business over there last year, we'll look to continue to build out the product set there.

You'll see more probably on the Boost side in Europe. But I think just overall it's -- overseas it's more of a controlled build out. You won't see broad blanketing of various categories. So that will give you a sense of the overall product launches.

Ryan Bailey: Got it.

And then if you could just give us maybe a bit of an update on distribution in Japan and Canada, maybe a little bit more detail, that would be great.

Kurt MacAlpine: Sure. So -- it's Kurt here again. So distribution, I'll start with Canada. So we launched the business at the end of July last year, which was bringing the initial suite of products to the marketplace.

We've been spending the last several months building out our distribution and research capital market teams focused on the Canadian market. So we have a team in place now with dedicated coverage in all the major cities in Canada. We also have asset allocation expertise and capital markets expertise weighing in on the Canadian market for us as well. So it's still very early days for us in the market, but we have products in the market that are well poised for growth and we have a team in place to go after that market. And Japan secondly, so as you know, we launched the Japan effort about 1.5 year ago, primarily focused on the institutional marketplace in Japan.

That team has been in place now for a year. We have been actively selling the license in the market for about a year as well. And we're starting to see -- we are having great client conversations across the board in the institutional markets. We're starting to see some traction of our strategies from buyers in Japan. And you might have noticed earlier this quarter, we pioneered or brought commission-free trading to Japan via collaboration with Monex, which is one of the leading online platforms in Japan.

So this is an opportunity for us to collaborate with a leading firm. Their end clients can deliver -- can purchase our products in commission-free format and it gives us a great form to share our research and education and things like that. So that's very early stages as well, but the initial results that we've seen in the first 2 weeks have been very strong.

Operator: And our next question comes from Chris Shulter (sic) [ Chris Shutler ] from William Blair.

Christopher Shutler: Can you maybe give us the latest AUM breakdown by channel? And within institutional, how have those assets grown over the last year?

Amit Muni: Chris, it's Amit.

So it hasn't changed that much overall. Let's take it offline and I can give you a further breakdown, but it really hasn't changed overall from what you have seen historically.

Christopher Shutler: Okay. Got you. And then Amit, on the gross margin, I know that came up just a little bit in the guidance.

What drove that?

Amit Muni: 2 things, so obviously, higher average AUM helps with the increase in the gross margins, which is why we took up the guidance. But second is we closed 7 funds at the end of March and so the cost savings of that rolls in. That's another reason for the slight increase in the guidance.

Christopher Shutler: Okay, makes sense. And then lastly, I guess, just sit and assume that, looking at the $200 million of inflows in U.S.

equity ETFs, $55 billion for the industry, definitely agree the assessment on kind of advisers playing catch-up in allocating the sheet data. But do you guys feel any need to take a closer look at pricing, particularly on some of the larger cap U.S. equity funds?

Amit Muni: So really, we don't think pricing made -- was a stumbling block in our flows. Really the atrophy performance of our funds is very, very strong. And so I don't think so.

And within respect to large-cap, there is really nobody want -- we're not willing to compete on price in the large-cap category, which is where you are close to 0 pricing, that's certainly not the strategy that we are going to see. So we're comfortable playing in different spaces, but pricing definitely doesn't feel like it’s an issue for us at the moment.

Operator: And our next question comes from Mac Sykes from Gabelli.

Macrae Sykes: Not to get back on pricing, but maybe going forward, can you talk a little bit about the selection for model portfolios and how important will ETF pricing be for the advisers, do you think, in terms of selection? Do you think that there will ultimately be an upper threshold for management fees to be included in these portfolios?

Luciano Siracusano: Mac, this is Luciano Siracusano. I'm the Chief Investment Strategist, and I'm the head of WisdomTree's asset allocation team and model portfolio effort.

It is interesting, because in the model portfolio world you can get management fees all-in on a globally diversified portfolio. You can get down to as low as about 10 basis points and that would include WisdomTree ETFs inside of it. So I would say we'll have offerings out there that will range in pricing all-in from probably 10 basis points rolling it up to 30 or 35. But at the end of the day, people will evaluate the performance of those portfolios principally on their returns over time after fees. They will also evaluate them on the risk-adjusted return and then finally on their -- how much tracking are we taking on relative to the benchmarks.

WisdomTree compares very well on all 3 of those metrics. And so I think we are going to have a lot to offer clients going forward, particularly clients who are interested in how do you marry smart data with data in portfolios. WisdomTree is uniquely positioned in the industry to be the leader in low-fee alpha. We in effect could create core smart beta portfolios for advisers that they can use all around the world. We can do it with funds that have a 10-year track record and a history of generating alpha above and beyond beta even though they are priced in higher fee points.

So this is a huge opportunity for WisdomTree going forward. We're going to make the most of it with the people, the investments we made in technology and I actually think it positions us really to open up a whole new distribution channel for the firm.

Jonathan Steinberg: And just -- this is Jono. And this effort, and what Luciano just said, it's one of the reasons why we continue to reaffirm our market share goals and sort of initial feedback, as we have been commercializing these models, has really been very positive. So we're feeling very optimistic.

Macrae Sykes: Great. Just 1 quick follow-up. Are there any industry numbers in terms of AUM, just adoption of model portfolios at this point? And where you might think that number might get to? Is there anything to point to at this point?

Jonathan Steinberg: We don't think there is a number for it, but there is a lot of market forces that are driving towards model growth. We don't know what the number is today. We don't have a benchmark number from some third party, but it definitely can lead to a better investing experience for the end client.

There's definitely good economics for the adviser and making for better scale business models for the adviser. It definitely plays to the strength and goals of the home office that want to put some controls over the individual adviser. So in every way, the market is pushing in that direction. So we definitely feel that on merit the model portfolio growth will grow and very dramatically.

Amit Muni: Just one other point to add to Jono's is if you think about -- so we certainly agree with your comment that, that model usage is large and will continue to increase, as Luciano had mentioned to you.

We have our own models that we're delivering from a distribution perspective through the AdvisorEngine platform, but also through third-party platforms. And we do have distribution infrastructure in place where our team is competing for allocations in other firms' models as well. So if you think about the different ways that models are applied, we have efforts lined up against each of them.

Operator: And our next question comes from Keith Housum from Northcoast Research.

Keith Housum: In the quest for you on the AdvisorEngine platform, can you provide a bit more context in terms of like the size of the company and how many customers it has and what's the pricing model? I guess it's kind of tough to get our hands around what you currently have here versus where the potential is.

Kurt MacAlpine: Yes, absolutely, it's a great question. I think the way to think about when people think about AdvisorEngine, people often think about Robo-adviser, which tends to be the platforms that a lot of the competing firms have built in the marketplace. In reality, AdvisorEngine is actually a digital end-to-end wealth management solution that enables and empowers an adviser to digitize every step of their business from initial prospecting all the way through to billing. Secondly, which is a key differentiator, it is built for the adviser. So the experience for the end clients, the financial adviser and the intermediary is exactly the same, which is also very unique in the marketplace.

So when people bucket AdvisorEngine into the Robo term, it absolutely has a Robo-adviser, but the platform itself is much more than that. In terms of the business itself, so when we made the investments last November, fast forward to today, the total number of clients using the AdvisorEngine platform has increased by 50% to 42 clients overall. That is a mix of RIAs, which is the primary client base today, but it also includes IDBs and RDBs and we have a very full pipeline of prospects that we are working through across all of those different channels.

Keith Housum: Great. And maybe going back to the last question that was asked.

But your efforts in terms of the technology-enabled services. Is it all happening through the investment in AdvisorEngine? Or is it happening separately within WisdomTree as well?

Kurt MacAlpine: It's happening throughout the firm. So in terms of the theme around technology at least as it relates to distribution, I'll have Amit touch on some other parts of it. There's really 2 ways we're leveraging technology. One is through our data and analytics efforts.

You can think about how we're using data and technology as a way to identify and prioritize which clients to focus on and ways to help us with insights and intelligence to better understand and service how we are using those clients. So we have a large distribution effort around technology as it relates to data. We are using it in the AdvisorEngine platform as well, as you had mentioned. But we're also using it in practice management more broadly. So over the past several months, we have been making really concerted efforts, as you have heard from Jono and Amit, to deepen relationships with our clients and partner with them in ways that helps them grow their business.

So you might have noticed yesterday AdvisorEngine had made an acquisition of a firm called Kredible. And Kredible is essentially a practical tool that's backed by research that helps advisers improve their online presence. So it is going to better position them to win new business and compete for new clients’ assets. When we talked to advisers, one of the single biggest challenges they are facing in their business is reigniting growth. So we made this technology investment through AdvisorEngine that we will be using in our distribution efforts as well.

Amit Muni: And then I guess the last piece, just add to that, is we've been investing over the last couple of years in building our technology team and the last place the technology investment's been able to really automate and digitize portfolio construction, asset allocation so we could help advisers understand the risk profile and how to use WisdomTree in their book of business.

Jonathan Steinberg: Let me just add one thing about the technology. So if you think about WisdomTree and those who have been early investors in the firm, we used to talk about how technology-light the business was because of the sub-advised business model and the structure of ETFs not actually owning the client data or even accustom the asset to WisdomTree. It really was technology-light. And so the point I want to make is when we started to bring technology to bear maybe 3 years ago, we were starting with a completely clean slate.

And so like in asset management, on the technology front, we are not dealing with any legacy issues. Again, it allows you to have a very clear and precise and efficient vision around technology. And I think it's really going to help us distinguish ourselves in the very near future.

Keith Housum: Got it. And if I can just squeeze one more in here.

I noticed in your press release yesterday, you guys put more money into AdvisorEngine and I'm assuming to help facilitate the acquisition of Kredible. Is the anticipation that you're going to have to continue to fund AdvisorEngine until it kind of hit a breakeven point at some point down the road? Or is there enough cash to breakeven?

Jonathan Steinberg: The company is well capitalized and so it -- so potentially could get to breakeven on the capital that they have raised. But we are strong and significant investor. So we will be -- no matter what, we will be constructive with AdvisorEngine.

Operator: And our next question comes from Michael Carrier from Bank of America.

Jeffrey Ambrosi: This is Jeff Ambrosi filling in for Mike. Just given the current run rate of earnings, cash flows, and the investments you are making to grow the business, just trying to get a sense of how comfortable you are with the dividend payout.

Amit Muni: So yes, we're comfortable with the dividend levels that we have in place today. On a cash earnings basis, we are covering our dividend. So as the earnings power improves, we will be able to cover it more and more, but we are comfortable with the levels that we have.

Jonathan Steinberg: And we are seeing -- again second quarter running average assets are above last quarter's and we are anxiously hoping for tax reform.

Operator: And our next question comes from Brennan Hawken from UBS.

Brennan Hawken: Jono, just wanted to circle back to your comments before on distributors. So it seems like we're seeing increased focus on fee rates for sure and you highlighted that. But I just -- I'm curious.

Philosophically, I don't quite understand why you think that the distributors are the ones who are going to eat the fee rate pressure rather than have that be at least shared if not largely passed on to the manufacturer. And whether or not this manifests itself in direct fee rate cut or just rotation into cheaper options sort of forcing it to happen competitively? Can you walk me through why that's wrong? And why is it you think that it should sustain?

Jonathan Steinberg: No, that's not wrong, that's exactly right. But ETFs are generally running at much lower fee rates than the traditional structures right now and WisdomTree's approach to -- is very much competitive and superior from a fee standpoint with active mutual fund, so the low-fee alpha-generating strategies really partner incredibly well with the fee compression on the most beta-targeted funds. But we as asset management, as an industry, is absolutely having to participate at lower fee rates than decades past. And I think that is absolutely right, and we built this business specifically with that information in mind.

And I think we are really comfortable with the value proposition that WisdomTree plays in this incredibly quickly changing asset management landscape. It's very hard to live solely on only a Russell, S&P, MSCI index family, which -- so WisdomTree really plays an incredible differentiating experience for the adviser and the end client.

Brennan Hawken: Okay, got it. That makes a ton of sense. Then I guess, my follow-up would be we've seen and one of the phenomenal sort of destructive creation components of the ETF business has been the idea that there are competitors who will launch products and continue to put downward pressure on fees.

So I think that's what, at least from my perspective, makes me a little bit nervous about your guys' fee rate, which is a lot higher than a lot of other ETFs. Given those competitive dynamics, how is it that you are going to sustain a premium price point given those pressures?

Jonathan Steinberg: So first let me say that, on a category by category standpoint, we really are incredibly well -- incredibly competitive with the other ETF sponsors. What we have is an unusual asset mix so that we have much more in sort of a liquid alt currency hedge international equity, so in more sort of exotic areas of the market would generate a higher fee rate. So I think that's what confuses a lot of investors, that the 50 basis points that we're getting in fee capture is really based on where the assets have been raised. We are very -- in Japan, we are in line with the fee rates that others are charging, but we have an incredibly positive performance story within that market.

And so anyway, I feel we are very comfortable with where it's going, where it stands today.

Operator: And at this time, I'm showing no further questions. I would like to turn the call back to WisdomTree for any closing remarks.

Jonathan Steinberg: Thank you all for your time and your interest, and we will speak to you in 90 days.

Operator: Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the program, and you may now disconnect. Everyone, have a great day.