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What changed in WisdomTree, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WisdomTree, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+482 added−482 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-28)

Top changes in WisdomTree, Inc.'s 2023 10-K

482 paragraphs added · 482 removed · 369 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

157 edited+30 added−43 removed135 unchanged
Biggest changeOur innovations include the following: • the WisdomTree Prime ™ mobile application, our blockchain-native digital wallet, which will serve as a new direct-to-consumer channel positioning us as an early mover and industry leader in blockchain-enabled financial services; • the tokenization of real-world assets like physical gold (i.e., gold tokens) and U.S. dollars (i.e., dollar tokens); • the WisdomTree Short-Term Treasury Digital Fund as well as nine other digital or blockchain-enabled mutual funds that will use blockchain technology to maintain a secondary record of their respective shares on one or more blockchains (e.g., Stellar or Ethereum); • the first gold and oil ETPs via our acquisition of the European exchange-traded commodity, currency and leveraged-and-inverse business of ETFS Capital Limited, or ETFS Capital.
Biggest changeOur innovations include the following: • the launch of the WisdomTree Prime mobile application, our blockchain -native digital wallet that serves as a new direct -to-consumer channel positioning us as an early mover and industry leader in blockchain -enabled financial services; the application is currently available in 38 states in the U.S., representing approximately 70% of the U.S. population; • the tokenization of real -world assets like physical gold (i.e., gold tokens) and U.S. dollars (i.e., dollar tokens); • 13 Digital Funds accessible through WisdomTree Prime including a government money market fund and other digital funds offering asset allocation, fixed income and equity exposures that use blockchain technology to maintain a secondary record of their respective shares on one or more blockchains (e.g., Stellar or Ethereum); • among the first to launch a spot bitcoin ETF in the U.S.; • the first ETF to add bitcoin futures exposure; • the first gold and oil ETPs via our acquisition of the European exchange -traded commodity, currency and leveraged -and-inverse business of ETFS Capital Limited, or ETFS Capital.
The ManJer Issuers will need to conduct FATCA style due diligence and annual local reporting in relation to financial accounts held directly and indirectly by residents of those jurisdictions with which the Foreign Financial Institutions (FFIs) jurisdiction of residence has signed an Intergovernmental Agreement (IGA) to implement the CRS.
The ManJer Issuers need to conduct FATCA style due diligence and annual local reporting in relation to financial accounts held directly and indirectly by residents of those jurisdictions with which the Foreign Financial Institutions (FFIs) jurisdiction of residence has signed an Intergovernmental Agreement (IGA) to implement the CRS.
We create comprehensive materials to support our sales process, including whitepapers, research reports, webinars, blogs, podcasts, videos and performance data for our products. Our marketing automation system connects seamlessly to our database of financial advisors to provide the sales team with additional insights about their clients.
We create comprehensive materials to support our sales process of our ETP products, including whitepapers, research reports, webinars, blogs, podcasts, videos and performance data for our products. Our marketing automation system connects seamlessly to our database of financial advisors to provide the sales team with additional insights about their clients.
Financial advisors are shifting their business model from one that is “transaction-based,” that is, based on commissions for trades or receiving sales loads, to a “fee-based” approach, where an overall fee is charged based on the value of AUM.
Financial advisors are shifting their business model from one that is “transaction -based ,” that is, based on commissions for trades or receiving sales loads, to a “fee -based ” approach, where an overall fee is charged based on the value of AUM.
We also plan to leverage the strength and reach of our existing brand, in addition to utilizing a highly focused “test, learn, iterate” paid and social media marketing strategy, to drive awareness and user adoption for WisdomTree Prime ™ . • Sales support.
We also leverage the strength and reach of our existing brand, in addition to utilizing a highly focused “test, learn, iterate” paid and social media marketing strategy, to drive awareness and user adoption for WisdomTree Prime. • Sales support.
Human Capital Resources We compete in the highly competitive asset management industry. Attracting, retaining and motivating highly skilled, and sometimes highly specialized, employees in operations, product development, research, sales and marketing and other positions is crucial to our ability to compete effectively.
Human Capital Resources We compete in the highly competitive asset management industry. Attracting, retaining and motivating highly skilled, and sometimes highly specialized, employees in operations, product development, research, technology, sales and marketing and other positions is crucial to our ability to compete effectively.
For example, we support employees with their information technology needs, provide a monthly stipend to cover remote work-related business expenses and provide guidance for managers to ensure that employees remain connected and maintain physical, mental and emotional wellbeing.
We support employees with their information technology needs, provide a monthly stipend to cover remote work -related business expenses and provide guidance for managers to ensure that employees remain connected and maintain physical, mental and emotional wellbeing.
Regulations adopted by the CFTC have required WT Asset Management to become a member of the NFA and register as a commodity pool operator for a select number of our ETFs. • Exchange Listing Requirements.
Regulations adopted by the CFTC have required WT Asset Management to become a member of the NFA and register as a commodity pool operator for a select number of our ETFs. • Products Exchange Listing Requirements.
ETPs are now available for virtually every asset class including equities, fixed income, commodities, alternative strategies, leveraged-and-inverse, currencies and cryptocurrencies (with greater access in markets outside the U.S.). However, we believe that there remain substantial areas for sponsors to continue to innovate, including cryptocurrency, liquid alternative, thematic and ESG strategies.
ETPs are now available for virtually every asset class including equities, fixed income, commodities, leveraged -and-inverse , currencies, alternative strategies and cryptocurrencies (with greater access in markets outside the U.S.). However, we believe that there remain substantial areas for sponsors to continue to innovate, including cryptocurrency, liquid alternative, thematic and other strategies.
We are embracing a concept we refer to as “responsible DeFi” for our anticipated and expanded products and services which we believe upholds the foundational principles of regulation in this innovative and quickly evolving space. We remain committed to being a trusted provider of innovative products and services guided by proactive engagement and continued collaboration with current and new regulators.
We are embracing what we refer to as “responsible DeFi” for our anticipated and expanded products and services which we believe upholds the foundational principles of regulation in this innovative and quickly evolving space. We remain committed to being a trusted provider of innovative products and services guided by proactive engagement and continued collaboration with current and new regulators.
In addition, since many younger investors and financial advisors have demonstrated a preference for the ETF structure over traditional product structures, we believe that wealth transfers from one generation to another will also have a positive effect on ETF industry growth. • International markets. We believe the growth of ETPs is a global phenomenon.
In addition, since many younger investors and financial advisors have demonstrated a preference for the ETP structure over traditional product structures, we believe that wealth transfers from one generation to another will also have a positive effect on ETP industry growth. • International markets. We believe the growth of ETPs is a global phenomenon.
We believe these financial advisors will migrate more of their clients’ portfolios to ETFs due to their lower fees, better fit within fee-based models, and their ability to provide access to more diverse market sectors, improve multi-asset class allocation, and be used for different investment strategies, including income generation.
We believe these financial advisors will migrate more of their clients’ portfolios to ETPs due to their lower fees, better fit within fee -based models, and their ability to provide access to more diverse market sectors, improve multi -asset class allocation, and be used for different investment strategies, including income generation.
We believe that our early launch of products in a number of asset classes or strategies, including fundamental weighting and currency hedging, along with commodities including gold, certain fixed income, alternative and thematic categories and our ESG offerings, positions us well to maintain our standing as one of the leaders of the ETP industry.
We believe that our early launch of products in a number of asset classes or strategies, including fundamental weighting and currency hedging, along with commodities including gold, certain fixed income, alternative and thematic categories, positions us well to maintain our standing as one of the leaders of the ETP industry.
SFDR requires WisdomTree Management Limited, as a UCITS management company, to disclose in a consistent and harmonized manner how environmental, social and governance, or ESG, factors are adopted in its decision-making process. SFDR also requires certain pre-contractual and periodic disclosure requirements for in scope WTICAV sub-funds, such as UCITS financial products.
SFDR requires WisdomTree Management Limited, as a UCITS management company, to disclose in a consistent and harmonized manner how environmental, social and governance, or ESG, factors are adopted in its decision -making process. SFDR also requires certain pre -contractual and periodic disclosure requirements for in scope WTICAV’s Sub -funds , such as UCITS financial products.
Our social media strategy allows us to continually enhance our brand reputation of expertise and thought leadership in the ETP industry. For example, we have an established presence on LinkedIn, Twitter, Instagram, Reddit and YouTube, and our blog content is syndicated across multiple business-oriented websites.
Our social media strategy allows us to continually enhance our brand reputation of expertise and thought leadership in the ETP industry. For example, we have an established presence on LinkedIn, X (formerly Twitter), Instagram, Reddit and YouTube, and our blog content is syndicated across multiple business -oriented websites.
Many of our index-based equity ETFs are based on our own indexes and we do not license them from, nor do we pay licensing fees to, third parties for these indexes. We do, however, license third-party indexes for certain of our fixed income, currency and alternative ETFs. 23 Table of Contents On March 6, 2012, the U.S.
Many of our index -based equity ETFs are based on our own indexes and we do not license them from, nor do we pay licensing fees to, third parties for these indexes. We do, however, license third -party indexes for certain of our fixed income, currency and alternative ETFs. 24 Table of Contents On March 6, 2012, the U.S.
Throughout this Report, we refer to the acquired business as ETFS and the acquisition as the ETFS Acquisition; • the first ETF to add bitcoin futures exposure; • the first emerging markets small-cap equity ETF; • the first actively managed currency ETF; • the first ETF to provide investors with access to the Additional Tier 1 Contingent Convertible, or CoCo, bond market; • one of the first international local currency denominated fixed income ETFs; • the first managed futures strategy ETF; • the first currency hedged international equity ETFs in the U.S.; • the first 90/60 balanced ETF; • the first multifactor ETFs incorporating dynamic currency hedging as a factor; and • the first smart beta corporate bond suite.
Throughout this Report, we refer to the acquired business as ETFS and the acquisition as the ETFS Acquisition; • the first emerging markets small -cap equity ETF; • the first actively managed currency ETF; • the first ETF to provide investors with access to the Additional Tier 1 Contingent Convertible, or CoCo, bond market; • one of the first international local currency denominated fixed income ETFs; • the first managed futures strategy ETF; • the first currency hedged international equity ETFs in the U.S.; • the first 90/60 balanced ETF; • the first multifactor ETFs incorporating dynamic currency hedging as a factor; and • the first smart beta corporate bond suite.
However, many of our employees, including all of our salespersons, are licensed with FINRA and are registered either as associated persons of WT Securities or the distributor of the WisdomTree Digital Funds and U.S. listed ETFs and, as such, are subject to the regulations of FINRA that relate to licensing, continuing education requirements and sales practices.
However, many of our employees, including all of our salespersons, are licensed with FINRA and are registered either as associated persons of WT Securities or the distributor of the WisdomTree Digital Funds and U.S. listed ETFs and, as such, are subject to FINRA rules that relate to licensing, continuing education requirements and sales practices.
As a financial innovator seeking to bridge the gap between traditional finance and blockchain-enabled finance, we are embracing a concept we refer to as “responsible DeFi” for our digital assets and blockchain-enabled products and services, which we believe upholds the foundational principles of regulation in this innovative and rapidly evolving space.
As a financial innovator seeking to bridge the gap between traditional finance and blockchain -enabled finance, we are embracing what we refer to as “responsible DeFi” for our digital assets and blockchain -enabled products and services, which we believe upholds the foundational principles of regulation in this innovative and rapidly evolving space.
We believe technology is altering the way financial advisors conduct business and through our Advisor Solutions program we offer technology-enabled and research-driven solutions including portfolio construction, asset allocation, practice management services and digital tools to help financial advisors address technology challenges and grow and scale their businesses.
We believe technology is altering the way financial advisors conduct business and through our Advisor and Portfolio Solutions programs we offer technology -enabled and research -driven solutions including portfolio construction, asset allocation, practice management services and digital tools to help financial advisors address technology challenges and grow and scale their businesses.
The chart below sets forth the asset mix of our ETPs at December 31, 2020, 2021 and 2022: Our Operating and Financial Results We operate as an ETP sponsor and asset manager, providing investment advisory services globally through our subsidiaries in the U.S. and Europe. U.S.
The chart below sets forth the asset mix of our ETPs at December 31, 2021, 2022 and 2023: Our Operating and Financial Results We operate as an ETP sponsor and asset manager, providing investment advisory services globally through our subsidiaries in the U.S. and Europe. U.S.
It enables real-time (near instant) settlement, audit and reporting; and it reduces processing times, the potential for error and delay, and the number of steps and intermediaries required to achieve the same levels of confidence in traditional processes, thereby reducing counterparty risks. • New products and potential markets.
It enables real -time (near instant) settlement, auditability and reporting; and it reduces processing times, the potential for error and delay, and the number of steps and intermediaries required to achieve the same levels of confidence in traditional processes, thereby reducing counterparty risks. • New products and potential markets.
Additionally, we believe that our affiliated indexing or “self-indexing” model, as well as our more recent active ETFs, enable us to launch proprietary products that do not have direct competition and are positioned to generate alpha versus benchmarks.
Additionally, we believe that our affiliated indexing or “self -indexing ” model, as well as our more recent active ETFs, enable us to launch proprietary products that do not have direct competition and are positioned to generate alpha versus benchmarks.
We believe that our expansion into digital assets will complement our existing core competencies in a holistic manner, diversify our revenue streams and contribute to our growth. Our strategy includes the following: • Launch innovative ETPs that diversify our product offerings and revenues .
We believe that our expansion into digital assets complements our existing core competencies in a holistic manner and will diversify our revenue streams and contribute to our growth. Our strategy includes the following: • Launch innovative ETPs that diversify our product offerings and revenues.
Some of these relationships that exist today are with LPL Financial, BNY Mellon/Pershing, Raymond James, Cetera, Swissquote and others. • Leverage data intelligence to serve and expand investor base and improve sales and marketing effectiveness. We utilize a cognitive customer-focused lead prioritization system which has enhanced our distribution efforts.
Some of these relationships that exist today are with LPL Financial, BNY Mellon/Pershing, Raymond James, Charles Schwab, Cetera and others. • Leverage data intelligence to serve and expand investor base and improve sales and marketing effectiveness. We utilize a cognitive customer -focused lead prioritization system which has enhanced our distribution efforts.
Since the ManJer Issuers are based in non-EU jurisdictions, obligations are only indirectly applicable to them, but a certain level of interaction with EU counterparties is required to comply with some of these requirements. WisdomTree Issuer X Limited is also primarily subject to the following legislation and regulatory requirements: • The Control of Borrowing (Jersey) Order 1958.
Since the ManJer Issuers are based in non -EU jurisdictions, obligations are only indirectly applicable to them, but a certain level of interaction with EU counterparties is required to comply with some of these requirements. 21 Table of Contents WisdomTree Issuer X Limited is also primarily subject to the following legislation and regulatory requirements: • The Control of Borrowing (Jersey) Order 1958.
The digital assets industry has picked up significant momentum 7 Table of Contents among market participants, including asset management firms, fintech firms, banks, broker-dealers and investors, which has spurred unprecedented adoption, growth and innovation. We believe that the benefits of blockchain technology can provide for the best product structures and executions in financial services.
The digital assets industry has picked up significant momentum among market participants, including asset management firms, fintech firms, banks, broker -dealers and investors, which has spurred unprecedented adoption, growth and innovation. We believe that the benefits of blockchain technology can provide for the best product structures and executions in financial services.
One of our subsidiaries, WisdomTree Management Limited, is an Ireland based management company authorized in Ireland providing collective portfolio management services to WisdomTree Issuer ICAV, or WTICAV, and WisdomTree UCITS ETFs. The WisdomTree UCITS ETFs are issued by WTICAV.
One of our subsidiaries, WisdomTree Management Limited, is an Ireland based management company authorized in Ireland providing collective portfolio management services to WisdomTree Issuer ICAV, or WTICAV, and WisdomTree UCITS ETFs. The WisdomTree UCITS ETFs, or Sub -Funds , are issued by WTICAV.
Additionally, in the U.S., we communicate to our retail database about new product launches and provide ETF education. • Social media. We have implemented a social media strategy that allows us to connect directly with financial advisors and investors by offering timely access to our research material and more general market commentary.
Additionally, in the U.S., we communicate to our retail database about new product launches and provide ETF education through a monthly newsletter. • Social media. We have implemented a social media strategy that allows us to connect directly with financial advisors and investors by offering timely access to our research material and more general market commentary.
As we seek to expand globally, similar approvals and/or reliance on exemptions will be required in applicable foreign markets, which may also involve approvals specific to a digital asset or related business.
As we seek to expand globally, similar approvals and/or reliance on exemptions will be required in applicable foreign markets, which also may involve approvals specific to a digital assets or related business.
See “Non-GAAP Financial Measures” included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. Seasonality We believe seasonal fluctuations in the asset management industry are common, however such trends are generally masked by global market events and market volatility in general.
See “Non -GAAP Financial Measures” included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. 4 Table of Contents Seasonality We believe seasonal fluctuations in the asset management industry are common, however such trends are generally masked by global market events and market volatility in general.
As the safety and security of our employees who choose to work in our office space is of critical importance, we have selected office buildings with robust security procedures, fire safety and sanitation and health practices.
As the safety and security of our employees who choose to work in our office space are of critical importance, we have selected office buildings with robust security procedures, fire safety and sanitation and health practices.
We generally believe we are well positioned from a product pricing perspective. 16 Table of Contents We also have been positioning ourselves to expand beyond our existing ETP business by leveraging blockchain technology, digital assets and principles of DeFi to deliver transparency, choice and inclusivity to customers and consumers around the world.
We generally believe we are well positioned from a product pricing perspective. We also have been positioning ourselves to expand beyond our existing ETP business by leveraging blockchain technology, digital assets and principles of DeFi to deliver transparency, choice and inclusivity to customers and consumers around the world.
FINRA guidance, the recently effective SEC Rule 18f-4, or the Derivatives Rule, and/or other future rules or regulations may influence how member firms effect sales of certain WisdomTree U.S. listed ETFs, such as our currency ETFs, or how such ETFs operate, which also use some forms of derivatives, including forward currency contracts and swaps, our international hedged equity ETFs, which use currency forwards, and our rising rates bond ETFs and alternative strategy ETFs, which use futures or options.
FINRA guidance, the recently effective SEC Rule 18f -4 , or the Derivatives Rule, and/or other future rules or regulations may influence how member firms effect sales of certain WisdomTree U.S. listed ETFs, such as our currency ETFs, or how such ETFs operate, which also use some forms of derivatives, including forward currency contracts and swaps, our international hedged equity ETFs, which use currency forwards, and our rising rates bond ETFs and alternative strategy ETFs, which use futures or options. • Section 17A of the Exchange Act.
We are building the foundation that will allow us to lead in this coming evolution. WisdomTree Prime ™ , our blockchain-native digital wallet, will position us to expand our blockchain-enabled financial services product offerings with a new direct-to-consumer channel where spending, saving and investing are united.
We are building the foundation that we believe will allow us to lead in this coming evolution. WisdomTree Prime, our blockchain -native digital wallet, positions us to expand our blockchain -enabled financial services product offerings with a new direct -to-consumer channel where spending, saving and investing are united.
We may pursue acquisitions or other strategic transactions that will enable us to strengthen our current business, expand and diversify our product offerings, complement our Advisor Solutions program, increase our AUM or enter into new markets. We believe pursuing acquisitions or other strategic transactions is a cost-effective means of growing our business and AUM.
We may pursue acquisitions or other strategic transactions that will enable us to strengthen our current business, expand and diversify our product offerings, complement our Advisor and Portfolio Solutions programs, increase our AUM or enter into new markets. We believe pursuing acquisitions or other strategic transactions is a cost -effective means of growing our business and AUM.
Regulatory Framework of the ETP Industry and Digital Assets Business Introduction ETPs Not all ETPs are ETFs. ETFs are a distinct type of security with features that are different than other ETPs. ETFs are open-end investment companies or unit investment trusts regulated in the U.S. by the Investment Company Act of 1940, or the Investment Company Act.
Regulatory Framework of the ETP Industry and Digital Assets Business ETPs Not all ETPs are ETFs. ETFs are a distinct type of security with features that are different than other ETPs. ETFs are open -end investment companies or unit investment trusts regulated in the U.S. by the Investment Company Act of 1940, as amended, or the Investment Company Act.
Supervised EU entities which issue financial instruments that reference a benchmark are required to comply with applicable obligations 20 Table of Contents as set out under the BMR. The BMR was published on June 30, 2016 and the majority of the provisions became effective on January 1, 2018.
Supervised EU entities which issue financial instruments that reference a benchmark are required to comply with applicable obligations as set out under the BMR. The BMR was published on June 30, 2016 and the majority of the provisions became effective on January 1, 2018.
In addition, over 40% of our U.S. listed AUM is rated 4- or 5-star by Morningstar. • Differentiated product set, powered by innovation and performance . Our products span a variety of traditional and high growth asset classes covering equity, commodity, fixed income, leveraged-and-inverse, currency, cryptocurrency and alternative strategies, and include both passive and actively managed funds.
In addition, approximately 50% of our U.S. listed AUM is rated 4- or 5 -star by Morningstar. • Differentiated product set, powered by innovation and performance . Our products span a variety of traditional and high growth asset classes covering equity, fixed income, commodity, leveraged -and-inverse , currency, alternative strategies and cryptocurrency, and include both passive and actively managed funds.
The Investment Advisers Act requires registered investment advisers to comply with numerous and broad obligations, including, among others, recordkeeping requirements, operational procedures, and registration, reporting and disclosure obligations. • The Investment Company Act of 1940 (Investment Company Act). All of our Digital Funds and U.S. listed ETFs are registered with the SEC pursuant to the Investment Company Act.
The Investment Advisers Act requires registered investment advisers to comply with numerous obligations, including, among others, recordkeeping requirements, fiduciary duties, operational procedures, and registration, reporting and disclosure obligations. • The Investment Company Act of 1940 (Investment Company Act). All of our Digital Funds and U.S. listed ETFs are registered with the SEC pursuant to the Investment Company Act.
We believe this trend is due to the inherent benefits of ETFs – transparency, liquidity and tax efficiency. We believe that our growth, and the growth of the industry in which we operate, will continue to be driven by the following factors: • Education and greater investor awareness.
We believe this trend is due to the inherent benefits of ETFs – transparency, liquidity and tax efficiency. 6 Table of Contents We believe that our growth, and the growth of the industry in which we operate, will continue to be driven by the following factors: • Education and greater investor awareness.
As part of this initiative, we launched a series of model portfolios in collaboration with Professor Jeremy Siegel; • providing customized portfolio and asset allocation services through our Portfolio & Growth Solutions program to support registered investment advisers and independent broker dealers in building, implementing, and managing their client portfolios while providing strategic guidance for advisors to support their business growth; • access to portfolio construction tools such as our award-winning Digital Portfolio Developer, an enhanced portfolio construction tool that assists financial advisors in analyzing an existing investment portfolio by examining the data and providing alternative portfolio approaches to consider in seeking to improve outcomes based on different measures; • wealth investment research and ETF education; and • practice management resources, including access to thought leaders in behavioral finance, leadership, and transforming wealth management technology. • Deepen relationships with distribution platforms .
As part of this initiative, we launched a series of model portfolios in collaboration with Professor Jeremy Siegel; • providing customized portfolio and asset allocation services to support registered investment advisers and independent broker dealers in building, implementing, and managing their client portfolios while providing strategic guidance for advisors to support their business growth; • access to portfolio construction tools such as our award -winning Portfolio Analysis Tools Hub (PATH), an enhanced portfolio construction tool that assists financial advisors in analyzing an existing investment portfolio by examining the data and providing alternative portfolio approaches to consider in seeking to improve outcomes based on different measures; • wealth investment research and ETF education; and • practice management resources, including access to thought leaders in behavioral finance, leadership, and transforming wealth management technology. • Deepen relationships with distribution platforms.
As a result, we are actively engaged or plan to be engaged with a variety of U.S. federal and state regulators (e.g., the SEC, FINRA, New York Department of Financial Services (NYDFS) and other state regulators) to secure, as necessary, the appropriate regulatory, registration and/or licensing approvals for various business initiatives and operations, including but not limited to: a New York state-chartered limited purpose trust company; money services and money transmitter business; broker-dealer; investment adviser; and investment funds.
As a result, we are actively engaged with a variety of U.S. federal and state regulators (e.g., the SEC, FINRA, New York Department of Financial Services (NYDFS) and other state regulators) to secure, as necessary, or maintain the appropriate regulatory, registration and/or licensing approvals for various business initiatives and operations, including but not limited to: a New York state -chartered limited purpose trust company; money services and money transmitter business; limited purpose broker -dealer ; transfer agent; investment adviser; and investment funds.
In addition, we consult with our senior advisers, including Professor Jeremy Siegel, on product development ideas, model collaboration and market commentaries. Product Development We are focused on driving continued growth through innovative product development including through our Modern Alpha approach and our digital assets offerings.
In addition, we consult with our senior advisers, including Professor Jeremy Siegel, Senior Economist to WisdomTree, on product development ideas, model collaboration and market commentaries. Product Development We are focused on driving continued growth through innovative product development including through our Modern Alpha approach and our digital assets offerings.
Our Women’s Initiative Network, or WIN, is an employee-led network designed to provide opportunities and support from all genders for women at WisdomTree; career development and professional training opportunities; and female empowerment and leadership within the organization.
Our Women’s Initiative Network, or WIN, is a global employee -led network designed to provide opportunities and support from all genders for women at WisdomTree, career development and professional training opportunities, and female empowerment and leadership within the organization.
We also offer a wide array of benefits including generous healthcare coverage, paid vacation, parental, sabbatical and sick leave, life insurance, short- and long-term disability benefits and a 401(k) plan with a matching contribution of up to 50% of eligible employee contributions. Our Product Categories U.S.
We also offer a wide array of benefits including generous healthcare coverage, paid vacation (unlimited in the U.S.), parental, sabbatical and sick leave, life and travel insurance, short- and long -term disability benefits and, in the U.S., a 401(k) plan with a matching contribution of up to 50% of eligible employee contributions. Our Product Categories U.S.
Each sub-fund is listed on a European stock exchange and has shares admitted to trading on the London Stock Exchange and, accordingly, is subject to the listing requirements of those exchanges. WTICAV is primarily subject to the following legislation and regulatory requirements: • European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended) (“UCITS Regulations”).
Each Sub -Fund has shares admitted to trading on the London Stock Exchange and, typically, on various European stock exchanges, and accordingly, is subject to the listing requirements of those exchanges. WTICAV is primarily subject to the following legislation and regulatory requirements: • European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended) (“UCITS Regulations”).
Investors often use ETFs to gain access to specific market sectors or regions around the world or a particular asset, such as physical gold, by investing in an ETF that holds a portfolio of securities in that region or segment rather than gaining exposure by purchasing individual securities or physical commodities. • Asset allocation.
Investors often use ETFs to gain access to specific market sectors or regions around the world or a particular asset, such as physical gold or crypto, by investing in an ETF that holds a portfolio of securities in that sector, region or asset rather than gaining exposure by purchasing individual securities, physical commodities or currencies. • Asset allocation.
We believe that our team has demonstrated an ability to innovate as well as recognize and respond to market opportunities and effectively execute our strategy and has a proven track record including developing an ETP sponsor from the ground up despite significant competitive regulatory and operational barriers. • Strong performance.
We believe that our team has demonstrated an ability to innovate as well as recognize and respond to market opportunities and effectively execute our strategy and has a proven track record including developing an ETP sponsor from the ground up despite significant competitive regulatory and operational barriers. 8 Table of Contents • Strong performance.
As we continue to pursue our digital assets strategy, we are embracing a concept we refer to as “responsible DeFi,” which we believe upholds the foundational principles of regulation in this innovative and rapidly evolving space.
As we continue to pursue our digital assets strategy, we are embracing what we refer to as “responsible DeFi,” which we believe upholds the foundational principles of regulation in this innovative and rapidly evolving space.
The system evaluates data across structured and unstructured sources such as historical investment data, market data and investor 11 Table of Contents activity history, extracting behavioral insights, and is designed to enable our sales and marketing teams to optimize outreach to our current and potential investor base. • Selectively pursue acquisitions or other strategic transactions.
The system evaluates data across structured and unstructured sources such as historical investment data, market data and investor activity history, extracting behavioral insights, and is designed to enable our sales and marketing teams to optimize outreach to our current and potential investor base. • Selectively pursue acquisitions or other strategic transactions.
Since its inception in 2019, WIN has held several successful global events, including panel discussions on women in the workforce featuring notable guest speakers; interactive seminars on topics including negotiation skills; workshops and coaching sessions to enhance confidence to speak up; and various roundtable forums, informal coffee catch-ups and in-person and virtual social gatherings to promote connectivity and increase engagement.
Since its inception in 2019, WIN has held numerous global events, including panel discussions on women in the workforce featuring WisdomTree employees and notable guest speakers, interactive seminars on topics including negotiation skills, workshops and coaching sessions to enhance confidence to speak up, and various roundtable forums, informal coffee catch -ups and in -person and virtual social gatherings to promote connectivity and increase engagement.
However, the SEC or an Exchange may ultimately determine not to allow the issuance of potential new WisdomTree U.S. listed ETFs or may require strategy modifications as part of the registration and/or listing process.
However, the SEC or an Exchange may ultimately determine not to allow the issuance of potential new WisdomTree U.S. listed ETFs or may require strategy or operational modifications as part of the registration and/or listing process. • Corporate Exchange Listing Requirements.
Since WMAI issues financial instruments that reference a benchmark, it also will be required to comply with applicable obligations under the BMR. • MAD. MAD has a direct effect in Ireland and strengthens the legal framework underpinning the function of detecting, sanctioning and deterring market abuse.
Since WMAI issues financial instruments that reference a benchmark, it also will be required to comply with applicable obligations within the timeframes set out under the BMR. • MAD. MAD has a direct effect in Ireland and strengthens the legal framework underpinning the function of detecting, sanctioning and deterring market abuse.
The team also provides a variety of investment research around these indexes and markets and manages a series of model portfolios that incorporate WisdomTree and 15 Table of Contents third-party products for various investment platforms, including WisdomTree Prime ™ .
The team also provides a variety of investment research around these indexes and markets and manages a series of model portfolios that incorporate WisdomTree and third -party products for various investment platforms, including WisdomTree Prime.
The JFSC has consented under Article 4 of the Control of Borrowing (Jersey) Order 1958 19 Table of Contents to the issue of the WisdomTree digital securities by WisdomTree Issuer X Limited. The prospectus of WisdomTree Issuer X Limited is also recognized by the Swiss Prospectus Office.
The JFSC has consented under Article 4 of the Control of Borrowing (Jersey) Order 1958 to the issue of the WisdomTree digital securities by WisdomTree Issuer X Limited. The prospectus of WisdomTree Issuer X Limited is also recognized by the Swiss Prospectus Office.
Fourth, because these indexes are proprietary to WisdomTree, we may face similar competition, but we never face exact competition. Our expertise in product development combined with our self-indexing capabilities provides a strategic advantage, enabling us to launch 9 Table of Contents innovative products.
Fourth, because these indexes are proprietary to WisdomTree, we may face similar competition, but we never face exact competition. Our expertise in product development combined with our self -indexing capabilities provides a strategic advantage, enabling us to launch innovative products.
We also launched the industry’s first smart beta corporate bond suite. Other product offerings include those that seek to track a yield-enhanced index of U.S. investment grade bonds and international fixed income products which are denominated in either local or U.S. currencies. Total AUM of our Fixed Income products was $15.3 billion at December 31, 2022.
We also launched the industry’s first smart beta corporate bond suite. Other product offerings include those that seek to track a yield -enhanced index of U.S. investment grade bonds and international fixed income products which are denominated in either local or U.S. currencies. Total AUM of our Fixed Income products was $21.2 billion at December 31, 2023.
Most of our leadership team has significant ETP or financial services industry experience in fund operations, regulatory and 8 Table of Contents compliance oversight, product development and management or marketing and communications.
Most of our leadership team has significant ETP or financial services industry experience in fund operations, regulatory and compliance oversight, product development and management or marketing and communications.
In terms of reporting obligations, being non-EU entities, the ManJer Issuers are only indirectly subject to such obligations when they interact with their EU-based financial counter-parties.
In terms of reporting obligations, being non -EU entities, the ManJer Issuers are only indirectly subject to such obligations when they interact with their EU -based financial counterparties.
We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc., were renamed WisdomTree Investments, Inc. on September 6, 2005, and ultimately renamed WisdomTree, Inc. on November 7, 2022. 2 Table of Contents Assets Under Management WisdomTree ETPs We offer ETPs covering equity, commodity, fixed income, leveraged-and-inverse, currency, alternatives and cryptocurrency.
We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc. and were ultimately renamed WisdomTree, Inc. on November 7, 2022. 2 Table of Contents Assets Under Management WisdomTree ETPs We offer ETPs covering equity, fixed income, commodities, leveraged -and-inverse , currency, alternatives and cryptocurrency.
Automated, more efficient processes may lead to reduced operational, transactional and infrastructure costs. • Streamlined processes. Automation and overall operational efficiency increases with the use of blockchain technology.
Automated, more efficient processes may lead to reduced operational, transactional and infrastructure costs. 7 Table of Contents • Streamlined processes. Automation and overall operational efficiency increases with the use of blockchain technology.
Investors seeking to invest in various asset classes to develop an asset allocation model in a cost-effective manner can do so easily with ETFs, which offer broad exposure to various asset classes in a single security. 6 Table of Contents • Protective hedging.
Investors seeking to invest in various asset classes to develop an asset allocation model in a cost -effective manner can do so easily with ETFs, which offer broad exposure to various asset classes in a single security. • Protective hedging.
Therefore, the ManJer Issuers are required to comply with various obligations under the Companies (Jersey) Law 1991 such as, but not limited to, convening general meetings, keeping proper books and records and filing financial statements. • The Foreign Account Tax Compliance Act, or FATCA , which was passed as part of the Hiring Incentives to Restore Employment (HIRE) Act, generally requires that foreign financial institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments.
Therefore, the ManJer Issuers are required to comply with various obligations under this law including, but not limited to, convening general meetings, keeping proper books and records and filing financial statements. • The Foreign Account Tax Compliance Act, or FATCA , a U.S. federal law that was passed as part of the Hiring Incentives to Restore Employment (HIRE) Act, generally requires that foreign financial institutions and certain other non -financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments.
We have taken steps to enhance and form new relationships through our Advisor Solutions program, including providing customized portfolio and asset allocation services through our Portfolio & Growth Solutions program to support registered investment advisers and independent broker dealers in building, implementing and managing their client portfolios while providing strategic guidance for advisors to support their 14 Table of Contents business growth.
We have taken steps to enhance and form new relationships through our Advisor and Portfolio Solutions programs, including providing customized portfolio and asset allocation services to support registered investment advisers and independent broker dealers in building, implementing and managing their client portfolios while providing strategic guidance for advisors to support their business growth.
Existing players have broadened their suite of products offering strategies that are, in some cases, similar to ours and large traditional asset managers are also launching ETPs, some with similar strategies as well. There remain substantial areas for sponsors to continue to innovate, including with respect to cryptocurrency, liquid alternative, thematic and ESG strategies.
Existing players have broadened their suite of products offering strategies that are, in some cases, similar to ours and large traditional asset managers are also launching ETPs, some with similar strategies as well. There remain substantial areas for sponsors to continue to innovate, including but not limited to cryptocurrency, liquid alternative, thematic and other strategies.
These products also track our own indexes, which are fundamentally weighted focusing on securities of companies that pay regular cash dividends or that have generated positive cumulative earnings over a certain period. Total AUM of our Emerging Market Equity products was $8.1 billion at December 31, 2022.
These products also track our own indexes, which are fundamentally weighted focusing on securities of companies that pay regular cash dividends or that have generated positive cumulative earnings over a certain period. Total AUM of our Emerging Market Equity products was $10.7 billion at December 31, 2023.
The winners received a modest incentive compensation award, the opportunity to donate to a charity of their choice and to recognize other employees who assisted them. The success of our employee engagement efforts is demonstrated by our employee retention rate of approximately 88% in 2022.
The winners received a modest incentive compensation award, the opportunity to donate to a charity of their choice and to recognize other employees who assisted them. The success of our employee engagement efforts is demonstrated by our employee retention rate of approximately 93.4% in 2023.
Close to 40% of our employees are dedicated to marketing, research and sales. Our sales professionals are the primary points of contact for financial advisors, independent advisory firms and institutional investors who invest in our ETPs. Their efforts are enhanced through value-added services provided by our research and marketing efforts.
Our sales professionals are the primary points of contact for financial advisors, independent advisory firms and institutional investors who invest in our ETPs. Their efforts are enhanced through value -added services provided by our research and marketing efforts.
Therefore, WTICAV is required to comply with various obligations under the ICAV Act such as, but not limited to, keeping proper books and records. The segregation of liability between sub-funds means there cannot be, as a matter of Irish law, cross-contamination of liability between sub-funds. Therefore, the insolvency of one sub-fund cannot affect another sub-fund. • EMIR.
Therefore, WTICAV is required to comply with various obligations under the ICAV Act such as, but not limited to, keeping proper books and records. The segregation of liability between Sub -funds means there cannot be, as a matter of Irish law, cross -contamination of liability between Sub -funds .
ITEM 1. BUSINESS Our Company We are a global financial innovator, offering a well-diversified suite of world-class exchange-traded products, or ETPs, models and solutions. We empower investors to shape their future and support financial professionals to better serve their clients and grow their businesses.
ITEM 1. BUSINESS Our Company We are a global financial innovator, offering a well -diversified suite of exchange traded products, or ETPs, models, solutions and products leveraging blockchain technology. We empower investors and consumers to shape their future and support financial professionals to better serve their clients and grow their businesses.
For example, our television advertising to promote our ETPs runs exclusively on the cable networks CNBC, Fox Business and Bloomberg. Television advertising will also be utilized to promote WisdomTree Prime TM . Also, our digital advertising runs on many investing and ETF-specific web sites, such as www.etftrends.com and www.etfdatabase.com , using targeted dynamic and personalized ad messaging.
For example, our television advertising to promote our ETPs runs exclusively on the cable networks CNBC, Fox Business and Bloomberg. It is anticipated that television advertising also will be utilized to promote WisdomTree Prime. Also, our digital advertising runs on many investing and ETF -specific web -sites , such as www.etftrends.com and www.etfdb.com, using targeted dynamic and personalized ad messaging.
International Developed Market Equity Our International Developed Market Equity products offer a variety of strategies including currency hedged and dynamic currency hedged products, exposures to large, mid and small-cap companies in these markets and multifactor strategies. Total AUM of our International Developed Market Equity products was $10.2 billion at December 31, 2022.
International Developed Market Equity Our International Developed Market Equity products offer a variety of strategies including currency hedged and dynamic currency hedged products, exposures to large, mid and small -cap companies in these markets and multifactor strategies. Total AUM of our International Developed Market Equity products was $15.1 billion at December 31, 2023.
WisdomTree Digital Movement, Inc. is operating as a money services business registered with the Financial Crimes Enforcement Network, or FinCEN, and is seeking state money transmitter licenses to operate a platform for the purchase, sale and exchange of digital assets, while also providing digital wallet services through WisdomTree Prime ™ to facilitate such activity.
WisdomTree Digital Movement, Inc. is a money services business registered with the Financial Crimes Enforcement Network, or FinCEN, and a state licensed money transmitter operating a platform for the purchase, sale and exchange of digital assets, while also providing blockchain -enabled digital wallet services through WisdomTree Prime to facilitate such activity.
Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases as part of our investor relations website.
Additionally, we provide notifications of news or announcements regarding our financial performance, SEC filings, investor events and press and earnings releases on our investor relations website.
CSDR introduced measures to prevent settlement failures, with settlement failures resulting in penalty charges applied by the Central Securities Depositaries to failing parties. Since most WTICAV sub-funds employ physical replication using equities and bonds, trades in these equities that take place within the EU come into scope of CSDR.
CSDR introduced measures to prevent settlement failures, with settlement failures resulting in penalty charges applied by the Central Securities Depositaries to failing parties. Since most WTICAV sub -funds employ physical replication using equities and bonds, trades in these equities that take place within the EU come into scope of CSDR. This regulation came into force on February 1, 2022.
We have a database of financial advisors to which we regularly market through a series of messages across channels (email, display, site) that are triggered based on user interest and predictive analytics, on-demand research presentations, ETP-specific or educational events and presentations, and market commentary from our senior investment strategy adviser, Professor Jeremy Siegel.
We have a database of financial advisors to whom we regularly market through a series of messages across channels (email, display, site) that are triggered based on user interest and predictive analytics, on -demand research presentations, ETP -specific or educational events and presentations, and market commentary from Professor Jeremy Siegel, Senior Economist to WisdomTree.
Level 1 of SFDR requirements applied from March 1, 2021 and Level 2 of the SFDR requirements applied from December 1, 2022. The EU Taxonomy Regulation amends the disclosure requirements in place under SFDR.
Level 1 of SFDR requirements applied from March 1, 2021 and Level 2 of the SFDR requirements applied from January 1, 2023. The EU Taxonomy Regulation amends the disclosure requirements in place under SFDR.
We are also developing next-generation digital products and structures, including Digital Funds and tokenized assets.
We are also developing and have launched next -generation digital products, services and structures, including Digital Funds and tokenized assets.
The costs of complying with such laws and regulations have increased and will continue to contribute to the costs of doing business: • The Investment Advisers Act of 1940 (Investment Advisers Act). The SEC is the federal agency generally responsible for administering the U.S. federal securities laws.
We are primarily subject to the following laws and regulations, among others. The costs of complying with such laws and regulations have increased and will continue to contribute to the costs of doing business: • The Investment Advisers Act of 1940 (Investment Advisers Act). The SEC is the federal agency generally responsible for administering the U.S. federal securities laws.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe products issued by our European business depend on the services of counterparties, custodians and other agents and are thus subject to a variety of counterparty risks, including the following: • Products issued by the ManJer Issuers (except WisdomTree Issuer X Limited) are backed by physical metal and are subject to risks associated with the custody of metal, including the risk that access to the physically backed metal held in the vaults or secure warehouses of a custodian or sub-custodian could be restricted by natural events, such as an earthquake, or human actions, such as a terrorist attack, the risk that such physically backed metal in its custody could be lost, stolen or damaged, and the risk that our recovery of any losses from a custodian, sub-custodian or insurer may be inadequate. • Products issued by WisdomTree Issuer X Limited are backed by digital currencies and are subject to risks associated with the custody of digital assets, including the risk that the digital currency itself or the relevant blockchain infrastructure could be threatened by hacks, other malicious actions, breakdown or disturbance of the infrastructure and loss of the digital keys. • Products issued by WMAI, certain WisdomTree UCITS ETFs and certain products issued by the ManJer Issuers are backed by swap, derivative or similar arrangements are subject to risks associated with the creditworthiness of their counterparties, including the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the relevant arrangement (whether or not bona fide) or because of a credit, liquidity, regulatory, tax or operational problem.
Biggest changeProducts issued by WMAI, certain WisdomTree UCITS ETFs and certain products issued by the ManJer Issuers are backed by swap, derivative or similar arrangements, which are subject to risks associated with the creditworthiness of their counterparties, including the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the relevant arrangement (whether or not bona fide) or because of a credit, liquidity, regulatory, tax or operational problem.
Even if a sanction imposed against us, our personnel or our ETPs is small in monetary amount, the adverse publicity arising from the imposition of sanctions against us or our ETPs by regulators could harm our reputation and thus result in redemptions from our products and impede our ability to retain and attract investors in WisdomTree ETPs, all of which may reduce our revenues.
Even if a sanction imposed against us, our personnel or our ETPs is small in monetary amount, the adverse publicity arising from the imposition of sanctions against us, our personnel or our ETPs by regulators could harm our reputation and thus result in redemptions from our products and impede our ability to retain and attract investors in WisdomTree ETPs, all of which may reduce our revenues.
Certain products are backed by physical metal and are subject to risks associated with the custody of physical assets, including the risk that access to the metal held in the secure facilities managed by HSBC and JP Morgan could be restricted by a pandemic (such as the COVID-19 pandemic), natural events (such as an earthquake) or human actions (such as a terrorist attack).
Such products that are backed by physical metal are subject to risks associated with the custody of physical assets, including the risk that access to the metal held in the secure facilities managed by HSBC and JP Morgan could be restricted by a pandemic (such as the COVID -19 pandemic), natural events (such as an earthquake) or human actions (such as a terrorist attack).
We currently depend on R&H Fund Services (Jersey) Limited in respect of the products issued by our Jersey-domiciled issuers, or ManJer Issuers, of ETCs (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of products issued by WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs to provide us with critical administrative services to those products.
We depend on R&H Fund Services (Jersey) Limited in respect of the products issued by our Jersey-domiciled issuers, or ManJer Issuers, of ETCs (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of products issued by WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs to provide us with critical administrative services to those products.
Human Capital Risks Our ability to operate effectively could be impaired if we fail to retain or recruit key personnel. The success of our business is highly dependent on our ability to attract, retain and motivate highly skilled, and sometimes highly specialized, employees, including in particular, operations, product development, research and sales and marketing personnel.
Human Capital Risks Our ability to operate effectively could be impaired if we fail to retain or recruit key personnel. The success of our business is highly dependent on our ability to attract, retain and motivate highly skilled, and sometimes highly specialized, employees, including in particular, operations, product development, research, technology, sales and marketing personnel.
A breach in cybersecurity, intentional or unintentional, may have an adverse impact on our digital assets business in many ways, including but not limited to, the loss of proprietary information, theft or corruption of data, denial-of-service attacks on websites or network resources, and the unauthorized release or misuse of confidential information.
A breach in cybersecurity, intentional or unintentional, may have an adverse impact on our digital assets business in many ways, including but not limited to, the loss or destruction of proprietary information, theft or corruption of data, denial -of-service attacks on websites or network resources, and the unauthorized release or misuse of confidential information.
We currently depend on Swissquote Bank Ltd and Coinbase Custody Trust LLC to provide us with critical custody services for digital currencies that back WisdomTree digital assets. The failure of Swissquote and/or Coinbase to adequately safeguard these digital assets could materially adversely affect our business and harm investors in this product.
We depend on Swissquote Bank Ltd and Coinbase Custody Trust LLC to provide us with critical custody services for digital currencies that back WisdomTree digital assets. The failure of Swissquote and/or Coinbase to adequately safeguard these digital assets could materially adversely affect our business and harm investors in this product.
We currently depend on HSBC and JP Morgan to provide us with critical physical custody services for precious metals that back our ETCs. The failure of HSBC and JP Morgan to adequately safeguard the physical assets could materially adversely affect our business and harm investors in our products.
The failure of HSBC and JP Morgan to adequately safeguard the physical assets could materially adversely affect our business and harm investors in our products. We depend on HSBC and JP Morgan to provide us with critical physical custody services for precious metals that back our ETCs.
It might require us to devote a significant portion of management’s time to negotiate a similar relationship with other vendors or have these services provided by multiple vendors, which would require us to coordinate the transfer of these functions to another vendor or vendors. 26 Table of Contents The WisdomTree UCITS ETFs primarily depend on either of Assenagon Asset Management S.A. or Irish Life Investment Managers Limited to provide portfolio management services and other third parties to provide many critical services to operate the WisdomTree UCITS ETFs.
It might require us to devote a significant portion of management’s time to negotiate a similar relationship with other vendors or have these services provided by multiple vendors, which would require us to coordinate the transfer of these functions to another vendor or vendors. 27 Table of Contents The WisdomTree UCITS ETFs primarily depend on either of Assenagon Asset Management S.A. or Irish Life Investment Managers Limited to provide portfolio management services and other third parties to provide many critical services to operate the WisdomTree UCITS ETFs.
If such an investor were to broadly change or withdraw its investments in our ETPs because of a change to its investment strategy, market conditions or any other reason, it may significantly change the amount and mix of our AUM, which may negatively affect our revenues and operating margins. 25 Table of Contents Third-Party Provider Risks We currently primarily depend on Mellon Investments Corporation, Newton Investment Management North America, LLC and Voya Investment Management Co., LLC to provide portfolio management services, State Street Bank and Trust Company to provide us with critical administrative services to operate our business and our U.S. listed ETFs, and other third parties to provide many other critical services to operate our business and our U.S. listed ETFs.
If such an investor were to broadly change or withdraw its investments in our ETPs because of a change to its investment strategy, market conditions or any other reason, it may significantly change the amount and mix of our AUM, which may negatively affect our revenues and operating margins. 26 Table of Contents Third-Party Provider Risks We primarily depend on Mellon Investments Corporation, Newton Investment Management North America, LLC and Voya Investment Management Co., LLC to provide portfolio management services, State Street Bank and Trust Company to provide us with critical administrative services to operate our business and our U.S. listed ETFs, and other third parties to provide many other critical services to operate our business and our U.S. listed ETFs.
Our Board of Directors and management strive to maintain constructive, ongoing communications with our stockholders, including the Investor Group, and welcome their views and opinions with the goal of enhancing value for all stockholders.
Our Board of Directors and management strive to maintain constructive, ongoing communications with our stockholders, including the Investor, and welcome their views and opinions with the goal of enhancing value for all stockholders.
ETFS Capital also has redemption rights for the Preferred Shares to protect against corporate events such as our having an insufficient number of shares of authorized common stock to permit full conversion and if, upon a change of control of us, ETFS Capital does not receive the same amount per Preferred Share that it would have received had the Preferred Shares been converted prior to a change of control.
ETFS Capital also has redemption rights for the Series A Preferred Stock to protect against corporate events such as our having an insufficient number of shares of authorized common stock to permit full conversion and if, upon a change of control of us, ETFS Capital does not receive the same amount per share of Series A Preferred Stock that it would have received had these shares been converted prior to a change of control.
Outsourced service provider risks We rely on third-party service providers in connection with different facets of our digital assets business, including but not limited to custodial arrangements, blockchain and wallet infrastructure, banking relationships, cloud computing, payment processors, data infrastructure, compliance support and product development, including mobile application development, all of which are critical to the success of our digital assets business.
Outsourced service provider risks We rely on third -party service providers in connection with different facets of our digital assets business, including but not limited to custodial arrangements, blockchain and wallet infrastructure, banking relationships, cloud computing, payment platforms and processors, data infrastructure, customer support, compliance support and product development, including mobile application development, all of which are critical to the success of our digital assets business.
Activist stockholders, such as the Investor Group, may from time to time attempt to effect changes in our strategic direction, and in furtherance thereof, may seek changes in how our Company is governed.
Activist stockholders, such as the Investor, may from time to time attempt to effect changes in our strategic direction, and in furtherance thereof, may seek changes in how our Company is governed.
Funds are being offered with fees of 20 basis points or less, which have attracted approximately 78% of the net flows globally during the last three years. Fee reduction by certain of our competitors has been a trend over the last few years and continues to persist and many of our competitors are well positioned to benefit from this trend.
Funds are being offered with fees of 20 basis points or less, which have attracted approximately 80% of the net flows globally during the last three years. Fee reduction by certain of our competitors has been a trend over the last few years and continues to persist and many of our competitors are well positioned to benefit from this trend.
In addition, such third-party service providers may be subject to financial, legal, regulatory and labor issues, data security and cybersecurity incidents, denial-of-service attacks, sabotage, privacy breaches or violations, fraud and other misconduct which could directly or indirectly have an impact on our digital asset products and services.
In addition, such third -party service providers may be subject to financial, legal, regulatory and labor issues, data security and cybersecurity incidents, denial -of-service attacks, sabotage, privacy breaches or violations, fraud and other misconduct, which could directly or indirectly have an impact on our digital assets products and services.
If we are not ultimately successful in defending ourselves against these claims in litigation, we may be subject to the risks described in the immediately preceding risk factor entitled “We may from time to time be subject to claims of infringement of third-party intellectual property rights, which could harm our business.” Digital Assets Risks As we endeavor to expand our digital asset product offerings and services beyond our existing ETP business, we believe the risks associated with our digital assets business include, but are not limited to, the following risks: Competition risks Competition in the digital assets industry on a global basis is increasing, ranging from large, established financial incumbents to smaller, early-stage financial technology providers and companies.
If we are not ultimately successful in defending ourselves against these claims in litigation, we may be subject to the risks described in the immediately preceding risk factor entitled “We may from time to time be subject to claims of infringement of third -party intellectual property rights, which could harm our business.” Digital Assets Risks As we endeavor to expand our digital assets product offerings and services beyond our existing ETP business, we believe the risks associated with our digital assets business include, but are not limited to, the following risks: 33 Table of Contents Competition risks Competition in the digital assets industry on a global basis is increasing, ranging from large, established financial incumbents to smaller, early -stage financial technology providers and companies.
Any inability to access and successfully sell our products through our distribution channels could have a negative effect on our AUM levels and adversely impact our business. 28 Table of Contents Performance and Investment Risks Many of our ETPs have a limited track record and poor investment performance could cause our revenues to decline.
Any inability to access and successfully sell our products through our distribution channels could have a negative effect on our AUM levels and adversely impact our business. 29 Table of Contents Performance and Investment Risks Many of our ETPs have a limited track record and poor investment performance could cause our revenues to decline.
In addition, the content and use of our marketing and sales materials and of our sales force in the U.S. regarding our U.S. listed ETFs is subject to the regulatory authority of FINRA. The SEC has also recently adopted rule amendments, which are designed to modernize sales and marketing materials and, as a result, impact marketing materials.
In addition, the content and use of our marketing and sales materials and of our sales force in the U.S. regarding our U.S. listed ETFs is subject to the regulatory authority of FINRA. The SEC also has recently adopted rule amendments that are designed to modernize sales and marketing materials and, as a result, impact marketing materials.
The price and liquidity of digital assets may be subject to high degrees of volatility resulting in large deviations or fluctuations from normalized levels. There is also heightened custodial risks due to the unique safekeeping attributes associated with public and private keys of digital assets.
The price and liquidity of digital assets may be subject to high degrees of volatility resulting in large deviations or fluctuations from normalized levels. There is also heightened custodial risk due to the unique safekeeping attributes associated with public and private keys of digital assets.
As a result of such intellectual property infringement claims, we could be required or otherwise decide that it is appropriate to: • pay third-party infringement claims; • discontinue selling the particular funds subject to infringement claims; • discontinue using the processes subject to infringement claims; • develop other intellectual property or products not subject to infringement claims, which could be time-consuming and costly or may not be possible; or 32 Table of Contents • license the intellectual property from the third party claiming infringement, which license may not be available on commercially reasonable terms.
As a result of such intellectual property infringement claims, we could be required or otherwise decide that it is appropriate to: • pay third -party infringement claims; • discontinue selling the particular funds subject to infringement claims; • discontinue using the processes subject to infringement claims; • develop other intellectual property or products not subject to infringement claims, which could be time -consuming and costly or may not be possible; or • license the intellectual property from the third party claiming infringement, which license may not be available on commercially reasonable terms.
As we seek to expand globally, similar approvals and/or reliance on exemptions will be required in applicable foreign markets, which may also involve approvals specific to a digital asset or related business.
As we seek to expand globally, similar approvals and/or reliance on exemptions will be required in applicable foreign markets, which also may involve approvals specific to a digital assets or related business.
We currently depend upon R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of products issued by WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs, to provide fund accounting, administration and, transfer agency services, as well as custody services in the case of the WisdomTree UCITS ETFs.
We depend on R&H Fund Services (Jersey) Limited in respect of the products issued by the ManJer Issuers (except WisdomTree Issuer X Limited), JTC Trust Company Jersey in respect of products issued by WisdomTree Issuer X Limited, APEX IFS Limited in respect of the products issued by WMAI and State Street Fund Services (Ireland) Limited in respect of the WisdomTree UCITS ETFs, to provide fund accounting, administration and, transfer agency services, as well as custody services in the case of the WisdomTree UCITS ETFs.
Our failure to complete strategic transactions or to integrate and manage acquired or combined businesses successfully could materially and adversely affect our business, results of operations and financial conditions. We instruct trades and perform other operational processes in respect of crypto basket ETPs that we have launched in Europe.
Our failure to complete strategic transactions or to integrate and manage acquired or combined businesses successfully could materially and adversely affect our business, results of operations and financial conditions. 30 Table of Contents We instruct trades and perform other operational processes in respect of crypto basket ETPs that we have launched in Europe.
The effect of any future legal or regulatory change or interpretation both domestically and internationally is unknown and such change could be substantial and adverse to our digital assets business. 33 Table of Contents In addition, we are actively engaged or plan to be engaged with a variety of U.S. federal and state regulators (e.g., the SEC, FINRA, NYDFS and other state regulators) to secure, as necessary, the appropriate regulatory, registration and/or licensing approvals for various business initiatives and operations, including but not limited to: a New York state-chartered limited purpose trust company; money services and money transmitter business; broker-dealer; investment adviser; and investment funds.
The effect of any future legal or regulatory change or interpretation both domestically and internationally is unknown and such change could be substantial and adverse to our digital assets business. 34 Table of Contents In addition, we are actively engaged with a variety of U.S. federal and state regulators (e.g., the SEC, FINRA, NYDFS and other state regulators) to secure, as necessary, or maintain the appropriate regulatory, registration and/or licensing approvals for various business initiatives and operations, including but not limited to: a New York state -chartered limited purpose trust company; money services and money transmitter business; limited purpose broker -dealer ; transfer agent; investment adviser; and investment funds.
In determining whether to approve the agreements, the Independent Trustees consider factors such as the nature and quality of the services provided by us, the fees charged by us and the costs and profits realized by us in connection with such services, as well as any ancillary or “fall-out” benefits from such services, the extent to which economies of scale are shared with the WisdomTree U.S. listed ETFs, and the level of fees paid by other similar funds.
In determining whether to approve the agreements, the Independent Trustees consider factors such as the nature and quality of the services provided by us, the fees charged by us and the costs and profits realized by us in connection with such services, as well as any ancillary or “fall -out ” benefits from such services, the extent to which economies of scale are shared with the WisdomTree U.S. listed ETFs or Digital Funds, and the level of fees paid by other similar funds.
In any litigation in which we are involved, we may be forced to incur costs and expenses to defend ourselves or to pay a settlement or judgment or comply with any injunctions in connection therewith if there is an unfavorable outcome. The expense of defending litigation may be significant.
From time to time, we may be subject to litigation. In any litigation in which we are involved, we may be forced to incur costs and expenses to defend ourselves or to pay a settlement or judgment or comply with any injunctions in connection therewith if there is an unfavorable outcome. The expense of defending litigation may be significant.
Although we maintain insurance and use other traditional risk-shifting tools, such as third-party indemnification, to manage certain exposures, they are subject to 27 Table of Contents terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.
Although we maintain insurance and use other traditional risk -shifting tools, such as third -party indemnification, to manage certain exposures, they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.
In addition, the SEC approved a broad set of rules regarding data reporting and fund liquidity, fund valuation and funds’ use of derivatives, which are imposing additional expense and require additional administrative services and requirements, among other matters, in seeking to comply with the new rules.
In addition, the SEC recently approved a broad set of rules regarding data reporting and fund liquidity, fund valuation and funds’ use of derivatives, which are imposing additional expense and require additional administrative services and requirements, among other matters, in seeking to comply with these rules.
If we are unable to retain and attract key personnel, it could have an adverse effect on our business, our results of operations and financial condition. Expense and Cash Management Risks Our expenses are subject to fluctuations that could materially affect our operating results.
If we are unable to retain and attract key personnel, it could have an adverse effect on our business, our results of operations and financial condition. 31 Table of Contents Expense and Cash Management Risks Our expenses are subject to fluctuations that could materially affect our operating results.
Similarly, under the Investment Advisers Act, a client’s investment management agreement may not be “assigned” by the investment adviser without the client’s consent. 35 Table of Contents An investment management agreement is considered under both acts to be assigned to another party when a controlling block of the adviser’s securities is transferred.
Similarly, under the Investment Advisers Act, a client’s investment management agreement may not be “assigned” by the investment adviser without the client’s consent. An investment management agreement is considered under both acts to be assigned to another party when a controlling block of the adviser’s securities is transferred.
Any change or failure to comply with data privacy laws or regulations related to the collection, processing, use and storage of personal data could materially affect our digital assets business and overall financial health. Other risks The risk of loss in purchasing, selling, trading, using or holding digital assets can be substantial.
Any change or failure to comply with data privacy laws or regulations related to the collection, processing, use and storage of such nonpublic information could materially affect our digital assets business and overall financial health. Other risks The risk of loss in purchasing, selling, trading, using or holding digital assets can be substantial.
We currently have outstanding $60.0 million in aggregate principal amount of 4.25% convertible senior notes due 2023, $150.0 million of 3.25% convertible senior notes due 2026 and $130.0 million in aggregate principal amount of 5.75% convertible senior notes due 2028, which we collectively refer to as the Convertible Notes.
We currently have outstanding $150.0 million of 3.25% convertible senior notes due 2026 and $130.0 million in aggregate principal amount of 5.75% convertible senior notes due 2028, which we collectively refer to as the Convertible Notes.
Our or our ETPs’ failure to comply with applicable 31 Table of Contents laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser.
Our or our ETPs’ failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser.
We are dependent upon the effectiveness of our own, and our vendors’, information security policies, procedures and capabilities to protect the technology systems used to operate our business and to protect the data that reside on or are transmitted through them.
We are dependent upon the effectiveness of our own, and our vendors’, information security policies, procedures and capabilities to protect the technology systems used to operate our business, to protect the data that reside on or are transmitted through them and to maintain adequate internal controls.
We are also establishing our digital assets business and expenses ultimately incurred in the near and long-term may be higher than anticipated. Accordingly, fluctuations in our expenses could materially affect our operating results and may vary from quarter to quarter.
We also have launched our digital assets business and expenses ultimately incurred in the near and long -term may be higher than anticipated. Accordingly, fluctuations in our expenses could materially affect our operating results and may vary from quarter to quarter.
Our Board of Directors could, therefore, issue preferred stock with dividend rights superior to that of the common stock, which could also limit the payment of dividends on the common stock.
Our Board of Directors could, therefore, issue preferred stock with dividend rights superior to that of the common stock, which could also limit the payment of dividends on the common stock. 39 Table of Contents
In addition, blockchain networks face significant challenges in connection with the volume, speed and security of transactions and their efforts to increase or enhance such characteristics of the blockchain network may not be successful.
In addition, blockchain networks face significant challenges in connection with the volume, speed, security and cost of transactions, and their efforts to increase or enhance such characteristics of the blockchain network may not be successful or adversely affect other characteristics of the blockchain network.
In connection with the ETFS Acquisition, we issued 14,750 shares of preferred stock, or Preferred Shares, to ETFS Capital, which are convertible into 14,750,000 shares of our common stock, subject to certain restrictions.
In connection with the ETFS Acquisition, we issued 14,750 shares of Series A Non -Voting Convertible Preferred Stock, or Series A Preferred Stock, to ETFS Capital, which are convertible into 14,750,000 shares of our common stock, subject to certain restrictions.
The financial markets are highly volatile and prices for financial assets may increase or decrease for many reasons, including general economic conditions, trade uncertainties, rising or falling interest rates, the strengthening or weakening of the U.S. dollar, events such as the COVID-19 pandemic and the war in Ukraine, political events, acts of terrorism and other matters beyond our control.
The financial markets are highly volatile and prices for financial assets may increase or decrease for many reasons, including general economic conditions, trade uncertainties, rising or falling interest rates, the strengthening or weakening of the U.S. dollar, events such as a pandemic or war, geopolitical conflicts, political events, acts of terrorism and other matters beyond our control.
The occurrence of any of the foregoing could result in unexpected expenses, reduce our revenues and adversely affect our business and financial results. We have been issued a patent, but may not be able to enforce or protect our patent and other intellectual property rights, which may harm our ability to compete and harm our business.
The occurrence of any of the foregoing could result in unexpected expenses, reduce our revenues and adversely affect our business and financial results. We have been issued trademark and other intellectual property rights, but may not be able to enforce or protect such intellectual property rights, which may harm our business.
If one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. Preferred Shares issued in connection with the ETFS Acquisition contain redemption rights, which, if triggered, could materially impact our financial position.
If one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. Series A Non-Voting Convertible Preferred Stock issued in connection with the ETFS Acquisition contain redemption rights, which, if triggered, could materially impact our financial position.
In addition, the adoption of Rule 6c-11, or the ETF Rule, removed the need to file for exemptive relief in order to issue ETFs, thereby creating fewer barriers to entry for competitors. We continue to expect that additional companies, both new and traditional asset managers, will enter and expand in the ETP space. Also, non-transparent active ETFs have been launched.
In addition, the adoption of Rule 6c -11 , or the ETF Rule, removed the need to file for exemptive relief in order to issue ETFs, thereby creating fewer barriers to entry for competitors. We continue to expect that additional companies, both new and traditional asset managers, will enter and expand in the ETP space.
At December 31, 2022, approximately 16% of our AUM were in ETPs backed by gold and approximately 11% were in ETPs backed by other commodities. Precious metals such as gold are often viewed as “safe haven” assets as they tend to attract demand during periods of economic and geopolitical uncertainty.
At December 31, 2023, approximately 12% of our AUM were in ETPs backed by gold and approximately 10% were in ETPs backed by other commodities. Precious metals such as gold are often viewed as “safe haven” assets as they tend to attract demand during periods of economic and geopolitical uncertainty.
And even if such approval were obtained, approval from the shareholders of the WisdomTree U.S. listed ETFs would be required to be obtained; such approval could not be guaranteed and even if obtained, likely would result in significant expense. This restriction may discourage potential purchasers from acquiring a controlling interest in our Company.
And even if such approval were obtained, approval from the shareholders of the WisdomTree Trust and WisdomTree Digital Trust would be required to be obtained; such approval could not be guaranteed and even if obtained, likely would result in significant expense. This restriction may discourage potential purchasers from acquiring a controlling interest in our Company.
At December 31, 2022, approximately 29% and 12% of our AUM was held in products with exposure to the U.S. and international developed markets, respectively.
At December 31, 2023, approximately 29% and 15% of our AUM was held in products with exposure to the U.S. and international developed markets, respectively.
These risks can be exacerbated during periods when there is low demand for an ETP, when the markets in the underlying investments are closed, when markets conditions are extremely volatile or when 24 Table of Contents trading is disrupted.
These risks can be exacerbated during periods when there is low demand for an ETP, when the markets in the underlying investments are closed, when market conditions are extremely volatile or when trading is disrupted.
We have developed risk management policies and procedures and we continue to refine them as we conduct our business. Many of our procedures involve oversight of third-party vendors that provide us with critical services such as portfolio management, custody, fund accounting and administration, and index calculation.
We have developed risk management policies and procedures and we continue to refine them as we conduct our business. Many of our procedures involve oversight of third -party vendors that provide us with critical services such as portfolio management, custody, fund accounting and administration, and index calculation as further described in “Third -Party Provider Risks” above.
The fund’s board must vote to continue such an agreement following any such assignment and the shareholders of the WisdomTree U.S. listed ETFs must approve the assignment. The cost of obtaining such shareholder approval can be significant and ordinarily would be borne by us.
The fund’s board must vote to continue such an agreement following any such assignment and the shareholders of the WisdomTree Trust and WisdomTree Digital Trust must approve the assignment. The cost of obtaining such shareholder approval can be significant and ordinarily would be borne by us.
On May 25, 2022, we entered into a cooperation agreement (the “Cooperation Agreement”) with the Investor Group whereby we agreed to, among other things, increase the size of our Board of Directors by two directors to a total of nine directors and appoint Lynn S. Blake and Deborah Fuhr to the Board of Directors.
On May 25, 2022, we entered into a cooperation agreement (the “Cooperation Agreement”) with the Investor Group whereby we agreed, among other things, to increase the size of our Board of Directors by two to a total of nine directors and appoint two nominees proposed by the Investor Group.
However, an activist campaign that seeks to replace members of our Board of Directors or changes in our strategic direction could have an adverse effect on us because: • responding to actions by activist stockholders is costly and may be disruptive, time-consuming and divert the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; • perceived uncertainties about our future direction as a result of changes to the composition of our Board of Directors or changes to our stockholder base may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners; • these types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and • if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and to create additional value for our stockholders.
However, an activist campaign that seeks to replace members of our Board of Directors or changes in our strategic direction could have an adverse effect on us because: • responding to actions by activist stockholders is costly and may be disruptive, time -consuming and divert the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; • perceived uncertainties about our future direction as a result of changes to the composition of our Board of Directors or changes to our stockholder base may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners; • these types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and • if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and to create additional value for our stockholders. 36 Table of Contents A change of control of our Company would automatically terminate our investment management agreements relating to the WisdomTree U.S. listed ETFs and Digital Funds, unless the Board of Trustees of the WisdomTree Trust, WisdomTree Digital Trust and shareholders of each voted to continue the agreements.
The market price of our common stock has been fluctuating significantly and may continue to do so, depending upon many factors, some of which may be beyond our control, including: • the ultimate duration of the COVID-19 pandemic or the war in Ukraine and their short-term and long-term impact on our business and the global economy; • actions of activist stockholders against us, which have been costly and may be disruptive and may cause uncertainty about the strategic direction of our business; • decreases in our AUM; • variations in our quarterly operating results; • differences between our actual financial operating results and those expected by investors and analysts; • publication of research reports about us or the investment management industry; • changes in expectations concerning our future financial performance and the future performance of the ETP industry and the asset management industry in general, including financial estimates and recommendations by securities analysts; • our strategic moves and those of our competitors, such as acquisitions or consolidations; • changes in the regulatory framework of the ETP industry and the asset management industry in general and regulatory action, including action by the SEC to lessen the regulatory requirements or shorten the process under the Investment Company Act to become an ETP sponsor; • the level of demand for our stock, including the amount of short interest in our stock; • changes in general economic or market conditions; and • realization of any other of the risks described elsewhere in this section. 36 Table of Contents In addition, stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company.
The market price of our common stock has been fluctuating significantly and may continue to do so, depending upon many factors, some of which may be beyond our control, including: • actions of activist stockholders against us, which have been costly and may be disruptive and may cause uncertainty about the strategic direction of our business; • decreases in our AUM; • variations in our quarterly operating results; • differences between our actual financial operating results and those expected by investors and analysts; • publication of research reports about us or the investment management industry; • changes in expectations concerning our future financial performance and the future performance of the ETP industry and the asset management industry in general, including financial estimates and recommendations by securities analysts; 37 Table of Contents • our strategic moves and those of our competitors, such as acquisitions or consolidations; • changes in the regulatory framework of the ETP industry and the asset management industry in general and regulatory action, including action by the SEC to lessen the regulatory requirements or shorten the process under the Investment Company Act to become an ETP sponsor; • the level of demand for our stock, including the amount of short interest in our stock; • changes in general economic or market conditions; and • realization of any other of the risks described elsewhere in this section.
We compete directly with other ETP sponsors and mutual fund companies and indirectly against other investment management firms, insurance companies, banks, brokerage firms and other financial institutions that offer products that have similar features and investment objectives to those offered by us.
Our business operates in a highly competitive industry. We compete directly with other ETP sponsors and mutual fund companies and indirectly against other investment management firms, insurance companies, banks, brokerage firms and other financial institutions that offer products that have similar features and investment objectives to those offered by us.
Expanding trading volumes may increase the risk of trading errors. The failure of any of our vendors to provide us and our products with the outsourced services and our failure to correctly place trade orders could lead to operational issues and result in financial loss to us and/or investors in our products.
The failure of any of our vendors to provide us and our products with the outsourced services and our failure to correctly place trade orders could lead to operational issues and result in financial loss to us and/or investors in our products.
In addition, an unfavorable outcome in any such litigation, including claims brought by investors in our WisdomTree WTI Crude Oil 3x Daily Leveraged ETP totaling approximately €15.8 million ($16.9 million), could have a material adverse effect on our business, results of operations, financial condition and cash flows. See Note 15 to our Consolidated Financial Statements for additional information.
In addition, an unfavorable outcome in any such litigation, including actual and potential claims by investors in our WisdomTree WTI Crude Oil 3x Daily Leveraged ETP totaling approximately €23.6 million ($26.1 million), could have a material adverse effect on our business, results of operations, financial condition and cash flows. See Note 14 to our Consolidated Financial Statements for additional information.
Anti-Money Laundering (“AML”) risks The decentralized infrastructure and anonymous or pseudonymous nature of digital assets could facilitate and create the opportunity for money laundering and terrorist financing activities, thereby circumventing certain anti-money laundering and counter terrorist financing laws and regulations designed to prevent financial crimes both domestically and internationally which could negatively impact our digital assets business.
A fork could adversely affect our digital assets business. 35 Table of Contents Anti-Money Laundering (“AML”) risks The decentralized infrastructure and anonymous or pseudonymous nature of digital assets could facilitate and create the opportunity for money laundering and terrorist financing activities, thereby circumventing certain anti -money laundering and counter terrorist financing laws and regulations designed to prevent financial crimes which could negatively impact our digital assets business.
Any such redemption will be at a price per Preferred Share equal to the dollar volume-weighted average price for a share of common stock for the 30-trading day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000. The redemption value of the Preferred Shares was $78.0 million at December 31, 2022.
Any such redemption will be at a price per share of Series A Preferred Stock equal to the dollar volume -weighted average price for a share of common stock for the 30 -trading day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000.
If a fork occurs, the original blockchain and the forked blockchain could potentially compete with each other for users and other participants, leading to a loss of these for the original blockchain. A fork could adversely affect our digital assets business.
If a fork occurs, the original blockchain and the forked blockchain could potentially compete with each other for users and other participants, leading to a loss of these for the original blockchain.
For products through which we derive additional revenue by staking, we operationally delegate the relevant assets to validators in our role as determination agent. Operational errors in the process could materially affect our business and harm investors in these products. The uncertainty regarding the U.K.’s exit from the EU could adversely affect our business.
For products through which we derive additional revenue by staking, we operationally delegate the relevant assets to validators in our role as determination agent. Operational errors in the process could materially affect our business and harm investors in these products.
Responding to actions by the Investor Group has been costly. Actions by activist stockholders to seek representation on our Board of Directors in the future may similarly impact us and could cause uncertainty about the strategic direction of our business.
Responding to actions by the Investor and the Investor Group has been costly and actions by activist stockholders to seek representation on our Board of Directors in the future may similarly impact us.
Any determination as to the payment of dividends or stock repurchases, as well as the level of such dividends or repurchases, will depend on, among other things, general economic and business conditions, our level of AUM, our strategic plans, our financial results and condition, limitations associated with new credit facilities or other agreements that could limit the amount of dividends we are permitted to pay or the stock we may repurchase, and any applicable laws.
Any determination as to the payment of dividends or stock repurchases, as well as the level of such dividends or repurchases, will depend on, among other things, general economic and business conditions, our level of AUM, our strategic plans, our financial results and condition, limitations associated with new credit facilities or other agreements that could limit the amount of dividends we are permitted to pay or the stock we may repurchase, and any applicable laws, including the Inflation Reduction Act, which includes an excise tax that would impose a 1% surcharge on stock repurchases.
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control the opinions of these analysts.
If equity research analysts issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline. The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control the opinions of these analysts.
While we typically outsource portfolio management services to third-party sub-advisers for our products, in this case, we instead act as determination agent and place buy and sell orders directly with a broker to rebalance these crypto basket ETPs in line with the indices. These rebalances occur either quarterly or annually depending on the product.
While we typically outsource portfolio management services to third -party sub -advisers for our products, in this case, we instead act as determination agent and place buy and sell orders directly with a broker to rebalance these crypto basket ETPs in line with the indices. These rebalances typically occur quarterly. Expanding trading volumes may increase the risk of trading errors.
If we are successful in securing the appropriate regulatory, registration and/or licensing approvals, or otherwise relying on, seeking or confirming exemptions therefrom, for these different initiatives in connection with our digital assets business, we will be subject to a myriad of complex and evolving global policy frameworks and associated regulatory requirements that we would need to comply with, or otherwise be exempt from, in seeking to ensure our digital asset products and services are successfully brought to different markets in a compliant manner.
As we secure the appropriate regulatory, registration and/or licensing approvals, or otherwise rely on, seek or confirm exemptions therefrom, in connection with our digital assets business, we are and will be subject to a myriad of complex and evolving global policy frameworks and associated regulatory requirements that we need to comply with, or otherwise be exempt from, to ensure our digital assets products and services are successfully brought to different markets in a compliant manner.
These provisions include: • a classified Board of Directors, which will be phased out over a two-year period concluding at our 2024 annual meeting of stockholders; • limitations on the removal of directors; • advance notice requirements for stockholder proposals and nominations; • the inability of stockholders to act by written consent or to call special meetings; • the ability of our Board of Directors to make, alter or repeal our by-laws; and • the authority of our Board of Directors to issue preferred stock with such terms as our Board of Directors may determine.
These provisions include: • limitations on the removal of directors; • advance notice requirements for stockholder proposals and nominations; • the inability of stockholders to act by written consent or to call special meetings; • the ability of our Board of Directors to make, alter or repeal our by -laws ; and • the authority of our Board of Directors to issue preferred stock with such terms as our Board of Directors may determine.
After the initial two-year term of the agreement for each ETF, the continuation of such agreement must be reviewed and approved at least annually by a majority of the Independent Trustees.
The advisory agreements are subject to initial review and approval. After the initial two -year term of the agreement for each ETF or Digital Fund, the continuation of such agreement must be reviewed and approved at least annually by a majority of the Independent Trustees.
In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement, could have a material adverse effect on the market price of our common stock. 37 Table of Contents Provisions in our certificate of incorporation and by-laws may prevent or delay an acquisition of our Company, which could decrease the market value of our common stock.
In addition, the sale of a substantial amount of common stock or equity -linked securities in the public market, either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement, could have a material adverse effect on the market price of our common stock.
These risks may increase in the future as the Company develops and launches its mobile application. In addition, technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products, which could affect our business.
These risks have increased with the launch of the WisdomTree Prime mobile application and may continue to increase in the future as the mobile application’s availability expands. In addition, technology is subject to rapid change and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products, which could affect our business.
We rely on various third-party distribution channels, including registered investment advisers, wirehouse and institutional channels to sell our products. Increasing competition, a failure to maintain business relationships and other factors could impair our distribution capabilities and increase the cost of conducting business. In addition, several of the largest custodial platforms and online brokerage firms eliminated trading commissions for ETFs.
Increasing competition, a failure to maintain business relationships and other factors could impair our distribution capabilities and increase the cost of conducting business. In addition, several of the largest custodial platforms and online brokerage firms eliminated trading commissions for ETFs.
We face increased operational, regulatory, financial, compliance, reputational and foreign exchange rate risks as a result of conducting our business internationally. The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our infrastructure to support our European business, could result in operational failures and regulatory fines or sanctions.
The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our infrastructure to support our European business, could result in operational failures and regulatory fines or sanctions.
Our advisory agreements with the WisdomTree Trust and the fees we collect from the WisdomTree U.S. listed ETFs are subject to review and approval by the Independent Trustees of the WisdomTree Trust. The advisory agreements are subject to initial review and approval.
Our revenues are derived primarily from investment advisory agreements with related parties. Our advisory agreements with the WisdomTree Trust and WisdomTree Digital Trust, and the fees we collect from the WisdomTree U.S. listed ETFs and Digital Funds are subject to review and approval by the Independent Trustees of the WisdomTree Trust and WisdomTree Digital Trust, as applicable.
If our policies and procedures do not adequately protect us from exposure and our exposure is not adequately covered by insurance or other risk-shifting tools, we may incur losses that would adversely affect our financial condition and could cause a reduction in our revenues as investors in our products shift their investments to the products of our competitors.
If our policies and procedures do not adequately protect us from exposure and our exposure is not adequately covered by insurance or other risk -shifting tools, we may incur losses that would adversely affect our financial condition and could cause a reduction in our revenues as investors in our products shift their investments to the products of our competitors. 28 Table of Contents Competition and Distribution Risks The asset management business is intensely competitive, and we may experience pressures on our pricing and market share, which could reduce revenues and profit margins.
While we may readily sell the gold that we earn under these advisory contracts, we still may maintain a position. We currently do not enter into arrangements to hedge against fluctuations in the price of gold and any hedging we may undertake in the future may not be cost-effective or sufficient to hedge against this gold exposure.
We currently do not enter into arrangements to hedge against fluctuations in the price of gold and any hedging we may undertake in the future may not be cost -effective or sufficient to hedge against this gold exposure.
Unless such initiatives result in an increase in our revenues that is at least proportionate to the increase in the costs associated with implementing them, our future profitability will be adversely affected. 29 Table of Contents In addition, any future strategic transactions may result in the issuance of a significant amount of our common stock or other securities that could be dilutive to our stockholders, require substantial borrowings, result in changes in our board composition and/or management team, constitute a change of control of our Company, lead to significant changes in our product offering, business operations and earning and risk profiles, and/or result in a decline in the price of our common stock.
In addition, any future strategic transactions may result in the issuance of a significant amount of our common stock or other securities that could be dilutive to our stockholders, require substantial borrowings, result in changes in our board composition and/or management team, constitute a change of control of our Company, lead to significant changes in our product offering, business operations and earning and risk profiles, and/or result in a decline in the price of our common stock.
Blockchain infrastructure risks The consensus or governance mechanisms of blockchain networks are subject to change and malfunctions and may not receive sufficient support from users and miners, which could negatively impact the blockchain network’s ability to grow and respond to challenges.
Blockchain infrastructure risks The consensus or governance mechanisms of blockchain networks are subject to change and malfunctions and may not receive adequate adoption from users and miners, which could negatively impact the blockchain network’s ability to scale and improve programmability, transparency, auditability and security.
During fiscal year 2022, we were the target of stockholder activism whereby certain investors (the “Investor Group”) notified us of their intention to nominate three director candidates to stand for election to the Board of Directors at the 2022 Annual Meeting of Stockholders.
During fiscal years 2022 and 2023, we were the target of stockholder activism whereby a certain investor, acting together with other investors during 2022 (the “Investor Group”) and acting alone during 2023 (the “Investor”), notified us of their intention to nominate director candidates to stand for election to the Board of Directors at the 2022 and 2023 Annual Meetings of Stockholders.
At December 31, 2022, 55% of our AUM was concentrated in ten of our WisdomTree ETPs with approximately 20% in four of our domestic equity ETFs, 16% in the WisdomTree Floating Rate Treasury Fund, or USFR, 13% in three of our precious metal products and 6% in two of our emerging markets ETFs.
At December 31, 2023, 54% of our AUM was concentrated in ten of our WisdomTree ETPs with approximately 18% in three of our domestic equity ETFs, 17% in the WisdomTree Floating Rate Treasury Fund, or USFR, 10% in three of our precious metal products, 6% in two of our emerging markets ETFs, and 3% in one of our international developed market equity ETPs.
If we seek to enforce our rights, we could be subject to claims that the intellectual property right is invalid or is otherwise not enforceable. Furthermore, our assertion of intellectual property rights could result in the other party seeking to assert alleged intellectual property rights of its own or assert other claims against us, which could harm our business.
Furthermore, our assertion of intellectual property rights could result in the other party seeking to assert alleged intellectual property rights of its own or assert other claims against us, which could harm our business.
Concentration Risks We derive a substantial portion of our revenues from a limited number of products and, as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products.
This could result in limited growth or a reduction in the overall ETP market and result in our revenues not growing as rapidly as it has in the recent past or even in a reduction of revenues. 25 Table of Contents Concentration Risks We derive a substantial portion of our revenues from a limited number of products and, as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products.
Our revenues could be adversely affected if the Independent Trustees of the WisdomTree Trust do not approve the continuation of our advisory agreements or determines that the advisory fees we receive from the WisdomTree ETFs should be reduced. Our revenues are derived primarily from investment advisory agreements with related parties.
Our revenues could be adversely affected if the Independent Trustees of the WisdomTree Trust or WisdomTree Digital Trust, as applicable, do not approve the continuation of our advisory agreements or determine that the advisory fees we receive from the WisdomTree U.S. listed ETFs or Digital Funds should be reduced.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis reduced footprint as compared to our prior headquarters better aligns with the number of employees expected to collaborate in person on any given day. While we believe having a physical office space for employees to work and socialize is important, we remain committed to our “remote first” philosophy in which employees primarily work remotely on a permanent basis.
Biggest changeThis reduced footprint, as compared to our prior headquarters, better aligns with the number of employees expected to collaborate in person on any given day.
ITEM 2. PROPERTIES Effective May 1, 2022, we relocated our principal executive office to 250 West 34 th Street, 3 rd Floor, New York, New York pursuant to a license agreement that expires in April 2025, with the option to terminate in April 2024.
ITEM 2. PROPERTIES Our principal executive office is located at 250 West 34 th Street, 3 rd Floor, New York, New York, pursuant to a license agreement that expires in April 2025, with the option to terminate in April 2024.
Removed
We believe that this space is sufficient to meet our needs until the expiration of the license agreement. 38 Table of Contents
Added
While we believe having a physical office space for employees to work and socialize is important, we embrace a “Work Smart” philosophy that transcends physical work settings, with a focus on optimizing productivity, efficiency and effectiveness of our work.
Added
Time in the office generally is not prescribed, and team leaders are empowered to determine how their teams work best, based on their roles, with employees remaining accountable for achieving individual, team and Company outcomes. We believe that this space is sufficient to meet our needs until the expiration of the license agreement.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 15 to our Consolidated Financial Statements for additional information regarding claims brought by investors in our WisdomTree WTI Crude Oil 3x Daily Leveraged ETP totaling approximately €15.8 million ($16.9 million). ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeSee Note 14 to our Consolidated Financial Statements for additional information regarding actual and potential claims by investors in our WisdomTree WTI Crude Oil 3x Daily Leveraged ETP totaling approximately €23.6 million ($26.1 million). ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 41 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) Period October 1, 2022 to October 31, 2022 — $ — — November 1, 2022 to November 30, 2022 — $ — — December 1, 2022 to December 31, 2022 — $ — — Total — $ — — $ 99,976 ITEM 6. [RESERVED] Not applicable. 39 Table of Contents
Biggest changeTotal Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Period (in thousands) October 1, 2023 to October 31, 2023 — $ — — November 1, 2023 to November 30, 2023 — $ — — December 1, 2023 to December 31, 2023 — $ — — Total — $ — — $ 96,406 In addition, on November 20, 2023, we repurchased our Series C Non -Voting Convertible Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”), which was convertible into approximately 13.1 million shares of our common stock, for aggregate cash consideration of approximately $84.4 million.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange under the symbol “WT.” As of December 31, 2022, there were 247 holders of record of shares of our common stock and we believe there were approximately 14,000 beneficial owners of our common stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange under the symbol “WT.” As of December 31, 2023, there were 30 holders of record of shares of our common stock and we believe there were approximately 18,000 beneficial owners of our common stock.
On February 22, 2022, our Board of Directors approved an increase of $85.7 million to our share repurchase program and extended the term for three years through April 27, 2025. There were no shares repurchased during the three months ended December 31, 2022. As of December 31, 2022, approximately $100.0 million remained under this program for future purchases.
On February 22, 2022, our Board of Directors approved an increase of $85.7 million to our share repurchase program and extended the term for three years through April 27, 2025. There were no shares repurchased under this program during the three months ended December 31, 2023.
Issuer Purchases of Equity Securities The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” of shares of our common stock.
Issuer Purchases of Equity Securities The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” of shares of our common stock as part of publicly announced plans or programs.
Added
As of December 31, 2023, approximately $96.4 million remained under this program for future purchases.
Added
See Note 23 to our Consolidated Financial Statements for additional information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(in thousands, except per share amounts) Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Operating Revenues: Advisory fees $ 70,913 $ 70,616 $ 75,586 $ 76,517 $ 77,441 $ 76,400 $ 74,169 $ 70,042 Other income 2,397 1,798 1,667 1,851 1,734 1,712 1,606 1,214 Total revenues 73,310 72,414 77,253 78,368 79,175 78,112 75,775 71,256 Operating Expenses: Compensation and benefits 24,831 23,714 24,565 24,787 23,178 22,027 20,331 22,627 Fund management and administration 16,906 16,285 16,076 15,494 15,417 15,181 14,367 13,947 Marketing and advertising 4,240 3,145 3,894 4,023 4,565 2,925 3,594 3,006 Sales and business development 3,407 2,724 3,131 2,609 2,668 2,935 2,159 2,145 Contractual gold payments 4,107 4,105 4,446 4,450 4,262 4,250 4,314 4,270 Professional fees 2,666 2,367 4,308 4,459 2,099 1,583 1,921 2,013 Occupancy, communications and equipment 1,110 986 1,049 753 725 1,163 1,266 1,475 Depreciation and amortization 104 58 53 47 45 185 256 252 Third-party distribution fees 1,793 1,833 1,818 2,212 1,830 1,873 2,130 1,343 Other 2,427 2,324 2,109 1,845 1,823 1,787 1,752 1,571 Total operating expenses 61,591 57,541 61,449 60,679 56,612 53,909 52,090 52,649 Operating income 11,719 14,873 15,804 17,689 22,563 24,203 23,685 18,607 Other Income/(Expenses): Interest expense (3,736 ) (3,734 ) (3,733 ) (3,732 ) (3,740 ) (3,729 ) (2,567 ) (2,296 ) (Loss)/gain on revaluation of deferred consideration (35,423 ) 77,895 2,311 (17,018) (3,048) 1,737 497 2,832 Interest income 945 811 770 794 864 689 225 231 Impairments — — — — — (15,853 ) — (303) Other losses and gains, net (1,815 ) (5,289 ) (4,474 ) (24,707 ) (1,368 ) (714 ) 49 (5,893) (Loss)/income before income taxes (28,310 ) 84,556 10,678 (26,974 ) 15,271 6,333 21,889 13,178 Income tax (benefit)/expense (21 ) 3,327 2,673 (16,713 ) 4,084 500 4,259 (1,969 ) Net (loss)/income $ (28,289 ) $ 81,229 $ 8,005 $ (10,261 ) $ 11,187 $ 5,833 $ 17,630 $ 15,147 (Loss)/earnings per share—basic $ (0.20 ) $ 0.50 $ 0.05 $ (0.08 ) $ 0.07 $ 0.04 $ 0.11 $ 0.09 (Loss)/earnings per share—diluted $ (0.20 ) $ 0.50 $ 0.05 $ (0.08 ) $ 0.07 $ 0.04 $ 0.11 $ 0.09 Dividends per common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 56 Table of Contents Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Percent of Revenues Operating Revenues Advisory fees 96.7 % 97.5 % 97.8 % 97.6 % 97.8 % 97.8 % 97.9 % 98.3 % Other income 3.3 % 2.5 % 2.2 % 2.4 % 2.2 % 2.2 % 2.1 % 1.7 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Operating Expenses Compensation and benefits 34.0 % 32.7 % 31.7 % 31.5 % 29.2 % 28.2 % 26.9 % 31.7 % Fund management and administration 23.1 % 22.5 % 20.7 % 19.8 % 19.4 % 19.5 % 19.0 % 19.6 % Marketing and advertising 5.8 % 4.3 % 5.0 % 5.1 % 5.8 % 3.7 % 4.7 % 4.2 % Sales and business development 4.6 % 3.8 % 4.1 % 3.3 % 3.4 % 3.8 % 2.8 % 3.0 % Contractual gold payments 5.6 % 5.7 % 5.8 % 5.7 % 5.4 % 5.4 % 5.7 % 6.0 % Professional fees 3.6 % 3.3 % 5.6 % 5.7 % 2.7 % 2.0 % 2.5 % 2.8 % Occupancy, communications and equipment 1.5 % 1.4 % 1.4 % 1.0 % 0.9 % 1.5 % 1.7 % 2.1 % Depreciation and amortization 0.1 % 0.1 % 0.1 % 0.1 % 0.1 % 0.2 % 0.3 % 0.4 % Third-party distribution fees 2.4 % 2.5 % 2.4 % 2.8 % 2.3 % 2.4 % 2.8 % 1.9 % Other 3.3 % 3.2 % 2.7 % 2.4 % 2.3 % 2.3 % 2.3 % 2.2 % Total operating expenses 84.0 % 79.5 % 79.5 % 77.4 % 71.5 % 69.0 % 68.7 % 73.9 % Operating income 16.0 % 20.5 % 20.5 % 22.6 % 28.5 % 31.0 % 31.3 % 26.1 % Other Income/(Expenses) Interest expense (5.1 %) (5.2 %) (4.8 %) (4.8 %) (4.8 %) (4.8 %) (3.5 %) (3.2 %) (Loss)/gain on revaluation of deferred consideration (48.3 %) 107.6 % 3.0 % (21.7 %) (3.8 %) 2.2 % 0.7 % 4.0 % Interest income 1.3 % 1.1 % 1.0 % 1.0 % 1.1 % 0.9 % 0.3 % 0.3 % Impairments — n/a n/a n/a n/a (20.3 %) n/a (0.4 %) Other losses and gains, net (2.5 %) (7.3 %) (5.8 %) (31.5 %) (1.7 %) (0.9 %) 0.1 % (8.3 %) (Loss)/income before income taxes (38.6 %) 116.8 % 13.8 % (34.4 %) 19.3 % 8.1 % 28.9 % 18.5 % Income tax (benefit)/expense (0.0 %) 4.6 % 3.5 % (21.3 %) 5.2 % 0.6 % 5.6 % (2.8 %) Net (loss)/income (38.6 %) 112.2 % 10.4 % (13.1 %) 14.1 % 7.5 % 23.3 21.3 % Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Operating Statistics GLOBAL ETPs (in millions ) Beginning of period assets $ 70,878 $ 74,302 $ 79,407 $ 77,479 $ 72,783 $ 73,948 $ 69,537 $ 67,392 Inflows/(outflows) 5,264 1,747 3,852 1,319 1,902 548 931 1,279 Market appreciation/(depreciation) 5,844 (5,171 ) (8,953 ) 609 2,809 (1,713 ) 3,484 866 Fund closures — — (4 ) — (15 ) — (4 ) — End of period assets $ 81,986 $ 70,878 $ 74,302 $ 79,407 $ 77,479 $ 72,783 $ 73,948 $ 69,537 Average assets during the period $ 77,654 $ 74,687 $ 77,744 $ 77,811 $ 75,990 $ 74,561 $ 73,630 $ 69,583 Average advisory fee during the period 0.36 % 0.38 % 0.39 % 0.40 % 0.40 % 0.41 % 0.40 % 0.41 % Number of ETPs—end of the period 348 347 344 341 329 322 318 313 U.S.
Biggest change(in thousands, except per share amounts) Q4/23 Q3/23 Q2/23 Q1/23 Q4/22 Q3/22 Q2/22 Q1/22 Operating Revenues: Advisory fees $ 86,988 $ 86,598 $ 82,004 $ 77,637 $ 70,913 $ 70,616 $ 75,586 $ 76,517 Other income 3,856 3,825 3,720 4,407 2,397 1,798 1,667 1,851 Total revenues 90,844 90,423 85,724 82,044 73,310 72,414 77,253 78,368 Operating Expenses: Compensation and benefits 27,860 27,955 26,319 27,398 24,831 23,714 24,565 24,787 Fund management and administration 18,445 18,023 17,727 17,153 16,906 16,285 16,076 15,494 Marketing and advertising 4,951 3,833 4,465 4,007 4,240 3,145 3,894 4,023 Sales and business development 3,881 3,383 3,326 2,994 3,407 2,724 3,131 2,609 Contractual gold payments — — 1,583 4,486 4,107 4,105 4,446 4,450 Professional fees 3,201 3,719 8,334 3,715 2,666 2,367 4,308 4,459 Occupancy, communications and equipment 1,208 1,203 1,172 1,101 1,110 986 1,049 753 Depreciation and amortization 335 307 121 109 104 58 53 47 Third-party distribution fees 2,549 2,694 1,881 2,253 1,793 1,833 1,818 2,212 Other 2,379 2,601 2,615 2,257 2,427 2,324 2,109 1,845 Total operating expenses 64,809 63,718 67,543 65,473 61,591 57,541 61,449 60,679 Operating income 26,035 26,705 18,181 16,571 11,719 14,873 15,804 17,689 Other Income/(Expenses): Interest expense (3,758) (3,461) (4,021) (4,002) (3,736) (3,734) (3,733) (3,732) Gain/(loss) on revaluation/termination of deferred consideration — — 41,361 20,592 (35,423) 77,895 2,311 (17,018) Interest income 1,225 791 1,000 1,083 945 811 770 794 Impairments (339) (2,703) — (4,900) — — — — Loss on extinguishment of convertible notes — — — (9,721) — — — — Other gains and losses, net 1,602 (2,512) 1,286 (2,007) (1,815) (5,289) (4,474) (24,707) Income/(loss) before income taxes 24,765 18,820 57,807 17,616 (28,310) 84,556 10,678 (26,974) Income tax expense/(benefit) 5,688 5,836 3,555 1,383 (21) 3,327 2,673 (16,713) Net income/(loss) $ 19,077 $ 12,984 $ 54,252 $ 16,233 $ (28,289) $ 81,229 $ 8,005 $ (10,261) Earnings/(loss) per share—basic $ 0.16 $ 0.07 $ 0.32 $ 0.10 $ (0.20) $ 0.50 $ 0.05 $ (0.08) Earnings/(loss) per share—diluted $ 0.16 $ 0.07 $ 0.32 $ 0.10 $ (0.20) $ 0.50 $ 0.05 $ (0.08) Dividends per common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 61 Table of Contents Q4/23 Q3/23 Q2/23 Q1/23 Q4/22 Q3/22 Q2/22 Q1/22 Percent of Total Revenues Operating Revenues Advisory fees 95.8% 95.8% 95.7% 94.6% 96.7% 97.5% 97.8% 97.6% Other income 4.2% 4.2% 4.3% 5.4% 3.3% 2.5% 2.2% 2.4% Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Operating Expenses Compensation and benefits 30.6% 31.0% 30.7% 33.5% 34.0% 32.7% 31.7% 31.5% Fund management and administration 20.3% 20.0% 20.7% 20.9% 23.1% 22.5% 20.7% 19.8% Marketing and advertising 5.5% 4.2% 5.2% 4.9% 5.8% 4.3% 5.0% 5.1% Sales and business development 4.3% 3.7% 3.9% 3.6% 4.6% 3.8% 4.1% 3.3% Contractual gold payments — n/a 1.8% 5.5% 5.6% 5.7% 5.8% 5.7% Professional fees 3.5% 4.1% 9.7% 4.5% 3.6% 3.3% 5.6% 5.7% Occupancy, communications and equipment 1.3% 1.3% 1.4% 1.3% 1.5% 1.4% 1.4% 1.0% Depreciation and amortization 0.4% 0.3% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Third-party distribution fees 2.8% 3.0% 2.2% 2.7% 2.4% 2.5% 2.4% 2.8% Other 2.6% 2.9% 3.1% 2.8% 3.3% 3.2% 2.7% 2.4% Total operating expenses 71.3% 70.5% 78.8% 79.8% 84.0% 79.5% 79.5% 77.4% Operating income 28.7% 29.5% 21.2% 20.2% 16.0% 20.5% 20.5% 22.6% Other Income/(Expenses) Interest expense (4.1%) (3.8%) (4.7%) (4.9%) (5.1%) (5.2%) (4.8%) (4.8%) Gain/(loss) on revaluation/termination of deferred consideration — — 48.2% 25.1% (48.3%) 107.6% 3.0% (21.7%) Interest income 1.3% 0.9% 1.2% 1.3% 1.3% 1.1% 1.0% 1.0% Impairments (0.4%) (3.0%) — (6.0%) — — — — Loss on extinguishment of convertible notes — — — (11.8%) — — — — Other gains and losses, net 1.8% (2.8%) 1.5% (2.4%) (2.5%) (7.3%) (5.8%) (31.5%) Income/(loss) before income taxes 27.3% 20.8% 67.4% 21.5% (38.6%) 116.8% 13.8% (34.4%) Income tax expense/(benefit) 6.3% 6.5% 4.1% 1.7% (0.0%) 4.6% 3.5% (21.3%) Net income/(loss) 21.0% 14.4% 63.3% 19.8% (38.6%) 112.2% 10.4% (13.1%) 62 Table of Contents Q4/23 Q3/23 Q2/23 Q1/23 Q4/22 Q3/22 Q2/22 Q1/22 Operating Statistics GLOBAL ETPs (in millions ) Beginning of period assets $ 93,735 $ 93,666 $ 90,740 $ 81,993 $ 70,878 $ 74,302 $ 79,407 $ 77,479 (Outflows)/inflows (255) 1,983 2,327 6,341 5,264 1,747 3,852 1,319 Market appreciation/(depreciation) 6,644 (1,914) 599 2,406 5,851 (5,171) (8,957) 609 End of period assets $ 100,124 $ 93,735 $ 93,666 $ 90,740 $ 81,993 $ 70,878 $ 74,302 $ 79,407 Average assets during the period $ 96,557 $ 95,743 $ 91,578 $ 87,508 $ 77,649 $ 74,677 $ 77,738 $ 77,809 Average advisory fee during the period 0.36% 0.36% 0.36% 0.36% 0.36% 0.41% 0.40% 0.41% Number of ETPs—end of the period 337 344 344 341 339 347 344 341 U.S.
We are at the forefront of innovation and believe that tokenization and leveraging the utility of blockchain technology is the next evolution in financial services. We are building the foundation that will allow us to lead in this coming evolution.
We are at the forefront of innovation and believe that tokenization and leveraging the utility of blockchain technology is the next evolution in financial services. We are building the foundation that we believe will allow us to lead in this coming evolution.
On or after May 15, 2028, March 15, 2026 and March 15, 2023 in respect of the 2023 Notes, 2021 Notes and 2020 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. • Cash settlement of principal amount: Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted.
On or after May 15, 2028 and March 15, 2026 in respect of the 2023 Notes, and the 2021 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. • Cash settlement of principal amount: Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted.
In addition, we pay certain costs based on transactions in our ETPs or based on inflow levels. The fees we pay for accounting, tax, transfer agency, index calculation, indicative values and exchange listing are based on the number of ETFs we have. The remaining fees are based on a combination of both AUM and number of funds, or as incurred.
In addition, we pay certain costs based on transactions in our ETPs or based on inflow levels. The fees we pay for accounting, tax, transfer agency, index calculation, indicative values and exchange listing are based on the number of ETPs we have. The remaining fees are based on a combination of both AUM and number of funds, or as incurred.
At our election, we will also settle our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of our common stock or a combination of cash and shares of its common stock. • Redemption price: We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 20, 2025, June 20, 2023 and June 20, 2021 in respect of the 2023 Notes, 2021 Notes and 2020 Notes, respectively, and on or prior to the 55th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price for the respective Convertible Notes then in effect for at least 20 trading days, including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date.
At our election, we will also settle our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of our common stock or a combination of cash and shares of its common stock. • Redemption price: We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after August 20, 2025 and June 20, 2023 in respect of the 2023 Notes and the 2021 Notes, respectively, and on or prior to the 55 th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price for the respective Convertible Notes then in effect for at least 20 trading days, including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date.
In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. See Note 8 to our Consolidated Financial Statements for information.
In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. See Note 7 to our Consolidated Financial Statements for information.
We believe technology is altering the way financial advisors conduct business and through our Advisor Solutions program we offer technology-enabled and research-driven solutions including portfolio construction, asset allocation, practice management services and digital tools to help financial advisors address technology challenges and grow and scale their businesses.
We believe technology is altering the way financial advisors conduct business and through our Advisor and Portfolio Solutions programs we offer technology -enabled and research -driven solutions including portfolio construction, asset allocation, practice management services and digital tools to help financial advisors address technology challenges and grow and scale their businesses.
Other Income/(Expenses) (in thousands) Year Ended December 31, Change Percent Change 2022 2021 Interest expense $ (14,935) $ (12,332) $ (2,603) 21.1% Gain on revaluation of deferred consideration 27,765 2,018 25,747 1,275.9% Interest income 3,320 2,009 1,311 65.3% Impairments — (16,156) 16,156 n/a Other losses, net (36,285) (7,926) (28,359) 357.8% Total other expenses, net $ (20,135) $ (32,387) $ 12,252 (37.8%) 50 Table of Contents Year Ended December 31, As a Percent of Revenues: 2022 2021 Interest expense (5.0%) (4.1%) Gain on revaluation of deferred consideration 9.2% 0.7% Interest income 1.1% 0.7% Impairments — (5.3%) Other losses, net (12.0%) (2.6%) Total other expenses, net (6.7%) (10.6%) Interest expense Interest expense increased 21.1% from $12.3 million during the year ended December 31, 2021 to $14.9 million in the comparable period in 2022 due to a higher level of debt outstanding in the current period.
Other Income/(Expenses) Year Ended December 31, Change Percent Change (in thousands) 2022 2021 Interest expense $ (14,935) $ (12,332) $ (2,603) 21.1% Gain on revaluation/termination of deferred consideration—gold payments 27,765 2,018 25,747 1,275.9% Interest income 3,320 2,009 1,311 65.3% Impairments — (16,156) 16,156 n/a Other losses, net (36,285) (7,926) (28,359) 357.8% Total other expenses, net $ (20,135) $ (32,387) $ 12,252 (37.8%) As a Percent of Revenues: Year Ended December 31, 2022 2021 Interest expense (5.0%) (4.1%) Gain on revaluation/termination of deferred consideration—gold payments 9.2% 0.7% Interest income 1.1% 0.7% Impairments — (5.3%) Other losses, net (12.0%) (2.6%) Total other expenses, net (6.7%) (10.6%) 59 Table of Contents Interest expense Interest expense increased 21.1% from $12.3 million during the year ended December 31, 2021 to $14.9 million in the comparable period in 2022 due to a higher level of debt outstanding in the current period.
Key terms of the Convertible Notes are as follows: 2023 Notes 2021 Notes 2020 Notes Principal outstanding $130.0 $150.0 $60.0 Maturity date (unless earlier converted, repurchased or redeemed) August 15, 2028 June 15, 2026 June 15, 2023 Interest rate 5.75% 3.25% 4.25% Conversion price $9.54 $11.04 $5.92 Conversion rate 104.8658 90.5797 168.9189 Redemption price $12.40 $14.35 $7.70 • Interest rate: Payable semiannually in arrears on February 15 and August 15 of each year for the 2023 Notes (beginning on August 15, 2023) and June 15 and December 15 of each year for the 2020 Notes and the 2021 Notes. • Conversion price: Convertible at an initial conversion rate into shares of our common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price set forth in the table above), subject to adjustment. • Conversion: Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2028, March 15, 2026 and March 15, 2023 for the 2023 Notes, 2021 Notes and 2020 Notes, respectively, only under the following circumstances: (i) if the last reported sale price of our common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the respective Convertible Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of our common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by us in accordance with the terms of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events.
Key terms of the Convertible Notes are as follows: 2023 Notes 2021 Notes Principal outstanding $ 130.0 $ 150.0 Maturity date (unless earlier converted, repurchased or redeemed) August 15, 2028 June 15, 2026 Interest rate 5.75% 3.25% Conversion price $ 9.54 $ 11.04 Conversion rate 104.8658 90.5797 Redemption price $ 12.40 $ 14.35 • Interest rate: Payable semiannually in arrears on February 15 and August 15 of each year for the 2023 Notes (beginning on August 15, 2023) and on June 15 and December 15 of each year for the 2021 Notes. • Conversion price: Convertible at an initial conversion rate set forth in the table above into shares of our common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price set forth in the table above), subject to adjustment. 69 Table of Contents • Conversion: Holders may convert at their option at any time prior to the close of business on the business day immediately preceding May 15, 2028 and March 15, 2026 for the 2023 Notes and the 2021 Notes, respectively, only under the following circumstances: (i) if the last reported sale price of our common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the respective Convertible Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sales price of our common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by us in accordance with the terms of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events.
Changes in the forward-looking price of gold and changes in the discount rate used to compute the present value of the annual payment obligations may have a material impact on the carrying value of the deferred consideration and our reported financial results.
Changes in the forward -looking price of gold and changes in the discount rate used to compute the present value of the annual payment obligations have had a material impact on the carrying value of the deferred consideration and our reported financial results.
Impairments During the year ended December 31, 2021, we recognized impairment charges totaling $16.2 million, including a loss of $9.3 million upon the termination of the lease of our former principal executive office at 245 Park Avenue, New York, New York, $6.6 million related to the write-off of leasehold improvements and fixed assets associated with our former New York office and $0.3 million upon exiting our London office (See Notes 9, 14 and 26 to our Consolidated Financial Statements).
Impairments During the year ended December 31, 2021, we recognized impairment charges totaling $16.2 million, including a loss of $9.3 million upon the termination of the lease of our former principal executive office at 245 Park Avenue, New York, New York, $6.6 million related to the write -off of leasehold improvements and fixed assets associated with our former New York office and $0.3 million upon exiting our London office (See Notes 7, 8, 13 and 26 to our Consolidated Financial Statements).
These increases were partly offset by $115.5 million used to purchase financial instruments owned, at fair value, $34.5 million used to repurchase our common stock, $19.5 million used to pay dividends on our common stock, $5.8 million used to purchase investments, $4.3 million used to pay Convertible Notes issuance costs and $0.2 million from other activities.
These increases were partly offset by $115.5 million used to purchase financial instruments owned, at fair value, $34.5 million used to repurchase our common stock, $19.5 million used to pay dividends on our common stock, $5.8 million used to purchase investments, $4.3 million used to pay the 2021 Notes issuance costs and $0.2 million from other activities.
On August 13, 2020, we issued and sold $25.0 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2023 at a price equal to 101% of the principal amount thereof, plus interest deemed to have accrued since June 16, 2020, which constitute a further issuance of, and form a single series with, our June 2020 Notes (the “August 2020 Notes” and together with the June 2020 Notes, the “2020 Notes”).
On August 13, 2020, we issued and sold $25.0 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2023 at a price equal to 101% of the principal amount thereof, plus interest deemed to have accrued since June 16, 2020, which constituted a further issuance of, and formed a single series with, our June 2020 Notes (the “August 2020 Notes” and together with the June 2020 Notes, the “2020 Notes”).
We have significant opportunities ahead in both the ETFs, models and Advisor Solutions business and as an early mover in digital assets and blockchain-enabled financial services which positions us well for success to grow in this competitive landscape. Components of Operating Revenue Advisory fees Substantially all of our revenues are comprised of advisory fees we earn from our ETPs.
We have significant opportunities ahead in both ETPs and the Portfolio Solutions business and as an early mover in digital assets and blockchain -enabled financial services, which positions us well for success to grow in this competitive landscape. Components of Operating Revenue Advisory fees Substantially all of our revenues are comprised of advisory fees we earn from our ETPs.
While we remain focused on providing investors with the best product structure to access various asset classes through ETFs, we believe that by leveraging blockchain technology, tokenized assets are the best product structure of tomorrow and future of 40 Table of Contents financial services.
While we remain focused on providing investors with the best product structure to access various asset classes through ETFs, we believe that by leveraging blockchain technology, tokenized assets are the best product structure of tomorrow and the future of financial services.
This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices.
This item represented the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward -looking gold prices.
Operating Expenses (in thousands) Year Ended December 31, Change Percent Change 2022 2021 Compensation and benefits $ 97,897 $ 88,163 $ 9,734 11.0% Fund management and administration 64,761 58,912 5,849 9.9% Marketing and advertising 15,302 14,090 1,212 8.6% Sales and business development 11,871 9,907 1,964 19.8% Contractual gold payments 17,108 17,096 12 0.1% Professional fees 13,800 7,616 6,184 81.2% Occupancy, communications and equipment 3,898 4,629 (731) (15.8%) Depreciation and amortization 262 738 (476) (64.5%) Third-party distribution fees 7,656 7,176 480 6.7% Other 8,705 6,933 1,772 25.6% Total operating expenses $ 241,260 $ 215,260 $ 26,000 12.1% As a Percent of Revenues: Year Ended December 31, 2022 2021 Compensation and benefits 32.5% 28.9% Fund management and administration 21.5% 19.4% Marketing and advertising 5.1% 4.6% Sales and business development 3.9% 3.3% Contractual gold payments 5.7% 5.6% Professional fees 4.6% 2.5% Occupancy, communications and equipment 1.3% 1.5% Depreciation and amortization 0.1% 0.2% Third-party distribution fees 2.5% 2.4% Other 2.9% 2.3% Total operating expenses 80.1% 70.7% 49 Table of Contents Compensation and benefits Compensation and benefits expense increased 11.0% from $88.2 million during the year ended December 31, 2021 to $97.9 million in the comparable period in 2022 due to higher incentive compensation and headcount.
Other income Other income increased 23.1% from $6.3 million during the year ended December 31, 2021 to $7.7 million in the comparable period in 2022 primarily due to higher fees associated with our European listed products. 57 Table of Contents Operating Expenses (in thousands) Year Ended December 31, Change Percent Change 2022 2021 Compensation and benefits $ 97,897 $ 88,163 $ 9,734 11.0% Fund management and administration 64,761 58,912 5,849 9.9% Marketing and advertising 15,302 14,090 1,212 8.6% Sales and business development 11,871 9,907 1,964 19.8% Contractual gold payments 17,108 17,096 12 0.1% Professional fees 13,800 7,616 6,184 81.2% Occupancy, communications and equipment 3,898 4,629 (731) (15.8%) Depreciation and amortization 262 738 (476) (64.5%) Third-party distribution fees 7,656 7,176 480 6.7% Other 8,705 6,933 1,772 25.6% Total operating expenses $ 241,260 $ 215,260 $ 26,000 12.1% As a Percent of Revenues: Year Ended December 31, 2022 2021 Compensation and benefits 32.5% 28.9% Fund management and administration 21.5% 19.4% Marketing and advertising 5.1% 4.6% Sales and business development 3.9% 3.3% Contractual gold payments 5.7% 5.6% Professional fees 4.6% 2.5% Occupancy, communications and equipment 1.3% 1.5% Depreciation and amortization 0.1% 0.2% Third-party distribution fees 2.5% 2.4% Other 2.9% 2.3% Total operating expenses 80.1% 70.7% Compensation and benefits Compensation and benefits expense increased 11.0% from $88.2 million during the year ended December 31, 2021 to $97.9 million in the comparable period in 2022 due to higher incentive compensation and headcount.
The fees we pay our sub-advisers generally are the higher of the fixed minimums per fund, which range from $25,000 to $737,000 per year, or the percentage fee, which ranges between 0.01% and 0.20% per annum of average daily AUM at various breakpoint levels depending on the nature of the ETP.
The fees we pay our sub -advisers generally are the higher of the fixed minimums per fund, which range from $25,000 to $180,000 per year, or the percentage fee, which ranges between 0.01% and 0.50% per annum of average daily AUM at various breakpoint levels depending on the nature of the ETP.
Our effective interest rate during the years ended December 31, 2021 and 2022 was 4.6%. Gain on revaluation of deferred consideration We recognized a gain on revaluation of deferred consideration of $2.0 million and $27.8 million during the years ended December 31, 2021 and 2022, respectively.
Our effective interest rate was 4.6% during the years ended December 31, 2021 and 2022. Gain on revaluation/termination of deferred consideration We recognized a gain on revaluation/termination of deferred consideration—gold payments of $2.0 million and $27.8 million during the years ended December 31, 2021 and 2022, respectively.
This expense was associated with the annual payment of 9,500 ounces of gold and was calculated using the average daily spot price of $1,770 and $1,800 per ounce during the years ended December 31, 2020 and 2021, respectively.
This expense was associated with the annual payment of 9,500 ounces of gold and was calculated using the average daily spot price of $1,800 per ounce during the years ended December 31, 2021 and 2022, respectively.
We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Introduction We are a global financial innovator, offering a well-diversified suite of ETPs, models and solutions.
We assume no obligation to update or revise publicly any forward -looking statements, whether as a result of new information, future events or otherwise, unless required by law. Introduction We are a global financial innovator, offering a well -diversified suite of ETPs, models, solutions and products leveraging blockchain technology.
As we continue to pursue our digital assets strategy, we are embracing a concept we refer to as “responsible DeFi,” which we believe upholds the foundational principles of regulation in this innovative and quickly evolving space.
As we continue to pursue our digital assets strategy, we are embracing what we refer to as “responsible DeFi,” which we believe upholds the foundational principles of regulation in this innovative and quickly evolving space.
Equity: 31bps Alternatives: 58bps Emerging Market Equity: 51bps Cryptocurrency: 96bps We determine the appropriate advisory fee to charge for our ETPs based on the cost of operating each ETP considering the types of securities the ETPs will hold, fees third-party service providers will charge us for operating the ETPs and our competitors’ fees for similar ETPs.
Equity: 31bps Alternatives: 58bps Emerging Market Equity: 59bps Cryptocurrency: 36bps We determine the appropriate advisory fee to charge for our ETPs based on the cost of operating each ETP considering the types of securities the ETPs will hold, fees third -party service providers will charge us for operating the ETPs and our competitors’ fees for similar ETPs.
Contractual Obligations Convertible Notes We currently have $340.0 million aggregate principal amount of Convertible Notes outstanding, of which $60.0 million, $150.0 million and $130.0 million are scheduled to mature on June 15, 2023, June 15, 2026 and August 15, 2028, respectively, unless earlier converted, repurchased or redeemed.
Contractual Obligations Convertible Notes We currently have $280.0 million aggregate principal amount of Convertible Notes outstanding, of which $150.0 million and $130.0 million are scheduled to mature on June 15, 2026 and August 15, 2028, respectively, unless earlier converted, repurchased or redeemed.
Additional corporate tax legislation could also impact our normalized effective tax rate. Factors that May Impact our Future Financial Results Our AUM is well diversified across the commodity, U.S. equity, international developed markets and emerging markets sectors.
Additional corporate tax legislation could also impact our normalized effective tax rate. 50 Table of Contents Factors that May Impact our Future Financial Results Our AUM is well diversified across the commodity, U.S. equity, international developed markets and emerging markets sectors.
The results of our analysis identified no indicators of impairment to be recognized based upon a quantitative assessment (discounted cash flow analysis) which relied upon significant unobservable inputs including projected revenue growth rates ranging from 3% to 8% (5% weighted average) and a weighted average cost of capital of 11.0%.
The results of our analysis identified no indicators of impairment to be recognized based upon a quantitative assessment (discounted cash flow analysis) which relied upon significant unobservable inputs including projected revenue growth rates of 3.0% and a weighted average cost of capital of 10.5%.
We empower investors to shape their future and support financial professionals to better serve their clients and grow their businesses. We leverage the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience.
We empower investors and consumers to shape their future and support financial professionals to better serve their clients and grow their businesses. We are leveraging the latest financial infrastructure to create products that provide access, transparency and an enhanced user experience.
Changes in product mix have led to a decline in our average advisory fee, which, for the years ended December 31, 2020, 2021 and 2022 were 0.40%, 0.41% and 0.38%, respectively.
Changes in product mix have led to a decline in our average advisory fee, which for the years ended December 31, 2021, 2022 and 2023 were 0.41%, 0.38% and 0.36%, respectively.
We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance. These non-GAAP financial measures exclude the following: • Unrealized gains or losses on the revaluation of deferred consideration: Deferred consideration is an obligation we assumed in connection with the ETFS Acquisition that is carried at fair value.
We believe presenting these non -GAAP financial measurements provides investors with a consistent way to analyze our performance. These non -GAAP financial measurements exclude the following: • Unrealized gains or losses on revaluation/termination of deferred consideration—gold payments: Deferred consideration—gold payments was an obligation we assumed in connection with the ETFS Acquisition that was carried at fair value.
WisdomTree Prime ™ , our blockchain-native digital wallet, is currently in beta testing and positions us to expand our blockchain-enabled financial services product offerings with a new direct-to-consumer channel where spending, saving and investing are united.
WisdomTree Prime, our blockchain -native digital wallet, positions us to expand our blockchain -enabled financial product and services offerings with a new direct -to-consumer channel where spending, saving and investing are united.
These advisory fees are calculated based on a percentage of the ETPs’ average daily net assets. Our weighted average fee rates by product category are as follows: Commodity & Currency: 37bps Leveraged & Inverse: 87bps International Developed Market Equity: 50bps Fixed Income: 16bps U.S.
These advisory fees are calculated based on a percentage of the ETPs’ average daily net assets. As of the date of this Report, our weighted average fee rates by product category are as follows: Commodity & Currency: 37bps Leveraged & Inverse: 84bps International Developed Market Equity: 49bps Fixed Income: 16bps U.S.
Use of Capital Our business does not require us to maintain a significant cash position. However, certain of our subsidiaries are required to maintain a minimum level of regulatory capital, which at December 31, 2022 was approximately $26.0 million in the aggregate.
Use of Capital Our business does not require us to maintain a significant cash position. However, certain of our subsidiaries are required to maintain a minimum level of regulatory capital, which at December 31, 2023 was approximately $29.2 million in the aggregate.
If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill.
Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill.
Continued success in winning advisor mindshare should lead to model flows that are recurring in nature and stackable on top of our current inflow profile.
We believe that continued success penetrating our accessible market and winning advisor mindshare should lead to model flows that are recurring in nature and stackable on top of our current inflow profile.
Third-Party Distribution Expense We currently estimate third-party distribution expense to be approximately $8.0 million to $9.0 million for the year ending December 31, 2023, which is dependent upon the AUM growth on our respective platforms.
Third-Party Distribution Expense We currently estimate third -party distribution expense to be approximately $10.0 million to $11.0 million for the year ending December 31, 2024, which is dependent upon the AUM growth on our respective platforms.
Interest income Interest income, which is recognized on an accrual basis, arises from investing our corporate cash and on notes receivable previously outstanding. Other losses and gains, net Included herein are gains and losses arising from our financial instruments owned, the sale of gold earned from advisory fees paid by physically-backed gold ETPs, foreign exchange and other miscellaneous items.
Interest income Interest income, which is recognized on an accrual basis, arises from investing our corporate cash into interest -bearing financial instruments. 49 Table of Contents Other losses, net Included herein are gains and losses arising from our financial instruments owned and investments, the sale of gold earned from advisory fees paid by physically -backed gold ETPs, foreign exchange and other miscellaneous items.
Capital Resources Our principal source of financing is our operating cash flow. We believe that current cash flows generated by our operating activities and existing cash balances should be sufficient for us to fund our operations for the foreseeable future. Our ability to satisfy our contractual obligations as they arise are discussed in the section titled “Contractual Obligations” below.
We believe that current cash flows generated by our operating activities and existing cash balances should be sufficient for us to fund our operations for the foreseeable future. 70 Table of Contents Our ability to satisfy our contractual obligations as they arise are discussed in the section titled “Contractual Obligations” below.
Interest income Interest income increased 65.3% from $2.0 million during the year ended December 31, 2021 to $3.3 million in the comparable period in 2022 due to an increase in financial instruments owned.
Interest income Interest income increased 65.3% from $2.0 million during the year ended December 31, 2021 to $3.3 million in the comparable period in 2022 due to an increase in our interest -bearing assets.
Sales and business development Sales and business development expense increased 19.8% from $9.9 million during the year ended December 31, 2021 to $11.9 million in the comparable period in 2022 primarily resulting from increases in conference and events spending as well as market data costs.
Sales and business development Sales and business development expense increased 19.8% from $9.9 million during the year ended December 31, 2021 to $11.9 million in the comparable period in 2022 primarily resulting from increases in conference and events spending as well as market data costs. 58 Table of Contents Contractual gold payments Contractual gold payments expense was essentially unchanged from the year ended December 31, 2021.
No sinking fund is provided for the Convertible Notes. • Limited investor put rights: Holders of the Convertible Notes have the right to require us to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events. • Conversion rate increase in certain customary circumstances: In certain circumstances, conversions in connection with a “make-whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 167.7853 shares, 144.9275 shares and 270.2702 shares of our common stock per $1,000 principal amount of the 2023 Notes, 2021 Notes and 2020 Notes, respectively (the equivalent of 59,767,426 shares of our common stock), subject to adjustment. • Seniority and Security: The Convertible Notes rank equal in right of payment, and are our senior unsecured obligations, but are subordinated in right of payment to our obligations to make certain redemption payments (if and when due) in respect of its Series A Non-Voting Convertible Preferred Stock (See Note 12 to our Consolidated Financial Statements). 62 Table of Contents The indentures contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of the Convertible Notes outstanding may declare the entire principal amount of all the Convertible Notes to be repurchased, plus any accrued special interest, if any, to be immediately due and payable.
No sinking fund is provided for the Convertible Notes. • Limited investor put rights: Holders of the Convertible Notes have the right to require us to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events. • Conversion rate increase in certain customary circumstances: In certain circumstances, conversions in connection with a “make -whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 167.7853 shares and 144.9275 shares of our common stock per $1,000 principal amount of the 2023 Notes and the 2021 Notes, respectively (the equivalent of 43,551,214 shares of our common stock), subject to adjustment. • Seniority and Security: The 2023 Notes and 2021 Notes rank equal in right of payment, and are our senior unsecured obligations, but are subordinated in right of payment to our obligations to make certain redemption payments (if and when due) in respect of our Series A Preferred Stock (See Note 11 to our Consolidated Financial Statements).
During the year ended December 31, 2022, we repurchased 593,261 shares of our common stock under the repurchase program for an aggregate cost of $3.4 million. Currently, approximately $100.0 million remains under this program for future purchases.
During the year ended December 31, 2023, we repurchased 635,653 shares of our common stock under the repurchase program for an aggregate cost of $3.6 million. Currently, approximately $96.4 million remains under this program for future purchases.
In the third quarter of 2021, we began excluding these items when calculating our non-GAAP financial measurements as these instruments have become a more meaningful percentage of total assets and the gains and losses introduce volatility in earnings and are not core to our operating business. • Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense.
We exclude these items when calculating our non -GAAP financial measurements as the gains and losses introduce volatility in earnings and are not core to our operating business. • Tax windfalls and shortfalls upon vesting and exercise of stock -based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense.
We believe that our expansion into digital assets will complement our existing core competencies in a holistic manner, diversify our revenue streams and contribute to our growth. Executive Summary Our business continues to generate significant positive momentum while executing against our long-term strategic initiatives.
We believe that our expansion into digital assets and blockchain -enabled finance complements our existing core competencies in a holistic manner, and will diversify our revenue streams and contribute to our growth. Executive Summary Our business continues to generate significant positive momentum while executing against our long -term strategic initiatives. We ended 2023 with record AUM of $100.1 billion.
Fund management and administration Fund management and administration expenses are expensed when incurred and are comprised of the following costs we pay third-party service providers to operate our ETPs and Digital Funds: • portfolio management of our ETPs (sub-advisory); • fund accounting and administration; • custodial and storage services; • market making; • transfer agency; • accounting and tax services; 43 Table of Contents • printing and mailing of stockholder materials; • index calculation; • indicative values; • distribution fees; • legal and compliance services; • exchange listing fees; • trustee fees and expenses; • preparation of regulatory reports and filings; • insurance; • certain local income taxes; and • other administrative services.
Under the fair value method, compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized as an expense over the vesting period. 47 Table of Contents Fund management and administration Fund management and administration expenses are expensed when incurred and are comprised of the following costs we pay third -party service providers to operate our ETPs and Digital Funds: • portfolio management of our ETPs (sub -advisory ); • fund accounting and administration; • custodial and storage services; • market making; • transfer agency; • accounting and tax services; • printing and mailing of shareholder materials; • index calculation; • indicative values; • distribution fees; • legal and compliance services; • exchange listing fees; • trustee fees and expenses; • preparation of regulatory reports and filings; • insurance; • certain local income taxes; and • other administrative services.
Our family of ETPs includes products that provide exposure to equities, commodities, fixed income, leveraged-and-inverse, currency, cryptocurrency and alternative strategies. We have launched many first-to-market products and pioneered alternative weighting we call “Modern Alpha,” which combines the outperformance potential of active management with the benefits of passive management to offer investors cost-effective funds that are built to perform.
We have launched many first -to-market products and pioneered alternative weighting we call “Modern Alpha,” which combines the outperformance potential of active management with the benefits of passive management to offer investors cost -effective funds that are built to perform.
We are focused on partner platforms such as Merrill Lynch, Morgan Stanley and others, as well as being an outsourced solution for smaller registered investment advisers and independent broker-dealers that make model portfolios easier to trade through our Portfolio & Growth Solutions which we launched in April 2022.
We are focused on adding new clients and continuing to deepen our impact on partner platforms such as Merrill Lynch, Morgan Stanley, LPL Financial and others, as well as being an outsourced solution for smaller registered investment advisers and independent broker -dealers to make model portfolios easier to trade through our Portfolio Solutions program.
Source: Morningstar 42 Table of Contents Industry Developments Asset Management – Consolidation In the recent past, a number of acquisitions in the asset management industry have either been announced or completed.
Equities and fixed income gathered the majority of those flows. Source: Morningstar 46 Table of Contents Industry Developments Asset Management – Consolidation In the recent past, a number of acquisitions in the asset management industry have either been announced or completed.
Operating Leases Total future minimum lease payments with respect to our operating lease liabilities were $1.5 million at December 31, 2022. Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments. See Note 14 to our Consolidated Financial Statements for additional information.
Operating Leases Total future minimum lease payments with respect to our operating lease liabilities were $0.6 million at December 31, 2023. Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments.
Sales and business development Sales and business development expenses are recorded when incurred and include the following: • travel and entertainment or conference related expenses for our sales force; • market data services for our research team; • sales related software tools; • voluntary payment of certain costs associated with the creation or redemption of ETF shares, as we may elect from time to time; and • legal and other advisory fees associated with the development of new funds or business initiatives.
Sales and business development Sales and business development expenses are recorded when incurred and include the following: • travel and entertainment or conference related expenses for our sales force; • market data services for our research team; • sales related software tools; • voluntary payment of certain costs associated with the creation or redemption of ETP shares, as we may elect from time to time; and • legal and other advisory fees associated with the development of new funds or business initiatives. 48 Table of Contents Contractual gold payments Contractual gold payments expense represented an obligation requiring us to pay 9,500 ounces of gold annually from the advisory fee income we earned for managing physically backed gold ETPs.
Cash and cash equivalents increased $67.3 million during the year ended December 31, 2021 due to $150.0 million of proceeds from the issuance of Convertible Notes, $75.3 million of net cash provided by operating activities, $19.4 million of proceeds from the sale of financial instruments owned, at fair value and $2.4 million of proceeds from the receipt of contingent consideration from the sale of our Canadian ETF business.
These increases were partly offset by $67.7 million used to purchase financial instruments owned, at fair value, $21.9 million used to purchase investments, $19.4 million used to pay dividends, $3.4 million used to repurchase our common stock and $3.4 million from other activities. 68 Table of Contents Cash and cash equivalents increased $67.3 million during the year ended December 31, 2021 due to $150.0 million of proceeds from the issuance of our 3.25% Convertible Senior Notes due 2026, or the 2021 Notes, $75.3 million of net cash provided by operating activities, $19.4 million of proceeds from the sale of financial instruments owned, at fair value and $2.4 million of proceeds from the receipt of contingent consideration from the sale of our Canadian ETF business.
Our executive management and Board of Directors strongly believe that equity awards are an important part of our employees’ overall compensation package and that incentivizing our employees with equity in the Company aligns the interests of our employees with that of our stockholders. We use the fair value method in recording compensation expense for equity-based awards.
Also included in compensation and benefits are costs related to equity awards granted to our employees. Our executive management and Board of Directors strongly believe that equity awards are an important part of our employees’ overall compensation package and that incentivizing our employees with equity in the Company aligns the interests of our employees with that of our stockholders.
Gains and losses also generally arise from the sale of gold earned from advisory fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items. Income Taxes Our effective income tax rate for the year ended December 31, 2021 of 12.1% resulted in income tax expense of $6.9 million.
Gains and losses also generally arise from the sale of gold earned from advisory fees paid by our physically -backed gold ETPs, foreign exchange fluctuations and other miscellaneous items. 56 Table of Contents Income Taxes Our effective income tax rate for 2023 was 13.8%, resulting in income tax expense of $16.5 million.
Revaluation of deferred consideration–gold payments Deferred consideration arose in connection with the ETFS Acquisition and is remeasured each reporting period using forward-looking gold prices observed on the CMX exchange, a selected discount rate and perpetual growth rate. See Note 10 to our Consolidated Financial Statements for additional information.
Revaluation/termination of deferred consideration–gold payments Deferred consideration arose in connection with the ETFS Acquisition and was remeasured each reporting period using forward -looking gold prices observed on the CMX exchange, a selected discount rate and perpetual growth rate. This obligation was terminated on May 10, 2023 for approximately $137.0 million.
This estimated rate may change and is dependent upon our actual taxable income earned in relation to our forecasts as well as any other items which may arise that are not currently forecasted. Such items may include, but are not limited to, any revaluation on deferred consideration–gold payments, reductions in unrecognized tax benefits and any stock-based compensation windfalls or shortfalls.
This estimated rate may change and is dependent upon our actual taxable income earned in relation to our forecasts as well as any other items which may arise that are not currently forecasted.
Other income Other income includes rebates from swap providers to our European listed ETPs, creation/redemption fees earned on our European non-UCITS products and fees from licensing our indexes to third parties. Components of Operating Expenses Our operating expenses consist primarily of costs related to selling, operating and marketing our ETPs as well as the infrastructure needed to run our business.
Other income Other income includes rebates from swap providers to our European listed ETPs, creation/redemption fees earned on our European non -UCITS products and fees from licensing our indexes to third parties.
Building on our heritage of innovation, we are also developing next-generation digital products and structures, including Digital Funds and tokenized assets, as well as our blockchain-native digital wallet, WisdomTree Prime ™ . We have approximately $82.0 billion in AUM as of December 31, 2022.
Building on our heritage of innovation, we are also developing and have launched next -generation digital products, services and structures, including Digital Funds and tokenized assets, as well as our blockchain -native digital wallet, WisdomTree Prime, which is currently available in the U.S. in 38 states, representing approximately 70% of the U.S. population.
Source: Morningstar European Listed ETP Industry Flows European listed ETP net flows were $74.2 billion for the year ended December 31, 2022. Equities and fixed income gathered the majority of those flows.
Source: FactSet 45 Table of Contents U.S. Listed ETF Industry Flows U.S. listed ETF net flows for the year ended December 31, 2023 were $489.1 billion. U.S. equity and fixed income gathered the majority of those flows. Source: Morningstar European Listed ETP Industry Flows European listed ETP net flows were $146.5 billion for the year ended December 31, 2023.
Discretionary Spending Discretionary spending includes marketing, sales, professional fees, occupancy and equipment, depreciation and amortization and other expenses. We currently estimate our discretionary spending for the year ending December 31, 2023 to range from $56.0 million to $59.0 million. Not included in the guidance above are any potential non-recurring expenses we may incur in response to a potential proxy contest.
Discretionary Spending Discretionary spending includes marketing, sales, professional fees, occupancy and equipment, depreciation and amortization and other expenses. We currently estimate our discretionary spending for the year ending December 31, 2024 to range from $64.0 million to $68.0 million.
Our effective interest rate during the years ended December 31, 2020 and 2021 was 5.5% and 4.9%, respectively. Gain/(loss) on revaluation of deferred consideration We recognized a gain on revaluation of deferred consideration of $2.0 million during the year ended December 31, 2021 as compared to a loss of $56.8 million during the year ended December 31, 2020.
Our effective interest rate on our outstanding convertible notes during the years ended December 31, 2022 and 2023 was 4.6% and 4.9%, respectively. Gain on revaluation/termination of deferred consideration We recognized a gain on revaluation/termination of deferred consideration—gold payments of $27.8 million and $62.0 million during the years ended December 31, 2022 and 2023, respectively.
Depreciation and amortization Depreciation and amortization expense results from depreciation on fixed assets we purchase as well as amortization of internally-developed software, which are depreciated/amortized over three to five years.
Occupancy, communications and equipment Occupancy, communications and equipment expense includes costs for our corporate headquarters in New York City as well as office related costs in our other locations. Depreciation and amortization Depreciation and amortization expense results from amortization of internally -developed software as well as depreciation on fixed assets, which are depreciated/amortized over three to five years.
As a result of this repurchase, we recognized a loss on extinguishment of approximately $9.7 million during the three months ended March 31, 2023. 61 Table of Contents After the issuance of the 2023 Notes (and together with the remaining 2020 Notes and the 2021 Notes, the “Convertible Notes”), we had $340.0 million aggregate principal amount of Convertible Notes outstanding.
In connection with the issuance of the 2023 Notes, we repurchased $115.0 million in aggregate principal amount of the 2020 Notes. As a result of this repurchase, we recognized a loss on extinguishment of approximately $9.7 million during the year ended December 31, 2023.
Off-Balance Sheet Arrangements We do not have any off-balance sheet financing or other arrangements and have neither created nor are party to any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. 63 Table of Contents Critical Accounting Policies and Estimates Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date.
See Note 13 to our Consolidated Financial Statements for additional information. 71 Table of Contents Off-Balance Sheet Arrangements We do not have any off -balance sheet financing or other arrangements and have neither created nor are party to any special -purpose or off -balance sheet entities for the purpose of raising capital, incurring debt or operating our business.
We had 67 U.S. listed ETFs and 242 European listed ETPs at December 31, 2020 compared to 75 U.S. listed ETFs and 254 European listed ETPs at December 31, 2021.
We had 79 U.S. listed ETFs and 260 European listed ETPs at December 31, 2022 compared to 76 U.S. listed ETFs and 261 European listed ETPs at December 31, 2023.
The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate. • Gains or losses on financial instruments owned: We account for our financial instruments owned as trading instruments, which requires these instruments to be measured at fair value with gains and losses reported in net income.
We exclude this item when calculating our non -GAAP financial measurements as it was not core to our operating business. The item was not adjusted for income taxes as the obligation was assumed by a wholly -owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.
For the year ending December 31, 2023, we currently estimate that our gross margin percentage will be 78% at current AUM and revenue levels and would anticipate margin expansion assuming continued organic flow growth.
Gross margin percentage is calculated as gross margin divided by total operating revenues. For the year ending December 31, 2024, we currently estimate that our gross margin percentage will be 79.0% to 80.0% at current AUM and revenue levels. If AUM drives higher from continued organic flow growth or favorable market conditions, we would anticipate further gross margin expansion.
The chart below sets forth the asset mix of our ETPs at December 31, 2020, 2021 and 2022: 46 Table of Contents Key Operating Statistics The following table presents key operating statistics that serve as indicators for the performance of our business: Year Ended December 31, 2022 2021 2020 GLOBAL ETPs (in millions ) Beginning of period assets $ 77,479 $ 67,392 $ 63,525 Assets sold — — (778 ) Inflows/(outflows) 12,182 4,660 (18 ) Market (depreciation)/appreciation (7,671 ) 5,446 4,663 Fund closures (4 ) (19 ) — End of period assets $ 81,986 $ 77,479 $ 67,392 Average assets during the period $ 76,974 $ 73,441 $ 61,166 Average advisory fee during the period 0.38% 0.41% 0.40% Number of ETPs—end of the period 348 329 309 US LISTED ETFs (in millions ) Beginning of period assets $ 48,210 $ 38,517 $ 40,600 Inflows/(outflows) 14,572 4,950 (1,253 ) Market (depreciation)/appreciation (6,807 ) 4,758 (830 ) Fund closures — (15 ) — End of period assets $ 55,975 $ 48,210 $ 38,517 Average assets during the period $ 49,727 $ 44,335 $ 34,224 Number of ETPs—end of the period 79 75 67 EUROPEAN LISTED ETPs (in millions ) Beginning of period assets $ 29,269 $ 28,875 $ 22,925 Assets sold — — (778 ) (Outflows)/inflows (2,390 ) (290 ) 1,235 Market (depreciation)/appreciation (864 ) 688 5,493 Fund closures (4 ) (4 ) — End of period assets $ 26,011 $ 29,269 $ 28,875 Average assets during the period $ 27,247 $ 29,106 $ 26,942 Number of ETPs—end of the period 269 254 242 PRODUCT CATEGORIES (in millions ) U.S.
The chart below sets forth the asset mix of our ETPs at December 31, 2021, 2022 and 2023: 51 Table of Contents Key Operating Statistics The following table presents key operating statistics that serve as indicators for the performance of our business: Year Ended December 31, 2023 2022 2021 GLOBAL ETPs (in millions ) Beginning of period assets $ 81,993 $ 77,479 $ 67,392 Inflows 10,396 12,182 4,660 Market appreciation/(depreciation) 7,735 (7,668) 5,427 End of period assets $ 100,124 $ 81,993 $ 77,479 Average assets during the period $ 92,847 $ 76,969 $ 73,430 Average advisory fee during the period 0.36% 0.38% 0.41% Number of ETPs—end of the period 337 339 329 US LISTED ETFs (in millions ) Beginning of period assets $ 55,973 $ 48,210 $ 38,517 Inflows 10,795 14,572 4,950 Market appreciation/(depreciation) 5,718 (6,809) 4,743 End of period assets $ 72,486 $ 55,973 $ 48,210 Average assets during the period $ 64,967 $ 49,723 $ 44,325 Number of ETPs—end of the period 76 79 75 EUROPEAN LISTED ETPs (in millions ) Beginning of period assets $ 26,020 $ 29,269 $ 28,875 Outflows (399) (2,390) (290) Market appreciation/(depreciation) 2,017 (859) 684 End of period assets $ 27,638 $ 26,020 $ 29,269 Average assets during the period $ 27,880 $ 27,246 $ 29,105 Number of ETPs—end of the period 261 260 254 PRODUCT CATEGORIES (in millions ) U.S.
Such expenses could be material to our results of operations for the year ending December 31, 2023. 45 Table of Contents Gross Margin We define gross margin as total operating revenues less fund management and administration expenses. Gross margin percentage is calculated as gross margin divided by total operating revenues.
Not included in the guidance above are any potential non -recurring expenses we may incur in response to a potential proxy contest. Such expenses could be material to our results of operations for the year ending December 31, 2024. Gross Margin We define gross margin as total operating revenues less fund management and administration expenses.
Equity Beginning of period assets $ 20,952 $ 21,058 $ 23,738 $ 23,860 $ 21,383 $ 21,285 $ 20,019 $ 18,367 Inflows/(outflows) 1,022 1,239 306 779 783 351 191 218 Market appreciation/(depreciation) 2,140 (1,345 ) (2,986 ) (901 ) 1,694 (253 ) 1,075 1,434 End of period assets $ 24,114 $ 20,952 $ 21,058 $ 23,738 $ 23,860 $ 21,383 $ 21,285 $ 20,019 Average assets during the period $ 23,496 $ 22,541 $ 22,368 $ 23,138 $ 22,962 $ 21,793 $ 20,982 $ 19,320 Commodity & Currency Beginning of period assets $ 19,561 $ 23,624 $ 26,302 $ 24,598 $ 23,825 $ 24,772 $ 23,657 $ 25,879 Inflows/(outflows) 796 (2,179 ) (475 ) (1,053 ) (251 ) (249 ) (318 ) (661 ) Market appreciation/(depreciation) 1,731 (1,884 ) (2,203 ) 2,757 1,024 (698 ) 1,433 (1,561 ) End of period assets $ 22,088 $ 19,561 $ 23,624 $ 26,302 $ 24,598 $ 23,825 $ 24,772 $ 23,657 Average assets during the period $ 20,346 $ 21,628 $ 25,767 $ 25,889 $ 24,421 $ 24,853 $ 25,550 $ 25,289 Fixed Income Beginning of period assets $ 11,695 $ 9,192 $ 5,418 $ 4,356 $ 3,530 $ 3,442 $ 3,246 $ 3,309 Inflows/(outflows) 3,392 2,627 4,038 1,242 838 115 168 10 Market appreciation/(depreciation) 186 (124 ) (264 ) (180 ) (12 ) (27 ) 28 (73 ) End of period assets $ 15,273 $ 11,695 $ 9,192 $ 5,418 $ 4,356 $ 3,530 $ 3,442 $ 3,246 Average assets during the period $ 13,962 $ 10,077 $ 7,426 $ 4,691 $ 4,119 $ 3,503 $ 3,339 $ 3,238 International Developed Market Equity Beginning of period assets $ 9,183 $ 9,968 $ 11,422 $ 11,894 $ 11,181 $ 10,795 $ 9,991 $ 9,414 Inflows/(outflows) 40 (115 ) 79 97 440 404 399 17 Market appreciation/(depreciation) 972 (670 ) (1,533 ) (569 ) 273 (18 ) 405 560 End of period assets $ 10,195 $ 9,183 $ 9,968 $ 11,422 $ 11,894 $ 11,181 $ 10,795 $ 9,991 Average assets during the period $ 10,000 $ 10,032 $ 10,695 $ 11,543 $ 11,524 $ 11,149 $ 10,531 $ 9,796 Emerging Market Equity Beginning of period assets $ 7,495 $ 8,386 $ 9,991 $ 10,375 $ 10,666 $ 11,519 $ 10,477 $ 8,539 (Outflows)/inflows (53 ) 114 (223 ) 189 (3 ) (149 ) 530 1,663 Market appreciation/(depreciation) 674 (1,005 ) (1,382 ) (573 ) (288 ) (704 ) 512 275 End of period assets $ 8,116 $ 7,495 $ 8,386 $ 9,991 $ 10,375 $ 10,666 $ 11,519 $ 10,477 Average assets during the period $ 7,770 $ 8,329 $ 9,155 $ 10,116 $ 10,550 $ 11,038 $ 11,012 $ 9,875 Leveraged & Inverse Beginning of period assets $ 1,523 $ 1,618 $ 1,856 $ 1,775 $ 1,663 $ 1,691 $ 1,519 $ 1,475 Inflows/(outflows) 59 45 90 (2 ) 10 41 (2 ) (5 ) Market appreciation/(depreciation) 172 (140 ) (328 ) 83 102 (69 ) 174 49 End of period assets $ 1,754 $ 1,523 $ 1,618 $ 1,856 $ 1,775 $ 1,663 $ 1,691 $ 1,519 Average assets during the period $ 1,623 $ 1,589 $ 1,765 $ 1,830 $ 1,761 $ 1,715 $ 1,664 $ 1,554 Alternatives Beginning of period assets $ 306 $ 305 $ 293 $ 261 $ 222 $ 198 $ 227 $ 215 Inflows/(outflows) 12 16 34 29 56 22 (39 ) — Market (depreciation)/appreciation (8 ) (15 ) (22 ) 3 (17 ) 2 10 12 End of period assets $ 310 $ 306 $ 305 $ 293 $ 261 $ 222 $ 198 $ 227 Average assets during the period $ 305 $ 313 $ 299 $ 275 $ 229 $ 214 $ 231 $ 223 Cryptocurrency Beginning of period assets $ 163 $ 151 $ 383 $ 357 $ 295 $ 229 $ 377 $ 168 (Outflows)/inflows (4 ) — 3 37 28 12 8 36 Market (depreciation)/appreciation (23 ) 12 (235 ) (11 ) 34 54 (156 ) 173 End of period assets $ 136 $ 163 $ 151 $ 383 $ 357 $ 295 $ 229 $ 377 Average assets during the period $ 152 $ 178 $ 265 $ 324 $ 406 $ 277 $ 300 $ 264 Closed ETPs Beginning of period assets $ — $ — $ 4 $ 3 $ 18 $ 17 $ 24 $ 26 Inflows/(outflows) — — — 1 1 1 (6 ) 1 Market (depreciation)/appreciation — — — — (1 ) — 3 (3 ) Fund closures — — (4 ) — (15 ) — (4 ) — End of period assets $ — $ — $ — $ 4 $ 3 $ 18 $ 17 $ 24 Average assets during the period $ — $ — $ 4 $ 5 $ 18 $ 19 $ 21 $ 24 Headcount 273 274 264 253 241 235 227 227 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree 58 Table of Contents Non-GAAP Financial Measurements In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non-GAAP information which we believe provides useful and meaningful information.
Equity Beginning of period assets $ 25,644 $ 26,001 $ 24,534 $ 24,112 $ 20,952 $ 21,058 $ 23,738 $ 23,860 Inflows/(outflows) 487 864 414 (149) 1,022 1,239 306 779 Market appreciation/(depreciation) 3,025 (1,221) 1,053 571 2,138 (1,345) (2,986) (901) End of period assets $ 29,156 $ 25,644 $ 26,001 $ 24,534 $ 24,112 $ 20,952 $ 21,058 $ 23,738 Average assets during the period $ 26,844 $ 26,501 $ 24,732 $ 24,725 $ 23,492 $ 22,534 $ 22,362 $ 23,134 63 Table of Contents Q4/23 Q3/23 Q2/23 Q1/23 Q4/22 Q3/22 Q2/22 Q1/22 Commodity & Currency Beginning of period assets $ 20,465 $ 22,384 $ 24,924 $ 22,097 $ 19,561 $ 23,624 $ 26,302 $ 24,599 (Outflows)/inflows (449) (1,815) (1,513) 2,003 796 (2,180) (475) (1,053) Market appreciation/(depreciation) 1,320 (104) (1,027) 824 1,740 (1,883) (2,203) 2,756 End of period assets $ 21,336 $ 20,465 $ 22,384 $ 24,924 $ 22,097 $ 19,561 $ 23,624 $ 26,302 Average assets during the period $ 21,254 $ 22,278 $ 24,033 $ 23,807 $ 20,345 $ 21,625 $ 25,766 $ 25,891 Fixed Income Beginning of period assets $ 21,797 $ 20,215 $ 18,708 $ 15,273 $ 11,695 $ 9,192 $ 5,418 $ 4,356 (Outflows)/inflows (715) 1,671 1,471 3,513 3,392 2,628 4,038 1,242 Market appreciation/(depreciation) 115 (89) 36 (78) 186 (125) (264) (180) End of period assets $ 21,197 $ 21,797 $ 20,215 $ 18,708 $ 15,273 $ 11,695 $ 9,192 $ 5,418 Average assets during the period $ 21,889 $ 20,965 $ 19,185 $ 17,176 $ 13,962 $ 10,077 $ 7,426 $ 4,691 International Developed Market Equity Beginning of period assets $ 13,902 $ 13,423 $ 11,433 $ 10,195 $ 9,183 $ 9,968 $ 11,422 $ 11,894 Inflows/(outflows) 9 798 1,593 450 40 (115) 79 97 Market appreciation/(depreciation) 1,192 (319) 397 788 972 (670) (1,533) (569) End of period assets $ 15,103 $ 13,902 $ 13,423 $ 11,433 $ 10,195 $ 9,183 $ 9,968 $ 11,422 Average assets during the period $ 14,267 $ 13,873 $ 12,276 $ 10,879 $ 10,000 $ 10,032 $ 10,695 $ 11,543 Emerging Market Equity Beginning of period assets $ 9,569 $ 9,191 $ 8,811 $ 8,116 $ 7,495 $ 8,386 $ 9,991 $ 10,375 Inflows/(outflows) 412 451 329 486 (53) 114 (223) 189 Market appreciation/(depreciation) 745 (73) 51 209 674 (1,005) (1,382) (573) End of period assets $ 10,726 $ 9,569 $ 9,191 $ 8,811 $ 8,116 $ 7,495 $ 8,386 $ 9,991 Average assets during the period $ 9,833 $ 9,652 $ 8,998 $ 8,666 $ 7,770 $ 8,329 $ 9,155 $ 10,116 64 Table of Contents Q4/23 Q3/23 Q2/23 Q1/23 Q4/22 Q3/22 Q2/22 Q1/22 Leveraged & Inverse Beginning of period assets $ 1,781 $ 1,864 $ 1,785 $ 1,754 $ 1,523 $ 1,618 $ 1,860 $ 1,777 (Outflows)/inflows (59) (1) 12 43 59 45 90 (1) Market appreciation/(depreciation) 93 (82) 67 (12) 172 (140) (332) 84 End of period assets $ 1,815 $ 1,781 $ 1,864 $ 1,785 $ 1,754 $ 1,523 $ 1,618 $ 1,860 Average assets during the period $ 1,803 $ 1,894 $ 1,798 $ 1,757 $ 1,623 $ 1,589 $ 1,770 $ 1,835 Cryptocurrency Beginning of period assets $ 243 $ 248 $ 239 $ 136 $ 163 $ 151 $ 383 $ 357 Inflows/(outflows) 28 10 (1) 13 (4) — 3 37 Market appreciation/(depreciation) 143 (15) 10 90 (23) 12 (235) (11) End of period assets $ 414 $ 243 $ 248 $ 239 $ 136 $ 163 $ 151 $ 383 Average assets during the period $ 325 $ 238 $ 236 $ 190 $ 152 $ 178 $ 265 $ 324 Alternatives Beginning of period assets $ 334 $ 340 $ 306 $ 310 $ 306 $ 305 $ 293 $ 261 Inflows/(outflows) 32 5 22 (18) 12 16 34 29 Market appreciation/(depreciation) 11 (11) 12 14 (8) (15) (22) 3 End of period assets $ 377 $ 334 $ 340 $ 306 $ 310 $ 306 $ 305 $ 293 Average assets during the period $ 342 $ 342 $ 320 $ 308 $ 305 $ 313 $ 299 $ 275 Headcount 303 299 291 279 273 274 264 253 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree Non-GAAP Financial Measurements In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non -GAAP information which we believe provides useful and meaningful information.
These decreases were partly offset by $175.3 million of proceeds from the issuance of Convertible Notes, $47.1 million of net cash provided by operating activities, $18.7 million of proceeds from the sale of financial instruments owned, at fair value, $16.5 million of proceeds from held-to-maturity securities maturing or called prior to maturity, $9.6 million of proceeds from the sale of our financial interests in AdvisorEngine, $2.8 million of net proceeds from the sale of our Canadian ETF business and $0.6 million from other activities.
These decreases were partly offset by $130.0 million of proceeds from the issuance of the 2023 Notes, $123.6 million of proceeds from the sale of financial instruments owned, at fair value, $85.6 million of net cash provided by operating activities, $28.8 million of proceeds from the exit from our investment in Securrency, Inc. in connection with the sale of Securrency, Inc. to an unaffiliated third party, $1.5 million from receipt of contingent consideration related to the sale of our Canadian ETF business, and $1.1 million from other activities.
Equity Beginning of period assets $ 23,860 $ 18,367 $ 17,732 Inflows/(outflows) 3,346 1,543 765 Market (depreciation)/appreciation (3,092 ) 3,950 (130 ) End of period assets $ 24,114 $ 23,860 $ 18,367 Average assets during the period $ 22,886 $ 21,264 $ 15,397 Commodity & Currency Beginning of period assets $ 24,598 $ 25,879 $ 20,073 (Outflows)/inflows (2,911 ) (1,479 ) 472 Market appreciation/(depreciation) 401 198 5,334 End of period assets $ 22,088 $ 24,598 $ 25,879 Average assets during the period $ 23,406 $ 25,027 $ 23,755 Fixed Income Beginning of period assets $ 4,356 $ 3,309 $ 3,565 Inflows/(outflows) 11,299 1,131 (281 ) Market (depreciation)/appreciation (382 ) (84 ) 25 End of period assets $ 15,273 $ 4,356 $ 3,309 Average assets during the period $ 9,039 $ 3,550 $ 3,540 47 Table of Contents Year Ended December 31, 2022 2021 2020 International Developed Market Equity Beginning of period assets $ 11,894 $ 9,414 $ 13,011 Inflows/(outflows) 101 1,260 (2,839 ) Market (depreciation)/appreciation (1,800 ) 1,220 (758 ) End of period assets $ 10,195 $ 11,894 $ 9,414 Average assets during the period $ 10,568 $ 10,750 $ 9,500 Emerging Market Equity Beginning of period assets $ 10,375 $ 8,539 $ 6,400 Inflows/(outflows) 27 2,041 1,700 Market (depreciation)/appreciation (2,286 ) (205 ) 439 End of period assets $ 8,116 $ 10,375 $ 8,539 Average assets during the period $ 8,843 $ 10,619 $ 6,057 Leveraged & Inverse Beginning of period assets $ 1,775 $ 1,475 $ 1,131 Inflows/(outflows) 192 44 248 Market (depreciation)/appreciation (213 ) 256 96 End of period assets $ 1,754 $ 1,775 $ 1,475 Average assets during the period $ 1,702 $ 1,674 $ 1,352 Alternatives Beginning of period assets $ 261 $ 215 $ 358 Inflows/(outflows) 91 39 (125 ) Market (depreciation)/appreciation (42 ) 7 (18 ) End of period assets $ 310 $ 261 $ 215 Average assets during the period $ 298 $ 224 $ 251 Cryptocurrency Beginning of period assets $ 357 $ 168 $ 1 Inflows/(outflows) 36 84 76 Market (depreciation)/appreciation (257 ) 105 91 End of period assets $ 136 $ 357 $ 168 Average assets during the period $ 230 $ 312 $ 30 Closed ETPs Beginning of period assets $ 3 $ 26 $ 1,254 Assets sold — — (778 ) Inflows/(outflows) 1 (3 ) (34 ) Market depreciation — (1 ) (416 ) Fund closures (4 ) (19 ) — End of period assets $ — $ 3 $ 26 Average assets during the period $ 2 $ 21 $ 1,284 Headcount 273 241 217 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree 48 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Selected Operating and Financial Information Year Ended December 31, Change Percent Change 2022 2021 AUM (in millions) Average AUM $ 76,974 $ 73,441 $ 3,533 4.8 % Operating Revenues (in thousands) Advisory fees $ 293,632 $ 298,052 $ (4,420 ) (1.5 %) Other income 7,713 6,266 1,447 23.1 % Total revenues $ 301,345 $ 304,318 $ (2,973 ) (1.0 %) Average AUM Our average AUM increased 4.8% from $73.4 billion at December 31, 2021 to $77.0 billion at December 31, 2022 due to net inflows partly offset by market depreciation.
Equity Beginning of period assets $ 24,112 $ 23,860 $ 18,367 Inflows 1,616 3,346 1,544 Market appreciation/(depreciation) 3,428 (3,094) 3,949 End of period assets $ 29,156 $ 24,112 $ 23,860 Average assets during the period $ 25,701 $ 22,881 $ 21,254 Commodity & Currency Beginning of period assets $ 22,097 $ 24,599 $ 25,879 Outflows (1,774) (2,912) (1,479) Market appreciation 1,013 410 199 End of period assets $ 21,336 $ 22,097 $ 24,599 Average assets during the period $ 22,843 $ 23,406 $ 25,027 Fixed Income Beginning of period assets $ 15,273 $ 4,356 $ 3,324 Inflows 5,940 11,300 1,130 Market depreciation (16) (383) (98) End of period assets $ 21,197 $ 15,273 $ 4,356 Average assets during the period $ 19,804 $ 9,039 $ 3,565 52 Table of Contents Year Ended December 31, 2023 2022 2021 International Developed Market Equity Beginning of period assets $ 10,195 $ 11,894 $ 9,414 Inflows 2,850 101 1,260 Market appreciation/(depreciation) 2,058 (1,800) 1,220 End of period assets $ 15,103 $ 10,195 $ 11,894 Average assets during the period $ 12,824 $ 10,568 $ 10,750 Emerging Market Equity Beginning of period assets $ 8,116 $ 10,375 $ 8,539 Inflows 1,678 27 2,041 Market appreciation/(depreciation) 932 (2,286) (205) End of period assets $ 10,726 $ 8,116 $ 10,375 Average assets during the period $ 9,287 $ 8,843 $ 10,619 Leveraged & Inverse Beginning of period assets $ 1,754 $ 1,777 $ 1,486 (Outflows)/inflows (5) 193 41 Market appreciation/(depreciation) 66 (216) 250 End of period assets $ 1,815 $ 1,754 $ 1,777 Average assets during the period $ 1,813 $ 1,704 $ 1,679 Cryptocurrency Beginning of period assets $ 136 $ 357 $ 168 Inflows 50 36 84 Market appreciation/(depreciation) 228 (257) 105 End of period assets $ 414 $ 136 $ 357 Average assets during the period $ 247 $ 230 $ 312 Alternatives Beginning of period assets $ 310 $ 261 $ 215 Inflows 41 91 39 Market appreciation/(depreciation) 26 (42) 7 End of period assets $ 377 $ 310 $ 261 Average assets during the period $ 328 $ 298 $ 224 Headcount 303 273 241 Note: Previously issued statistics may be restated due to fund closures and trade adjustments Source: WisdomTree Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Selected Operating and Financial Information Year Ended December 31, Change Percent Change 2023 2022 AUM (in millions) Average AUM $ 92,847 $ 76,969 $ 15,878 20.6% Operating Revenues (in thousands) Advisory fees $ 333,227 $ 293,632 $ 39,595 13.5% Other income 15,808 7,713 8,095 105.0% Total revenues $ 349,035 $ 301,345 $ 47,690 15.8% 53 Table of Contents Operating Revenues Advisory fees Advisory fee revenues increased 13.5% from $293.6 million during the year ended December 31, 2022 to $333.2 million during the year ended December 31, 2023 as higher average AUM was partially offset by a decline in our average advisory fee.
Operating Revenues Advisory fees Advisory fee revenues decreased 1.5% from $298.1 million during the year ended December 31, 2021 to $293.6 million in the comparable period in 2022 as higher average AUM was offset by a decline in our average advisory fee.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Selected Operating and Financial Information Year Ended December 31, Change Percent Change 2022 2021 AUM (in millions) Average AUM $ 76,969 $ 73,430 $ 3,539 4.8% Operating Revenues (in thousands) Advisory fees $ 293,632 $ 298,052 $ (4,420) (1.5%) Other income 7,713 6,266 1,447 23.1% Total revenues $ 301,345 $ 304,318 $ (2,973) (1.0%) Operating Revenues Advisory fees Advisory fee revenues decreased 1.5% from $298.1 million during the year ended December 31, 2021 to $293.6 million in the comparable period in 2022 as higher average AUM was offset by a decline in our average advisory fee.
Headcount was 217 and 241 at December 31, 2020 and 2021, respectively. Fund management and administration Fund management and administration expense increased 3.8% from $56.7 million during the year ended December 31, 2020 to $58.9 million in the comparable period in 2021 primarily due to higher average AUM and product launches.
Headcount was 273 and 303 at December 31, 2022 and 2023, respectively. 54 Table of Contents Fund management and administration Fund management and administration expense increased 10.2% from $64.8 million during the year ended December 31, 2022 to $71.3 million during the year ended December 31, 2023 primarily due to higher average AUM and inflows.
Sales and business development Sales and business development expense decreased 6.4% from $10.6 million during the year ended December 31, 2020 to $9.9 million in the comparable period in 2021 primarily due to lower travel and discretionary spending resulting from the persistence of the COVID-19 pandemic.
Sales and business development Sales and business development expense increased 14.4% from $11.9 million during the year ended December 31, 2022 to $13.6 million during the year ended December 31, 2023 primarily resulting from increases in travel and events spending.
Cash and cash equivalents decreased $1.5 million during the year ended December 31, 2020 due to $179.0 million used to repay our debt, $36.4 million used to purchase financial instruments owned, at fair value, $31.2 million used to repurchase our common stock, $20.1 million used to pay dividends on our common stock and $5.4 million used to pay Convertible Notes issuance costs.
Cash and cash equivalents decreased $2.8 million during the year ended December 31, 2023 due to $184.3 million used to repurchase and settle our 4.25% Convertible Senior Notes due 2023, $57.4 million used to purchase financial instruments owned, at fair value, $50.0 million used to terminate our deferred consideration—gold payments obligation, $40.0 million used to repurchase our Series C Preferred Stock, $20.1 million used to pay dividends on our common stock, $11.2 million used to purchase investments, $3.6 million used to repurchase our common stock, $3.5 million used to pay issuance costs in respect of our 5.75% Convertible Senior Notes due 2028, or the 2023 Notes, $2.1 million used for software development and $1.2 million used in other activities.
Income Tax Expense We currently estimate that our consolidated normalized effective tax rate will be approximately 23% for the year ending December 31, 2023, an increase from 22% during the prior year primarily due to the main rate of corporate taxation in the U.K. rising from 19% to 25% effective April 1, 2023.
Income Tax Expense We currently estimate that our consolidated normalized effective tax rate will be approximately 24.0% to 25.0% for the year ending December 31, 2024, a slight increase as compared to the year ended December 31, 2022 to account for the full year impact of the U.K. tax rate change to 25.0% that went into effect on April 1, 2023.
This includes a charge of $6.0 million and $5.2 million during the years ended December 31, 2020 and 2021, respectively, arising from the release of a tax-related indemnification asset upon the expiration of the statute of limitations. An equal and offsetting benefit has been recognized in income tax expense.
Other losses, net Other losses, net were $36.3 million and $1.6 million during the years ended December 31, 2022 and 2023, respectively. This includes a charge of $19.9 million and $1.4 million during the years ended December 31, 2022 and 2023, respectively, arising from the release of a tax -related indemnification asset upon the expiration of the statute of limitations.
Our effective income tax rate for the year ended December 31, 2020 of negative 1.2% resulted in income tax expense of $0.4 million.
Our effective income tax rate for the year ended December 31, 2022 was negative 26.9%, resulting in an income tax benefit of $10.7 million.
AUM diversification and product performance have us well-positioned to continue on this growth trajectory. Our models strategy is succeeding as we continue to expand both the number of our model partners as well as the number of models on partner platforms.
AUM diversification and product performance have us well -positioned for this growth trajectory to continue. 43 Table of Contents Our models strategy is another growth driver where we are succeeding, with our model portfolios available to over 70,000 advisors.
In connection with the issuance of the 2023 Notes, we repurchased $115.0 million of aggregate principal amount of the 2020 Notes.
After the repurchase and maturity of the 2020 Notes and the issuance of the 2023 Notes (such 2023 Notes, together with the 2021 Notes, the “Convertible Notes”), we had $280.0 million in aggregate principal amount of Convertible Notes outstanding.
See Note 10 to our Consolidated Financial Statements for additional information. Revenue Recognition We earn substantially all of our revenue in the form of advisory fees from our ETPs and recognize this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets.
Investments in debt instruments are accounted for at fair value, with changes in fair value reported in other income/(expenses). Revenue Recognition We earn substantially all of our revenue in the form of advisory fees from our ETPs and recognize this revenue over time, as the performance obligation is satisfied.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, our Convertible Notes bear interest at fixed rates of 5.75%, 3.25% and 4.25% for the 2023 Notes, 2021 Notes and 2020 Notes, respectively. Therefore, we have no direct financial statement risk associated with changes in interest rates.
Biggest changeIn addition, our Convertible Notes bear interest at fixed rates of 5.75% and 3.25% for the 2023 Notes and the 2021 Notes, respectively. Therefore, we have no direct financial statement risk associated with changes in interest rates. However, the fair value of the Convertible Notes changes primarily when the market price of our common stock fluctuates or interest rates change.
We currently do not enter into arrangements to hedge against fluctuations in the price of these commodities and cryptocurrencies and any hedging we may undertake in the future may not be cost-effective or sufficient to hedge against this exposure.
We currently do not enter into arrangements to hedge against fluctuations in the price of these commodities and cryptocurrencies and any hedging we may undertake in the future may not be cost -effective or sufficient to hedge against this exposure. 73 Table of Contents
During the years ended December 31, 2021 and 2022, we recognized losses on these financial instruments of $3.7 million and $16.5 million, respectively, and any losses recognized in the future may be material to our operating results. We do not anticipate that changes in interest rates will have a material impact on our financial condition or cash flows.
During the years ended December 31, 2022 and 2023, we recognized losses on these financial instruments of $16.5 million and $0.5 million, respectively, and any losses recognized in the future may be material to our operating results. We do not anticipate that changes in interest rates will have a material impact on our financial condition or cash flows.
Interest Rate Risk We invest our corporate cash in short-term interest earning assets, primarily in federal agency debt instruments, WisdomTree fixed income ETFs, U.S. treasuries, corporate bonds, money market instruments at a commercial bank and other financial instruments which totaled $139.0 million and $127.4 million as of December 31, 2021 and 2022, respectively.
Interest Rate Risk We invest our corporate cash in short -term interest earning assets, primarily in federal agency debt instruments, WisdomTree fixed income ETFs, U.S. treasuries, corporate bonds, money market instruments at a commercial bank and other financial instruments which totaled $127.4 million and $109.2 million as of December 31, 2022 and 2023, respectively.
However, the fair value of the Convertible Notes changes primarily when the market price of our common stock fluctuates or interest rates change. 65 Table of Contents Exchange Rate Risk We are subject to currency translation exposure on the results of our non-U.S. operations, primarily in the U.K. and Europe.
Exchange Rate Risk We are subject to currency translation exposure on the results of our non -U .S. operations, primarily in the U.K. and Europe.
In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold, other precious metals and cryptocurrencies are paid in the underlying metal or cryptocurrency. In addition, we pay gold ounces to satisfy our deferred consideration obligation (See Note 10 to our Consolidated Financial Statements).
In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold, other precious metals and cryptocurrencies are paid in the underlying metal or cryptocurrency. While we readily sell the gold, precious metals and cryptocurrencies that we earn under these advisory contracts, we still may maintain a position.
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While we readily sell the gold, precious metals and cryptocurrencies that we earn under these advisory contracts, we still may maintain a position.

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