WisdomTree, Inc. (WT) Q3 2021 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the WisdomTree Third Quarter Earnings Call. [Operator Instructions] Please advised that today's conference may be recorded. [Operator Instructions] I'd now like to hand the conference over to your host today, Jessica Zaloom, WisdomTree Head of Corporate Communications and Public Relations. Please go ahead.

Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including, but not limited to, the risks set forth in this presentation and in the Risk Factors section of the WisdomTree's annual report on Form 10-K for the year ended December 31, 2020, and quarterly report on Form 10-Q for the quarter ended June 30, 2021. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now it is my pleasure to turn the call over to WisdomTree President and COO, Jarrett Lilien.

Thanks, Jess, and welcome, everyone. I'm going to kick it off today with some color on the momentum in our business and then turn it over to Bryan to go through the results in more detail and to provide an update on expense guidance and then Jono will give some closing thoughts before we open it up to Q&A. WisdomTree's positive momentum continued through Q3 with another quarter of organic growth and strong execution against our longer-term strategic initiatives. The $550 million of net inflows in the third quarter marked our fourth straight quarter of net inflows, but the real story is the increasing breadth and depth of our flows and product lineup. Year-to-date, WisdomTree is growing at an annualized organic growth rate over 6.5% with twice as many of our funds having inflows than outflows. In Q3, that fund inflow outflow ratio for ETFs and UCITS increased to 2.7:1. And so far in October, the ratio is running well over 3:1 with over $1 billion in net inflows, marking our best month of the year. Our U.S. business is generating organic growth of 13% and the third quarter marked the fifth consecutive quarter of net inflows, including organic growth in '21 of the past 26 months. Success has been marked by recent strength in our fixed income suite, but sustained strength in our equities franchise, including our U.S. efficient core fund, which just got its 5-star rating from Morningstar in September and recognition in The Wall Street Journal about it's potential use as the cornerstone of an investor's portfolio. In Europe, UCITS momentum continues with 12 consecutive months of positive flows driving over $1.2 billion of inflows year-to-date and taking AUM in our UCITS suite over $3 billion. Our physical gold suite revamp has proven successful with core gold, swiss Gold and hedge gold products taking in $180 million of flows in 2021 so far. Year-to-date, our top 10 inflowing funds are a nice mix of UCITS and thematics, industrial metals and new launches, including gold and carbon. Overall, new fund launches have been a point of strength this year with 14 new fund launches in 2021 and more on the way. Of note is our carbon ETP in Europe, which launched on August 27 and grew to $165 million in AUM by the end of the quarter. That momentum has continued through October, and the fund now has over $220 million in AUM. The pipeline for new product launches remains robust in both the U.S. and Europe and I look forward to sharing additional successes with you next quarter. We also continue to gain traction with our managed models business. There's a long sales cycle here, especially relative to single ticker ETFs and mandates are hard to win, but with success comes stickier and more recurring inflows. To date, we have reported on some of those hard to win successes, most notably with Merrill Lynch last year and with Morgan Stanley last quarter, but we also have a strong pipeline, where we hope to announce another large wirehouse win and another major RIA win soon. We are still ramping up engagement at Merrill and Morgan and the new wins haven't yet closed. But through September 30, roughly 10% of our U.S. ETF inflows are already coming through WisdomTree managed models. To be clear, our ETFs are also part of other home office and custom models, and I'm referring to flows coming solely from WisdomTree models. If we were to include these other models where we are also having significant success, the numbers would be substantially higher. Bottom line, we've been investing in our models business for some time and this investment is paying off. Models are already a meaningful contributor to net inflows today, and we see an even greater opportunity in future periods. Lastly, I want to share with you some of our success and momentum in the crypto landscape. First, in mid-October, the WisdomTree Enhanced Commodity Strategy Fund was the first ETF to add Bitcoin futures as part of the fund mix. Second, we maintain our strong position in crypto ETPs in Europe with both Bitcoin and Ether and additional strategies like crypto baskets in the product development pipeline. As the crypto rally extends in the fourth quarter, there's upward momentum in crypto-related management fees from both market move and organic growth, but the momentum has continued even outside ETPs as WisdomTree's partnership with OnRamp and Gemini and our shared initiative to bring crypto to advisers got it's first model win this quarter. Federal Life announced the launch of a variable annuity product that implements a WisdomTree model comprised of nearly 2/3 direct crypto and a third disruptive technology ETFs. We are excited to get this product to market and look forward to further implementations with additional partners in the future. All in all, we have momentum, and we are generating strong organic growth. As I said last quarter, and we'll say again this quarter and look forward to saying next quarter, we are executing well on all fronts. Now let me turn it over to Bryan to bring it all together with the numbers.

Thank you, Jarrett. Beginning on Slide 5. Our AUM at September 30 was $72.8 billion, a decrease of 2% versus the prior quarter driven by negative market movement partly offset by net inflows. Our average AUM was $74.6 billion, a third consecutive record quarter. We generated in excess of $500 million of inflows during the quarter, largely into our international equity and U.S. equity products. We had outflows from emerging markets products and commodities saw mixed results with outflows in precious metals, offset by inflows into oil and our recently launched carbon products which attracted $155 million of flows in just over 1 month. As Jarrett had previously mentioned, our U.S. ETFs have generated positive inflows for 5 consecutive quarters and 21 of our ETFs currently have over $1 billion in AUM. Our AUM currently stands at $76.9 billion, $4 billion greater than where we ended the quarter due to market appreciation and inflows. Inflows in October are approaching $1 billion or $3.7 billion year-to-date. Next slide, please. Before discussing our financial results, I'm bringing to your attention immaterial revisions that have been made to previously reported advisory fees and fund management expenses to align with our current presentation. These revisions were made by us voluntarily to retain an apples-to-apples comparison of our revenue and gross margin trends. These line items have been reduced by equal and offsetting amounts and represent the netting of expense reimbursements collected on behalf of a third party, which had been recorded gross in our income statement. We have also revised previously reported gross margin percentages, operating income margins and our fee capture for this change. There is no impact to previously reported net income. The information shown to the right summarizes these changes as it relates to last quarter's results. We have included in the appendix a slide showing the impact on prior quarter and annual periods. Next slide. Revenues were $78 million, an increase of 3% from the prior quarter due to higher average AUM and a slightly higher fee rate. Adjusted net income was $16.3 million or $0.10 a share, unchanged from the prior quarter. This quarter, we recognized an impairment charge of $16 million in connection with the termination of our New York office leads as well as a noncash after-tax gain of $1.7 million for our future gold commitment payments and $500,000 in other net nonoperating losses. Next slide. Our operating income margin was 31%, and our gross margin was 80.6% for the quarter, largely unchanged from the prior quarter. The chart to the left demonstrates the operating leverage of our business model as we've seen meaningful margin expansion as our average AUM levels have grown over time. Our gross margin guidance requires an update due to the previously mentioned accounting change that impacted our advisory fee and fund management lines in our income statement. Gross margin for the fourth quarter is expected to follow within a range of 80% to 81%. We typically incur rebalancing costs in the fourth quarter and, therefore, anticipate our gross margin falling toward the lower end of this range. Next slide, please. Our operating expenses were up 3.5% for the quarter due to higher incentive compensation and fund costs. Compensation expense was $22 million during the quarter, and our discretionary spending was $10.6 million. We are updating our expense guidance with additional details shown in the next slide. Next slide, please. Compensation levels are determined based upon a variety of factors, including our operating performance and net flows. Year-to-date, we have generated revenue growth of 22% versus the comparable prior year period. Our operating income has grown 58% and our operating margins have expanded from 23% to just shy of 30%. We have also generated about $3.7 billion of organic inflows through today. This performance has us increasing our full year compensation guidance from $85 million to between $88 million and $89 million. As you can see in the chart on the left, our compensation to revenue ratio is 29%, essentially unchanged from our actual ratio in the prior year. This updated guidance assumes steady state market conditions, and any meaningful changes, whether up or down could have an impact on our year-end compensation levels. We are taking our discretionary spending guidance down from $49 million to between $44 million and $45 million. The savings are largely from lower sales expenses due to the persistence of the pandemic, but also include marketing and other discretionary items. We are also realizing occupancy and depreciation savings from the recent termination of our New York office lease. This reduction in guidance more closely aligns our anticipated fourth quarter spend with the prior quarters and should not have an impact on our organic growth. Third-party distribution expenses are projecting higher than our original guidance as the performance of our Latin American platform has exceeded expectations. We are now anticipating the spend to be about $7.5 million for the year. The changes in guidance within compensation, discretionary spending and third-party distribution largely offset with no net meaningful change in our overall expense level. We are also anticipating an uptick in our fourth quarter tax rate to 22%, due to a change in mix of the earnings contribution of our U.S. and European businesses. And as a final reminder, our gross margin guidance for the fourth quarter is being updated, ranging from 80% to 81% due to the previously mentioned accounting change that impacted our advisory fee and fund management lines in our income statement. That's all I have. I will now turn the call over to Jono.

Thank you, Bryan. As Jarrett and Bryan each outlined, WisdomTree had another strong quarter. I am pleased with the success that the firm is having regarding flows, as we look to extend our streak of inflows through the fourth quarter and into 2022. The 6.5% of organic growth of inflows reflects a significant upward change from recent prior years, but I see further upside as recent model wins ramp up and we continue to win new model mandates. That's in addition to potential flow acceleration into high-demand ETFs like carbon, thematic and efficient core. On the operational side, we've executed very well this year and are really leaning into the Remote- First business model with our New York lease termination back in September. We found that Remote-First has significantly widened the pool of employee candidates, and I'm very bullish on the talent we've been bringing on. Our strong execution year-to-date has generated nearly 700 basis points of operating margin expansion versus last year. However, I'd note that our expense guidance for 2021 also includes roughly $4 million of costs related to our digital asset initiatives. So our core business is actually more profitable than the reported results. At the same time, that digital asset spend has already unlocked new revenue streams. We were already generating $4 million run rate revenue from crypto ETPs in Europe. In the U.S., we see a big opportunity for advisers to give their clients crypto exposure through models and separate accounts. And finally, we remain bullish on future opportunities around asset tokenization and our wallet initiatives. The key takeaway of this quarter and really the past several quarters is that unlike years past, our success today is being driven by the breadth and depth of our product lineup. As I said, we are executing well and we are investing in both today's growth as well as tomorrow's. I'm very excited about where WisdomTree is headed. Now before moving into the analyst Q&A, we're going to try something new this quarter. In the past, we've engaged with our individual shareholders in a more informal manner, and we found smart people who are strategic and long term in their thinking. These individual investors are very important to us at WisdomTree as they are not only shareholders, but in many cases, they're also WisdomTree clients. This quarter, we contract with Say Technologies cofounded by WisdomTree [indiscernible] Zach Hascoe to better engage with our individual shareholders. So operator, if you could please turn the call over to our new Head of Investor Relations, Jeremy Campbell, we will answer a few questions from our shareholders before opening up the call to our sell-side analysts. Thank you.

I'd now like to turn the call over to Jeremy Campbell, Head of Investor Relations for questions from the Say platform.

Thank you, Liz, and good morning, everybody. We're going to be doing the Say platform next quarter. So for all you individual shareholders we're sitting in today. We invite you to participate next quarter. We're going to take 1 question from our shareholders right now, and then we're going to do a couple of analyst questions and then back to a shareholder question and then open it up to the remaining analyst questions in the queue. So Jono, question number one, how do you see the Bitcoin ETF race playing out? Can you share more about how WisdomTree is investing to benefit from the growth of the cryptocurrency space?

Thanks, Jeremy. And so good question. Really, it's a 2-part question. So how do we see the bitcoin ETF marketplace playing out. When we approach new products, our philosophy is launching the best structures. The best structures lead to the best experiences. We felt and we feel today strongly that 100% Bitcoin futures is not the best execution. Simply the possibility really the likelihood of Contango which could meaningfully hurt returns is why we chose to go with a physical filing for Bitcoin. And I'm very confident that physical will come to the market. I expect that it will play a big role in clients' portfolios for those that are looking for bitcoin exposure. And WisdomTree will play a big role within the physical market, I'm highly confident. WisdomTree's a lot of experience in crypto in physically owning the underlying with our Bitcoin and Ethereum launches over the last couple of years. Before I transition though to the second part of the question, I will say on a positive, I think that the success that you saw in the U.S. market will be a catalyst for faster institutional and wealth management adoption in Europe as the institutional market can really see that U.S. participation put in a [ floor ] and really was a catalyst for higher prices of Bitcoin. But transitioning to the second part of the question, which is how are we investing to benefit from the crypto space. The investment started about 3 years ago in Europe when we were preparing to launch our first Bitcoin ETP and the knowledge that we gained from that was just extraordinary. And the nice thing is we've already started to recoup or get like $4.5 million of run rate revenue against our crypto exposures. But as Jarrett said earlier on the call, we spoke about the baskets we have further development of crypto ETPs in Europe. We're going to be launching basket products, I think, before the end of the year. We're very excited about that. Also, we were in the U.S., the first ETF to get bitcoin futures into the ETF with our broad-based commodity fund GCC. Unfortunately, the SEC only gave us a 1-day lead over full Bitcoin, but still part of the investment that we're making. We also talked about on the call and really prior calls, our investment in partnership with OnRamp, the workflow company for RIAs to incorporate crypto into their book of business. And I actually think in the U.S. market because of the difficulty of the regulators, the SMA may be a preferred vehicle for the financial intermediary to access crypto. So we're very pleased with what we're doing there. And in fact, as you heard earlier, we had our first win with Federal Life. And then I guess lastly, in terms of investments, in my portion of the script, I discussed that in the guidance that we gave for discretionary spending, it included $4 million for our digital asset initiatives. So in addition to product that includes dollars for the development of our wallet application and our tokenized gold and treasury exposure. So which should all be coming out early next year. So really, I think these investments position WisdomTree very well for crypto and DeFi going forward.

Great. Liz, if we can take some analyst questions.

Our first question comes from Robert Lee with KBW.

This is Margo filling in for Rob. So my first question is on the crypto model with OnRamp and Gemini. I was hoping that you could talk about the construction of these models and also sort of what the relationship is with OnRamp and Gemini? And then secondarily, if you could elaborate on the economics of this relationship. Is it based on assets or a flat rate? Any color that you could provide there?

So this is Jeremy Schwartz. Our Global Head of Research and I've been working very closely with the OnRamp team on some of these efforts. The exciting part about OnRamp, so there's a few different components. So OnRamp is helping enable the direct access to crypto through their platform. We have -- we launched and announced that we have a plus crypto model portfolio series for advisors and they can come and see those sort of prebuilt models on our model adoption center, the MAC, the plus crypto models are there. You could see what's in them if you're a financial adviser. And there's sort of 3 components of those models. There's a traditional 60-40 that adds 5% to Bitcoin. There's an 80-20 that adds 5% Bitcoin. And then there's what we call a disruptive growth model that has some thematics and Bitcoin and Ether. The Fed life announcement actually did a customized model. A lot of the model relations we have do want to sort of -- they look at -- you're off the show and then they want to tweak it for their specific use case. And we have really 2 models for Fed Life, one that is the crypto focus and one that is a traditional equity bond allocation, and there will be more to come from that Fed Life relationship. But for us, it's really just the ETF business. We have ETF as part of the model, and we will benefit from the flows to the ETF there. For top of that traditional ETF models, there will be other opportunities with OnRamp. We have invested in OnRamp in their very early stage financing. And so we have a participation in the company, and we look to do more there. But there is a -- there could be some other opportunities for revenue in the future as well. But right now, it's a traditional ETF relationship.

Yes. And just adding 1 other thing. I mean, Federal Life is our first real win, and it's early in the relationship with OnRamp and we expect more wins to come in the coming quarters.

Great. If I could ask 1 more on your managed model portfolios. I know you talked about Merrill Lynch and Morgan Stanley as well as some anticipated wins in the near future. Could you talk about any other distributors that are currently offering the portfolios? And then also elaborate on the nature of these distribution relationships, maybe in your experience so far, how they tend to ramp and the time line for that?

Yes. This is Jarrett Lilien, and I might take part of that to start. Right now, we've disclosed Merrill last year, Morgan Stanley this year. Really, the names that we disclosed, we have to do in conjunction with our models partners. So I'm not looking to disclose other names right now. But in talking about the ramp-up, I guess, there are 2 really important points to make here. First, the type of sales and then the ramp-up. But let me actually start with the type of model sales that there are. First of all, there is what we do, where we work with advisors and we'll come up with -- help them develop a custom model. We're doing that with several advisors today and again, more in the pipeline. We also build our own models, and we then get those on with partnerships on the third-party model platforms, and that's like what we've done with Merrill and Morgan Stanley. That is what I referred to in my prepared remarks about that being 10% of our flows this year coming from those type of partnerships. But there's also another kind of model sale, and that's something we do every day as well, which is winning positions in existing advisor or home office models. And that's actually substantially more AUM that comes in through models into WisdomTree. In terms of ramping up, on the first 2 categories I talked about, customizing with an advisor or getting on to a wirehouse platform on their third-party model platform, there are 2 real successes that you have to have there. One is just the home office win, getting that partnership in place, developing the model and getting it on to the platform. And that's sort of victory #1, but that on day 1 doesn't really get you any AUM. Then what you need to do is work with your partner and then work with all of the advisors on that platform to get them up to speed in the model and get them to be users of the model. And that is what we're starting to see now is that early traction and it's growing traction. So it's significant. It's meaningful now to our flows, but we are gaining more traction. We expect it to ramp further and we expect it to be a more significant contributor going forward.

Our next question comes from Brennan Hawken with UBS.

Jono, you spoke -- you were seeing about the Bitcoin ETF developments in that market in the answer to the first question. I wanted to just maybe follow up a little bit about that. Avoiding Cantango with derivatives certainly is logical. But are there any other markets that you could use as an illustration, either for us or when you're speaking to regulators where you see physical ETFs that might not necessarily purely be on exchange, but are still used in ETFs, and therefore, there's a precedent for the physical market and maybe even use cases where conference Cantango can cause problems with derivative-oriented ETFs.

We're -- we think -- and I apologize, I had a little trouble hearing. We have Bitcoin in our broad commodity fund. And there, we have the ability to toggle up and down exposures and so you can manage Contango. We've -- it's been reported that we'll be adding it into our managed futures. And then you're -- obviously, you saw that we're dealing with the models and the separate accounts. So there is a lot of effort to bring with very difficult exposures to the broader market in a compliant way, a tremendous amount of education to the intermediary market, a little distinction. When you're dealing with retail with Bitcoin, there's a fanaticism to it. They're just completely committed. Those that are argumented just see it as something that's going to [ $50,000 ] -- $500,000 a coin and they just know it in their heart. On the institutional side, more of just an asset allocation for them 1% to 3% to put it into a broad asset allocation. So I may have missed a little bit of your -- the nuance of your question. If I missed something, could you just repeat it.

Yes, sure. Sorry if the phone line broke up a little bit. Yes. So what I was curious about was whether or not there is a good use case or a case study where you could point to other markets, where there are derivatives ETFs versus physical ETFs and Contango actually creates adverse outcomes in those when you're explaining the virtues of "physical".

I mean, the most obvious would be U.S. [ oil ] market, it had proven to be a very disappointing construction for the market. So it just depends if you can have physical, we think physical is better and that -- and in certain cases, like, let's say, gold you could have gold futures, but most gold investors actually want the physical. So the -- we have plenty of examples. It's not hard to educate the market. Certainly, and intermediaries are very sophisticated and they understand. I am pretty confident that the full Bitcoin exposures at a future base will have a tough time accessing the platforms. Jeremy Schwartz, would you like to add more detail to that?

I mean I think the only thing I would just reemphasize, and we're already doing call Bitcoin and Ether in Europe and our team in Europe has a broad expertise on commodities, both with physical and futures, and we think there's opportunity to continue to innovate in commodities with physical, which we're doing in Europe and continue to do -- have some more interesting opportunities going into the end of the year on physical commodities. But this is a well-known issue. It's also why we have -- we talked about GCC sort of this enhanced growing process. Europe also has an enhanced role broad commodity fund. It's sort of well-known this issue. And so I think we are taking the steps to address both with physical and with this better rolling process in Europe and the U.S. And we think eventually, as Jono has said, the regulators will come to see that view.

And are the regulators -- I'm sure market participants are receptive to these nuanced divergences and the data? Are you finding so far that the regulators are as well? Or are they a little bit have they been more rigid in their approach to this?

We have very good relationships with the regulators. They've -- they had some concerns. We're addressing their concerns. It's hard to see how they will allow for; a less good user experience be the only way to access this. Since the funds, the full Bitcoin future funds have launched, you're starting to see in the press that they're getting up to their contract limits. And so you're actually seeing that the Contango is real, and it's going to grow over time as you're forced to go past the 1-month contract. So again, we have a tremendous amount of confidence that it will come to market and that we will be first with the physical and that physical will play a big role in the future.

I'd like to turn the call back to Jeremy Campbell for some more Say questions.

Thanks, Liz. So Say question number 2 from our shareholder base is Jono, what do you see as the biggest growth for drivers for WisdomTree as we look into 2022?

So first of all, you could tell from the tone of the call, we have a lot of momentum in the business. So the core business is growing very, very strongly. I'm very excited about the 13% organic growth in the U.S. We haven't seen numbers like that in quite some time. And what we said earlier is we're doing without any hot funds, and so we see that there could even be further upside to those numbers. When you look under the hood of Europe's flows, though they're slightly negative for the year. Our UCITS suite in Europe had organic growth year-to-date of 90%, taking in $1.25 billion of flows. So I feel very strongly that our UCITS suite is going to continue to grow very, very quickly. And I guess when we talk about like hot funds, how our funds tied to market sentiment, there is really a sense of growing inflation expectations. And our global franchise around crypto, gold and broad commodities positions us very well for heightened inflation expectations, which could lead to faster all-in growth than the 6.5% organic growth that we're showing. So I'm very bullish on the core. But if you really -- if I'm pushed what has me most excited for 2022, we've spoken about it in the past, and I'm anxious for time to pass that we can do it. We're launching native to the blockchain, our wallet application plus tokenized assets like gold and treasuries. I would say that it's beyond excitement for just 2022. This may be the most excited I've ever been at WisdomTree, and this includes the hay days of DXJ and hedge, being an early pioneer and something is game-changing as blockchain enabled financial services. For WisdomTree, this is the beginning of a global consumer-centric responsible DeFi business. So I think that is where my greatest excitement is, and I'm looking forward to giving you more details next quarter and next year.

Great. Liz, let's take some more analyst questions.

Our next question comes from Michael Cyprys with Morgan Stanley.

I apologize if you already hit this, I hopped on late. But I just wanted to just talk a little bit about the tokenized treasury and gold products that I believe you were starting -- you had filed already with the SEC and we're looking to launch. Maybe you could just give us an update on some of the initiatives there? And remind us like how those products work and how you see the overall ecosystem evolving if you see any other folks out there looking to do something similar?

So I have to -- you can only say so much of -- but we filed the treasuries, which is really getting the '40 Act on to the blockchain native. So when you think about why do investors or retail, why are they so excited about crypto when they like the exposure, but there's an ease with which you can move around the globe. Gold tokens have the ability to really go global. So right now, we have a gold business, which is local in Europe. We have -- I've said in the past that when you put gold properly onto the blockchain, we have an opportunity with the wallet to turn gold into currency, use gold to pay for things. So save in gold, invest in gold, transaction gold. We're trying to offer this ecosystem of digital assets or this ecosystem of this DeFi world more choice so that way you can stay in this ecosystem and make -- get interest instead of just playing crypto. So we see that there'll be a big evolution. We're starting with sort of the foundational exposures of gold and treasuries, but we're going to be -- we want to be a big player in this. And so I think really, if I'm looking -- ETFs are 30 years -- almost 30 years old now. I think the next 30 years, you're going to be talking about regulated tokens. It's going to prove to be the new wrapper. And we want to be really sort of first through the door. So at the moment, that's all I can say, except that we're making progress on all of these initiatives and looking forward to actually launching them next year.

Great. And maybe just a follow-up question on the thematics and ETF products. Maybe you could just give us a little bit of an update on some of the traction you're seeing there and what the pipeline looks like for bringing new products to the marketplace in those certain categories?

Jeremy, do you mind taking the conversation onto [indiscernible], so you do have to be a little careful about talking about future products.

Of course. So thanks, Jono, and for the question. As Jono has said that the exciting growth -- organic growth rate out of Europe, the 90% growth rate. A lot of that is coming from the growth in thematics and you look at -- this really wasn't something we really had as a franchise 3 or 4 years ago. I mean it's really been exceeding the last few years. One of the sort of blockbusters for us has been our cloud computing WCLD in the U.S. We launched it September 2019 with NASDAQ and Bessemer Venture Partners, but best more being the premier cloud computing venture firm. That fund has grown to $2 billion globally between the U.S. and Europe. In Europe, they've had a lot of success with artificial intelligence, a battery value chain type strategy, sort of ESG efforts in Europe have been very strong, and that's where you saw sort of carbon. Recently is, in some ways, the spirit of a thematic, but commodity-focused thematic. And I think we're going to continue to do more, and we're trying to do things globally. So we're going to learn from Europe and do more things like that in the U.S. as well, where we don't have the exposures they have. But yes, I think this is one of the -- as you think about the transition of how people use ETFs, sectors are a big category that the thematics are a way to do sectors in a more interesting way. You've seen that with cloud, and we did cybersecurity together this year. That's been one of our faster ramp-ups. Both have had good first year success a little bit under $100 million in the combined U.S. and global cybersecurity. We did a bio-revolution fund WDNA in the U.S., that's early, but we think it's got a unique value proposition -- So yes, we're excited to do a lot more in the thematic space.

And I'll just add that. This is really, for the U.S. business and for Europe, this is really diversifying for us. It really gets us into the grossy area of equities, which is something that we've been trying to do more of over the last few years. I'm sorry, you had an add-on question.

Yes. Sorry to cut you up there. I was just going to ask on a separate topic, if I could squeeze in 1 more, just around the crypto European ETF products, you guys were a little early on that. I was just curious if you had any sort of update on some of the distribution initiatives. I know the AUM and flows there have been a little more lackluster. So as you look to bring to the U.S., any sort of lessons learned from your experience in Europe as you think about bringing this product over to the U.S.

So the regulators with crypto are sort of a mixed bag. So we're talking about doing baskets. So that's a positive, meaning how hard it is to get Bitcoin launched in the U.S. So when will they get -- let you do Ether or others. So it's very, very challenging. But I think the -- so there's a positive from the regulator standpoint. The market for crypto though really tends to be to date, almost exclusively retail. And so there is a big advantage to the U.S. market where you have a much bigger direct-to-retail set of channels. Or is our products in Europe are -- our products in Europe have to go more through sort of institutional and wealth management channels and there's an educational process. And again, for the institutional market, it's not the same set of passion. It's more about education, learning about the merits of crypto as an asset class and then getting an entry point. And then for them, it's just a 1% to 3% allocation. But I could only say that the engagement of the institutional market has been very strong and heightened since the U.S. launches. And so I'm hoping to see faster growth in Europe.

Our next question comes from Keith Housum with Northcoast.

Great job on the quarter. In terms of like the overall market share for WisdomTree, perhaps, Jono, you can give a little bit of color in terms of how is WisdomTree doing in terms of it's compared to the verticals in which it plays in the ETF markets that compared to the competitors?

Jeremy, you want to start? It's really.

The -- one of the families, we've been talking about thematics and that's a growing share of business. We talked about models, which is one of the ways we think we can get broader, more than diversifying the business, we talked about the breadth and depth of the flows this year. The model effort that was in [indiscernible] model effort is one of the ways we're getting broader allocations and helping grow share. I think one of families and Jarrett talked about this in his remarks. But I think one of the places we have a huge opportunity, perhaps one of our biggest opportunities is our efficient core family with NTSX, and we've expanded that. We started the year at $400 million in NTSX and now have $800 million in the family, sort of doubling, and that is competing for unique core beta and one of our -- I think our biggest opportunity sets there and can ramp significantly from that. And so I think we're, in some ways, going after these bigger categories with market sharing and trying to diversify the flows with the managed models. Jarrett, do you have any additional things to say there?

Yes. The only thing I'd add is market share is something that we look at very closely because there's our absolute performance, which we're thrilled with. I mean it's been actually a building momentum for a couple of years now that I don't think is entirely recognized. So we're very happy with the absolute growth. But of course, we also look at market share, and that's it's very nuanced in how you look at it, but you have to look at where we play. So for instance, in our product development sort of approach, we're not thinking about being a me-too low-fee beta shop. We're looking for more innovative, differentiated products. And I think we're doing a great job. We've launched, as we said earlier, 14 really solid products this year, more to come. That's even a change from the last couple of years. But in the market share where we play and where we compete, we're doing extremely well.

Great. As a follow-up there. In terms of the discretionary costs, obviously lower than we expected this quarter. It sounds like that's going to be the same for next quarter. I guess, is that sustainable as we look out to 2022 that we have a new level of discretionary cost mix?

This is Bryan. I think we should just table any discussions on 2022 until next quarter. We'll have a wholesome update for you at that point.

Our next question comes from Robert Lee with KBW.

This is Margo again. I actually also have a question on expenses. But I guess, -- If you could provide any color on how we just might think about kind of expense growth moving forward overall? And then I know you had talked about some remote savings. Do you expect that you might be able to retain these? Or might they be offset by increased marketing expenses going forward?

Bryan?

So again, I'm -- yes, I'm on -- yes, sorry, I wasn't sure if I was on unmute. Remote- First, savings, we should be able to retain those. We had disclosed that the total savings -- when we disclosed the total savings, we were benchmarking that against full year 2020. It's just easier to quantify that way. But if you look at our Remote- First savings specifically with respect to occupancy, our space, our lease depreciation, fixed assets and leasehold improvements and that kind of stuff, we anticipate that, that spend is about $3.5 million less than what those line items were in 2020. And when we provide that guidance, we're taking into consideration the fact that we do anticipate getting into new space in New York albeit at a much smaller footprint. But that's what we would anticipate with respect to Remote- First. And then Margo, I'm sorry, I forgot the first part of your question, if you could just repeat that again?

I was just asking about 2022 expenses, but I will ask another quarter.

Our next question comes from Ryan Bailey with Goldman Sachs. .

Jono, I'm sorry for what might perhaps be a simple question here, and please correct me if my history is wrong, but I think WisdomTree has always been a business that's evolved. You've heard from being an index [ creator ] to a pioneer in the ETF space, in particular, smart beta. So my question is, are we at a customer that sort of the next evolution of the business? And if we were to roll forward, say, 5 years, is WisdomTree going to be a DeFi business that has ETFs? Or an ETF business that's pioneering DeFi? Or is that just completely the wrong characterization?

Thanks for the question. So WisdomTree really has been a business that has evolved that started as a financial media company, individual investor, transitioned to ETFs when I saw how transformative they were for the investing process. The -- I would say that I'm sort of personally all in on DeFi. I say that because I believe it's going to meaningfully change the user experience for the positive; and from a business standpoint, transform the economics of financial services. So I believe that over the next 5 years, we will be recognized as a DeFi business that has an ETF business, or said a different way. We're in the business of transparent exposures, whether we're doing it in regulated tokens or through ETFs. I think they'll prove to be quite complementary. Now we're 30 years into ETFs in the mutual fund industry, mutual funds are still very, very strong. I'm very bullish on ETFs. But when I think about where WisdomTree sort of stacks in the competitive set that we were somewhat early in ETFs, we were 13 years after Stage 7 years after iShares. Here, we sort of have a chance to be first through the door with this new wrapper. So I think I really see a massive opportunity. I think that's what we'll be defined as over time, a DeFi company.

Got it. And so just to sort of make sure I'm thinking about this right. By having a well-established and scaled ETF business at the moment, you kind of have the mechanism or at least the platform based in order to stop pioneering DeFi?

So one, they're very complementary. One of the things that got us so excited about this sort of next journey was how well our core business mapped to the future. So there's -- we said that we're spending in this year, $4 million on digital assets. We're taking -- trying to be as efficient as possible going to some of the margin questions. We're really asking a number of people to sort of where has -- we're transitioning to building a pure digital asset team, and we probably have maybe 8 or 9 people in that space now. It's very, very helpful. The expertise that we have as the third largest gold manager in the world makes what we're going to do on gold tokens work, the same for treasuries. And one of the things that DeFi needs, and really we're pitching this as responsible DeFi, which means regulated DeFi. The market needs to get things through regulators. And really, it is one of our strengths. We -- I think the regulators are viewing WisdomTree in this new world as a trusted solutions provider. And so really trying to work out the issues because obviously, the standards can't be different in a digital asset world. You need to be -- maintain the foundational principles of regulation of know your customer and no anti-money laundering, disclosures and all of those things that make financial services trustworthy has to come over to the new world order of distributed ledger tech. And so we think we could be sort of that bridge brand that could pull this off.

I am showing no further questions in queue at this time. I'd like to turn the call back to Jonathan Steinberg for closing remarks.

I just wanted to thank everybody for your interest and participation on the call. We look forward to speaking to you next quarter. Have a great day, everybody, and a great weekend. Bye-bye. .

This concludes today's conference call. Thank you for participating. You may now disconnect.