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Takeaway: Our February data continues to show share losses for WisdomTree in both hedged and unhedged international ETFs.

Editor's Note: Below is a brief excerpt from a recent research note written by Hedgeye Financials analyst Jonathan Casteleyn. For more information on our institutional research email sales@hedgeye.com.

We Maintain Our Short Call on WisdomTree  - zc

WisdomTree's (WETF) two main currency hedged ETFs, which comprise 31% of the firm's assets-under-management, continue to lose funds and market share to plain vanilla unhedged funds at BlackRock (BLK) and also to competing currency hedged products in the month of February.

Both the WisdomTree Hedged Japan ETF (the DXJ), and the WisdomTree Hedged Europe product (the HEDJ) have seen accelerating outflows since our last update, with the delta in Japan between the DXJ and the unhedged BlackRock EWJ, the biggest in our data set. WisdomTree's DXJ has now bled out more than -$1.7 billion for the running 1Q18 quarter (through February 27th) compared to the +$3.1 billion inflow for the unhedged BlackRock product. This $4.8 billion delta between the two products, is the biggest quarterly differential in our data set going back to 1Q13, signifying a quickening of the pace of share losses to products which do not hedge foreign currency appreciation.

In Europe, the situation is not as dire, but WisdomTree's HEDJ has shed -$772 million thus far quarter-to-date compared to the +$746 million in new AUM gains at BlackRock's EZU. This $1.5 billion delta is at the mean for the market share shift which has taken place since the start of 2016.

Within hedged products, Japanese share continues at the same levels as January with WisdomTree still taking the vast majority or 74.9% of all AUM. Competitors BlackRock and Deutsche Bank held share steady at 11.0% and 14.2% respectively throughout February. Within Europe however, WETF lost another 200 bps of market share to BlackRock with BLK setting a new high in hedged European ETF AUM at 23% of the market.

In aggregate, trends continue to be troubling in our view with the market allocating to ETFs that don't currency hedge in the important Japanese and European geographies and the firm continuing to lose share on the margin within apples-to-apples hedged products (in Europe).

Our data feeds have pulled information through February 27th and outline the biggest differential in flows between hedged (WETF) and unhedged Japanese ETFs (BLK). Total AUM share of the WETF product compared to the unhedged BLK fund is down to just 33%.

We Maintain Our Short Call on WisdomTree  - z1

We Maintain Our Short Call on WisdomTree  - z2