WisdomTree Inc (WT) Q2 2025 Earnings Call Highlights: Strategic Acquisition and Record AUM ...
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
WisdomTree Inc (NYSE:WT) announced the acquisition of Ceres Partners, a leading US farmland investment manager, which is expected to accelerate revenue growth and expand margins.
The acquisition is expected to raise at least $750 million into farmland-focused strategies by 2030, potentially doubling the current base and performance fee revenues.
WisdomTree Inc (NYSE:WT) reported record AUM of $126 billion as of June 30th, driven by strong inflows across regions and asset classes.
The company's European Defense Fund has attracted significant inflows, contributing to organic growth at an annualized rate of 12%.
WisdomTree Inc (NYSE:WT) is seeing meaningful traction in digital assets, with AUM in digital assets more than doubling since last quarter, reaching $500 million.
Negative Points
The acquisition of Ceres Partners involves a significant upfront cash payment of $275 million and a potential earnout of up to $225 million, contingent on achieving revenue growth targets.
Foreign exchange headwinds could adversely impact discretionary expense guidance by approximately $3 million if current exchange rates hold.
The performance fees from Ceres Partners are largely driven by the mark-to-market of the farmland portfolio, which may fluctuate depending on market conditions.
There are concerns about the predictability and consistency of performance fees, which are not episodic and depend on the net profits of the fund.
The integration of Ceres Partners involves managing a portfolio of 540 properties, which requires annual appraisals and could involve additional operational complexities.
Q & A Highlights
Warning! GuruFocus has detected 6 Warning Signs with CPT.
Q: Can you explain the fund structure and fundraising plans for the acquisition of Ceres Partners? A: Jeremy Schwartz, Head of Global Research, explained that Ceres operates an evergreen fund structure, which is designed to be a long-term partner for farmers, unlike traditional drawdown funds. This structure aligns well with WisdomTree's client base, which includes institutions, RIAs, and advisors, and will benefit from WisdomTree's strong distribution capabilities.
Q: How durable and predictable are the performance fees from Ceres Partners? A: Brian, CFO, clarified that performance fees are largely driven by the mark-to-market valuation of the farmland portfolio. The fund's properties generate steady rental income, and historically, farmland has appreciated at about 6% annually. Performance fees are based on net profits and are not dependent on asset realizations, offering a consistent revenue stream.
Q: Why not add farmland to your model portfolios given the competitive opportunities? A: Jonathan Steinberg, CEO, indicated that WisdomTree is considering adding farmland allocations to their model portfolios and selected ETFs. The farmland asset class is highly attractive and underappreciated, with minimal competition from major asset managers, presenting a significant growth opportunity.
Q: What are the expectations for the model's business for the rest of the year? A: Jarrett Lilien, President and COO, stated that the focus is on expanding user engagement with existing models and acquiring new users. The company is on track with its goals and aims to continue this momentum through consistent execution.
Q: How do you plan to accelerate the growth of Ceres Partners, and what is the profitability outlook for management and performance fees? A: Jonathan Steinberg, CEO, mentioned that WisdomTree's distribution capabilities will help broaden Ceres's reach to financial intermediaries and high-net-worth clients. Brian, CFO, added that management fee revenues are expected to double by 2030, with performance fees growing 1.5 to 2 times, driven by historical farmland appreciation rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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