Good day, ladies and gentlemen. Welcome to the WisdomTree Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to introduce your first speaker for today, Jason Weyeneth, WisdomTree Director of Investor Relations. You have the floor, sir.

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, which are generally identified by terms, such as believe, expect, anticipate and similar expressions suggesting future outcomes or events. Forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date when made. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may prove to be incorrect. Such statements should not be read as guarantees of future results and will not necessarily be accurate indications of whether or not or at times at or by which results will be achieved. 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 company's annual report on Form 10-K for the year ended December 31, 2015, and quarterly report Form 10-Q for the quarter ended June 30, 2016. Now it's my pleasure to turn the call over to WisdomTree's CFO, Amit Muni.

Thank you, Jason, and good morning, everyone. Since most of the information for the quarter is already known, I'm going to spend a few minutes discussing our key accomplishments in 2016 and then turn to our thoughts for 2017 before handing the call over to Jono for some closing remarks and then taking questions. Many of the slides we typically present each quarter are included in the appendix in today's presentation. So let's begin. 2016 can be summarized as one with obvious challenges, but it's important not to let the macro market sentiment-driven challenges overshadow our significant developments in 2016. We had a record year for our U.S. Equity product suite, taking in $1.9 billion of net inflows. We further diversified our product set with the launch of 12 new ETFs, including the industry's first smart-beta corporate bond suite, the first dynamic currency-hedged products and our innovative S&P 500 PutWrite strategy. Out of the 245 U.S. listed ETFs launched in 2016, our Dynamic Currency Hedged International Equity Fund, DDWM, was the industry's most successful new fund launch as measured by assets under management. Remember that usually the best flows don't come in the year the fund is launched. As such, we are expecting the 52 ETFs we've launched since 2013 will be important contributors to our future growth. We expanded our distribution team and went deeper and broader into client channels. On the institutional side, we added depth and experience in consultant relations and retirement solutions. We are leveraging the expertise in these key areas to launch collective investment trusts to the retirement market. We also expanded into the private wealth and independent broker-dealer channels as ETFs continued to grow in these areas. We made an investment in AdvisorEngine to deepen relationships with advisers and participate in the digitization of…

Thank you, Amit. Good morning, everyone. As you know, 2016 was an incredibly challenging year for WisdomTree. In many respects, it reminded me of 2008. The negative macro sentiment towards our largest exposures overshadowed our efforts. As the slide on Page 12 shows, Europe and Japan were by far the 2 most out-of-favor categories, followed by Morningstar. I think it's striking to see that out of the 96 categories followed, Japan and Europe ranked 95th and 96th from a flow perspective. You can see the industry outflows of those 2 markets created this incredible headwind that caused outflows for WisdomTree. Like 2008, WisdomTree stayed the course. We have very strong convictions on the future direction of the asset management industry, so we know how incredibly well positioned we are within the global asset management space, making staying the course easy, or at least easier. Post U.S. elections, our flows flexed positively, and we ended the quarter with positive inflows, which continue into 2017. Macro headwinds seemed to be shifting to tailwinds, setting the stage for a significantly better 2017. I believe it's important not to let the macro market-driven sentiment challenges during the year completely overshadow some of the accomplishments, as Amit has already mentioned, as well as a couple of developments I would like to discuss. In 2016, our U.S. Equity franchise had its most successful year ever, generating inflows of $1.9 billion, bringing our AUM in the category to $12 billion. Our inflows for the year represented a 22% annualized organic growth rate, which is significantly faster than the ETF industry's U.S. equity growth rate. U.S. Equity ETFs are the most crowded and competitive segment of the global ETF market, making these flow numbers even more significant. Given our strong relative performance across the fund suite, we believe…

[Operator Instructions] Our first question comes from the line of Craig Siegenthaler from Credit Suisse.

First one here on fees. While it makes sense that your newer product launches are coming in at lower fees, are you seeing a pickup in fee pressure in any of your established categories? And are there any segments where you think a reduction in pricing could actually increase inflows?

So this is Jono. Thank you, Craig. Really the products that we launched have been holding up incredibly well from a fee standpoint. As an example, what we discussed about the U.S. Equity inflows, many of those funds were priced 10, almost 11, years ago and the flows have been the strongest that they've ever been. So I would say that we look at our funds on an individual basis, make sure that they are competitive within their categories. But because of their differentiation and their performance, we feel very strong about the pricing to date. And again just to remind everybody, we were created for this kind of a dynamic from the very, very beginning, again, making us probably the best positioned to deal with the fee compressions on nonexclusive indexing.

Got it. And then I have a follow-up here on fixed income. I would've thought the last few months would have been a pretty good setup for your rising rate bond suite. And I know there's been some small creation, especially in HYZD, and I think you've got a pickup in overall volume too, which is a good signal, but are you a little surprised that you haven't had lumpier, chunkier creations across the rising rate fixed-income suite?

So whenever we launch funds, so this particular suite, Amit mentioned the 52 funds going back to 2013. So the Zero- or Negative-Duration Bond funds for the interest rate hedge suite was launched at that in 2013. We were way early, very hard to establish traction up until just recently. So no, I'm not surprised. We were taking smaller funds and growing them. We are very encouraged by market sentiment by the increased volumes, by how well these funds are performing. They are doing exactly what we anticipated they would do in a rising rate environment. We are seeing a real pickup, particularly, as you mentioned, in High Yield Zero. We are certainly promoting them with research and marketing and have certainly laid the educational groundwork for significantly faster growth if rates should continue to be strong. So we're very positive on this suite.

Our next question comes from the line of Surinder Thind from Jefferies.

Just a couple of quick questions here. One, I just would like to talk a little bit about where we are in the investment cycle. In terms of growth initiatives, you guys guided to about $3 million to $4 million this year. That's about 25% of the level that was anticipated for last year. How should we think about that going on, on a going-forward basis, not necessarily for 2017, but kind of where we are more broadly in your investment life cycle as a young firm?

Surinder, it's Amit. Over the last several years, we've made a lot of investments in our business, right, in the people, the products, our technologies, expanding geographically. And we feel that the investments that we've made so far are -- they are done. And now we are really gearing up to capitalize on those investments, drive those investments for further growth going forward and to really get to that operating leverage in our business as we exit 2017 and beyond. So we don't really see needs for major levels of investments going forward. It's about capitalizing and growing.

That's helpful. And then maybe a little bit of an update on the European business or maybe the International Business more broadly. When I kind of look back, I think in your initial estimates of where guidance was in terms of the losses that you guys would be at in terms of getting at 2016, 2017 was kind of roughly in the $6 million to $9 million range. Obviously, going forward, the new guidance is from $9 million to $13 million, but that also includes Canada. Can you walk us through kind of the changes there? And is there somewhat more of a greater investment that we're expecting in Europe? Or has traction been a little bit slower than we originally anticipated at this point?

So, Surinder, obviously, you saw the impairment charge that we took this quarter. So obviously, there is some differences between the actual results and what we had anticipated. And we made some changes in our European business last year, we have a new management team in place. We are already seeing positive results from that, I mentioned, from a flow perspective. So far this year, we've taken more flows into our UCITS funds than we've seen all of last year. We're looking at how we approach the markets, we're looking at our -- looking at how we do our distribution capabilities, looking at our sales and marketing practices. So it's just taking a little bit longer than we had anticipated. But with the new management team in place that we have there, we believe very strongly that we should be able to drive that business to get to profitability in the next 2 to 3 years.

That's helpful. And then just one other final quick question, I'll let my colleagues ask the others. But any update on Japan at this point? And how things are in terms of the operational capabilities there?

So Japan, this is Jono, Surinder. So Japan -- our Japan operations really has 2 functions. One is to sell to the Japanese market our non-Japan exposures to the institutional market, and we've been very productive over the course of the last year. It is a slow-moving market. But as markets have moved favorably from a standpoint of the need for additional income and yen diversification, I think we're well positioned. We've certainly been having some small wins but making real progress. The other efforts from the Japan team is to sell the Japan theme to the rest of the world. And there, we've been very, very pleased with how we have defended our leadership position. As Japan has turned since the election, year-to-date, we've taken 70% of the flows into Japan into the currency-hedged space. And that has been done by our constant reinforcing, our mind share leadership on the Japanese market during the course of 2016. So net-net, it's very, very positive but we are hopeful that there is -- rising interest rates in the U.S. will have a very positive effect on the Japanese market overall.

Our next question comes from the line of Chris Shutler from William Blair.

On the U.S. expense baseline of, I think, $138 million, you're expecting for 2017, I think that's before changes in AUM and incentive comp. On the incentive comp piece, assuming no change in assets and kind of flat flows, I mean, can you give us some sense where we should expect that incentive comp piece to come in? Would it be relatively similar to 2016?

So if you look at the 2016 amounts, obviously, you have to do some annualizations for some hires that we made during the year, so it would be a little bit higher. What we paid in 2016 in a very tough environment, it's probably low levels or minimum levels of what we think compensation should be.

Okay, got it. And then secondly, how are you guys thinking about additional product innovation or product rollouts in 2017?

The way we always have, we're trying to look past just the moment, trying to be first to market, always differentiated, always adding improvement to the exposures. It's sort of what we always do. And there's no change in the way we are approaching this market. But we were very early from a product launch standpoint on the rising rate theme really both in equities, with our quality dividend growth strategies, and in our zero in -- our duration hedged product. So we've really laid the foundation for maybe this market cycle. Last year, we touched on a couple of things, particularly on the liquid alts market. I think you'll see us continue to invest in that nascent category in the ETF structure. But in general, the approach to product development remains unchanged.

Okay, fair enough. And then lastly, guys, on AdvisorEngine. Can you just walk us through in maybe a little more detail how that solution works? And within that, are you mainly partnering with home offices? Or is this more of a sale to individual advisers? I'm wondering how both groups are differentiating among all the different robo or digital solutions, because it seems like all ETF providers now are talking about robos and being a solutions provider.

This is Kurt MacAlpine, global head of distribution. So first on AdvisorEngine, in terms of what makes it different relative to other solutions that exist in the marketplace. So when we undertook the effort to look at how we could participate in technology in a more meaningful way. One of the most important factors for us was finding a partner that was, as Jono had mentioned earlier, had a similar philosophy in terms of how they thought about the world and a similar approach to partnering with their clients. So through this effort, we found that AdvisorEngine was truly the only B2B solution that was designed to partner with a financial intermediary to help them serve clients. If you look at the traditional profile of a robo-adviser, they tend to be a B2C platform, either continuing to focus on the B2C market or a platform that's transformed from a B2C to a B2B. So what does that mean in terms of AdvisorEngine? What makes them unique? If you think about how an adviser partners with their clients, AdvisorEngine allows us to bring a solution that's truly digital from end to end. So literally everything from initial prospecting through to billing can be digitized on the AdvisorEngine platform. So we feel like that solution, based on all the research we've done in the couple of months that we've been out in the market, selling alongside AdvisorEngine, is truly unique and differentiated, relative to what else exists in the marketplace. In terms of who we're selling it to, I think the answer is, to your question, all of the above. We see a lot of value in terms of selling this to partnering with home offices and allowing them to deliver this capability to their advisers. There's a lot of applicability in terms of selling it directly to RAAs and smaller platforms. And another benefit is that the platform itself is truly modular. So instead of just having to adopt AdvisorEngine or not, you can take various different pieces or components of it, which we think makes it an attractive solution for home offices and larger platforms.

Our next question comes from the line of the Bill Katz from Citi.

Just a couple of questions come up as a result of that. Amit, if I run some of the guidance through the model, it looks like the U.S. margin drops to about 30% or something like that. So I'm just trying to understand why the investment spending cycle is slowing that, that ratio would drop so much? And then as I think about the other side of that into '18, what kind of incremental margin do you think is on the business at this point in time?

Sure, Bill. As I mentioned, the investment spending is down. We've made a lot of investments over the last couple of years. And now we're going to be focusing on capitalizing on those investments going forward and driving for growth. So the expense base is obviously different than what it was in prior periods and so that's probably accounting for the margin difference. As far as what it looks like post '17, as you've seen in the past, the way we've built our business, the operating leverage is there. As AUM scales, you'll see -- we'll see improvements in our margins and that's how we're driving the business forward.

Bill, this is Jono. The one -- the reason for the slowing in the spend is that we have achieved our goals expanding in the retirement space, launching the CIT business, the digitization of our business. And we have really achieved what we're trying to achieve. So that's the reason for the spend slowing down, that we've accomplished what we were trying to accomplish.

I was just trying to counter-balance that why the margin is compressing as much as it is against that. We can follow up offline. Second question I have is, if I look at your Slide 12 from the supplement, you mentioned your equity. But if I do the math, it's only about 1% market share of the related equity flows, and I appreciate the faster growth. And then if I take your comments about where the entry was for January versus your flows for January, that's also about 1%-ish type of share. I think you in the past have said you expect it again sort of 4%, 5%, 6%-ish type of market share. What do you think it's going to take to ramp the penetration? And do you need to sort of pick up the marketing spend perhaps or advertising spend or maybe reorient it in some way to potentially increase the relevant share opportunity?

So we look at it across the full suite. So the U.S. Equity business has really shown -- has strengthened over time, and so we're feeling very strong that we are in a better position as our track records have become more established. We have our earnings family hitting their 10-year track records this quarter, which should enhance those -- that family. The quality dividend growth family will -- has also, it's not nearly as old, but were made for the rising interest rate. So we think those will accelerate. But we never expected that the 7% -- 5% to 7% of the flows would come equally in every category. The U.S. market from day one was always so crowded. But there will be a combination of strong U.S. flows, hopefully participating much more fully in domestic fixed income. We have built out a very strong suite who, I think, is well positioned for this market cycle. Strong dollar should add a lot of power to the currency-hedged suite, where, as I said, we took, year-to-date, 70% of the flows into the Japan currency-hedged suite. We think that though it's a small market today, the liquid alts will be a stronger category and will take strong market share in those categories. So net-net of it all, we think that we get to a higher market share. In addition, as our model portfolios get monetized, you're taking much -- you're doing much more than just a product sale, but a whole suite sale, and we should be taking more of the adviser market share. So I think it's the investments that have been made already that should drive to those numbers. When we made those aspirational targets of 5% to 7%, it was with the knowledge that the investments that we were making would have payoff sometime in the future.

Got you. Just one last one. You highlighted the retired market, both DB and DC, those have been a little tougher, I think, to crack, generally speaking, and steep in some pretty strong competition by some of your larger competitors. Could you talk a little bit about strategically how these products might be priced relative to legacy business? Is that the right way to couch it? Just wanted to get if there's a different structural pricing model for this particular channel.

So if you look at the collective trust more broadly and when we undertook the transformation of our institutional team in 2016, accessing the retirement market in a more meaningfully was one of the primary objectives. Through the conversation, so we're now at a place where our collective trusts are operationally ready for funding. We have received our GIPS compliance certification. We're currently in the market having conversations asset consultants, institutional investors and retirement platforms. In terms of pricing, the feedback we've heard early on was that this was more around packaging our intellectual property in a structure that fits for the retirement marketplace where ETFs have historically, as a structure, struggled. We don't have really guidance in terms of what the pricing is going to net out to be.

For us, we already had the IT. So here, we're trying to squeeze out additional efficiency on an asset that is already on the books, the intellectual property. And because it is a -- it doesn't cannibalize something that we're doing, it should all be incremental. And similar to the ETF industry, proprietary indexing will get better pricing in what, as you know, is a price competitive market. But that was true also about the ETF business or the indexing business more broadly. So we should be getting superior pricing relative to much of the indexing business that exists today.

So like Schwab's 3 basis point, you get a premium to that. Is what you're saying?

We're doing that in ETFs today. So, I mean, yes, we're doing that today. And everything that we do, we are not competing with nonexclusive beta on price.

Our next question comes from the line of Michael Carrier from Bank of America.

Maybe just one on the investment spend and the outlook. I guess I'm trying to understand, when you look at the investments that you're making and what you expect that return to be in terms of the organic growth, how you think about fees and maybe the time frame on that when you reassess, like how things are trending or progressing versus expectations. Just wanted to get some understanding just given some of the pressure that we're seeing on the margin and maybe some of these things taking a bit longer to produce the uptick.

So I mean, with respect to sort of the core U.S. ETF business, it's -- don't get confused by the massive outflows in the European and Japanese exposures across the board. So that's just a headwind. Our -- but the investments that we've made in products, our expectations are dead on, that nothing has changed whatsoever. With respect to some of the foreign markets, we are less confident that we will be profitable in 2017, as we had originally given you guidance, but I think we'll make significant progress towards that and, hopefully -- and now as mentioned early on the call, the segment does include Canada as well. But -- so all of our international operations we're targeting for 2 to 3 years of profitability. But -- the expectations, we know that much of what we're doing is -- always has been hard, particularly entering the European market, but -- so we're not really that surprised. So I don't know what else to say. It feels like it's a strong, balanced approach to investing, trying to capitalize on what is by far the most dynamic market in asset management.

Okay, that's helpful. And then just as a follow-up. Just on the cash, Amit, maybe, just -- I think you mentioned some going into securities portfolio. Just, I don't know maybe strategy there, I don't know if it's just the rate backdrop and you taking advantage of some things. And then just given where the cash is in the earnings level, just an update on the dividend.

Sure. So we're just trying to squeeze some more yield out of some excess cash, so we started to buy some of the short-duration, fixed-income securities. So nothing more than just managing our cash. And the second, when we think about capital management, nothing really has changed from last year. We're very focused on continuing to support our dividend, and that's where our focus needs to be. We're still generating a good amount of cash. We have -- we're very comfortable with the cash that we have on our balance sheet.

Our next question comes from the line of Mac Sykes from Gabelli.

Just 2 questions, I'll just say them first. I do appreciate the industry flow trend expectations. But can you talk a little bit about the competitive aspects today? It seems like every day we hear bigger and more well-capitalized firms offering new strategies and products. And then as a second note, can you talk about the impact on flow share going forward should the SEC -- with the new SEC-approved nontransparent ETFs?

So the dynamic is not so dissimilar from how -- what it was 10, 11 years ago with the largest players, State Street, iShares and Vanguard, having roughly the same market share that they had then that they have now. You have many more participants who have entered the market in the last 5 or 6 years, mostly were focused, as we have been since the very beginning, on the 3 largest players. So the dynamic hasn't particularly changed that much. What you've seen is the -- all of the new entrants are sort of validating the industry itself that this is really where the future of the industry is going. It is just a better investing experience, and we're expecting flows to accelerate. One of the things that you're seeing with this new administration, this sort of pull back of regulation has created, I think, sort of reignited the animal spirits of the investing community, which is good for asset managers. The flow numbers in December and January have been records for those months. In fact, December was just the best month in the history of the industry. January, the best January in the history of the industry. We just think it's going to accelerate, and we are still playing for our -- we are not changing the aspirational target of 5% to 7%. Our market share is only about 2.5% of the industry average. Anything over 2.5% will be we're taking market share. Again, don't get confused by the challenges that we faced in 2016, which were really just macro negative sentiment against the largest exposures. But in general, in many of these other categories, we performed very well, and we feel better positioned in this new sort of higher interest rate environment than we were in a declining industry environment, particularly around the fixed income suite where we strategically positioned our entrance into the fixed income, looking to the next cycle. And at the time of those launch, that meant higher interest rates.

And just wanted your thoughts on...

Yes, I'm sorry, on the nontransparent. It's not something that we're interested in participating in. I'm not sure that there is a consumer -- this is a consumer-driven approach. It's more of an incumbent structural approach to try to minimize the damage to their historical active mutual fund business. I'm not sure it will be commercially successful. I certainly don't think it will be a big driver of flows. That's a personal opinion, but we'll see. It's not something that we're interested in, though.

Our next question comes from the line of Robert Lee from KBW.

Most of my questions have been asked. Just had a follow-up question on AdvisorEngine. I guess I'm just kind of curious or interested in understanding how to model it a little bit more. So if you're providing your allocation and other models to them and they have an open architecture platform -- I mean, I'm just trying to get a sense of how that -- how you think that will actually drive demand for your products if they're open architecture. Do you get paid at all for the model usage? Is there some type of preferred positioning for your ETFs as part of the model, just trying to square the open architecture with driving kind of semi-proprietary flows?

So if you look at our -- so first AdvisorEngine and our asset allocation effort overall. So for the model component of AdvisorEngine. So through our investment in there, we've been partnering very closely with them to bring our integrated capabilities to market, which is the AdvisorEngine platform and WisdomTree's asset allocation capabilities and our underlying product abilities. So yes, the model they're offering absolutely allows for standardized models off the shelf. Those could be standardized WisdomTree models. They could port in models from another asset manager. And we also work alongside the clients of AdvisorEngine, WisdomTree to design customized models for them. So we feel at least based on the conversations we've had to date that there is a meaningful role for both standard and custom WisdomTree models. And we continue to see that through the activity and the conversations we've been having with clients.

And in addition, we will be getting a -- we participate in sort of the wrap fee for making those models. So we do have that additional revenue stream, and we think it's -- so we won't be necessarily 100% WisdomTree in our models. But we'll, though, depending upon the model that they choose, very significant WisdomTree when it's appropriate.

Great. And maybe also a follow-up question on the CIT initiative. I mean, I completely understand and appreciate the logic of leveraging your intellectual property. But I guess it strikes me as being pretty much a DCIO kind of strategy. And to the extent that you're going after that market and you have the strategies and track records, but, I mean, are you going to see at all a need to kind of provide any kind of seed capital for any of these products to get a participant uptake or get someone to add it to their platforms down the road? Am I thinking of that the right way?

Yes. I think so, first, in terms of, if you think about the CITF overall, it's a combination of targeting the defined benefit and the defined contribution market. You're right at the beginning, within the defined contribution segment, the DCIO component is the largest and fastest-growing segment of defined contribution, and our strategy is based upon how they're position will fit in well there. In terms of seed capital, it doesn't necessarily work that way. With the collectives, I mean, the strategies themselves are operationally ready for funding today. We do have our GIPS compliance certification. We're in the market having these conversations. So we're in a place now, as of the beginning of January, where we're actually able to take client money into these strategies. But no, we don't need initial seed to stand them up to get them operational and ready.

Our next question comes from the line of Mike Grondahl from Northland Securities.

Just 2 quick ones. Trying to think about core expenses in 2017, sort of under what scenario could expenses be flattish? Is that possible next year?

Mike, it's Amit. So our baseline operating expense base, if you look at our -- the U.S. outlook on Page 10 of the presentation, we are projecting the baseline business to be flat prior to any variable expenses associated with AUM, which is primarily the fund cost and the incentive comp. So we are targeting it to be flat. If we wanted to take more actions, we can as we demonstrated last year, right? We took down our spending in the second half of the year. So we do have the capabilities to take it down further, if we really wanted to. But I think it's important to remember that we're not driving our business today to have the highest margins. Really, it's about positioning it for growth, which we're doing in '17, and then seeing the operating leverage emerge as we exit 2017.

Got it. And then if I think about the total expenses, some of the European charges aren't recurring, but it seems like they're kind of being offset with additional losses in Europe and/or Canada. Is that fair?

No, I think -- so now, we own 100% of our European business. Our Canadian business we stood up. So those expenses on a consolidated basis will flow through. And again, we've given what we think breakeven will be in those businesses, and we're driving those businesses to get to profitability in the next 2 to 3 years. So they are -- on a consolidated basis, they are part of our expense base.

Our next question comes from the line of Brennan Hawken from UBS.

So one on Slide 10, the $4 million in onetimers, does that include the fourth quarter comp charge that you guys took, that $3 million?

Yes -- no, I'm sorry. That's, you see, it's adjusted in the true up that you see. When we annualize all of our AUM and comp, it's taken part in that.

Okay. All right. Fine. And then just following up on that to clarify on the last question there about how much flexibility you have in expenses. So I'm trying to square that comment with the comment you made on comp, which I believe was that this should basically be viewed as a floor for comp, which you did in 2016. So does that mean that if you were to choose to ratchet down expenses versus 2016, it would be in noncomp lines and that's where the flexibility should sit?

That's exactly right.

Okay, terrific. And then one last one on pricing pressure, just to follow up. I think, Jono, that you had, in response to Craig's question, had made a comment about that you were built to sustain this pricing pressure. Was that based around some of the pressure we've seen in vanilla beta and the idea that you would be above that? Is that the point?

So when we launched the firm go back 12, 13 years ago, so the original business plan was, how do you live in a Vanguard world? So in today's -- using sort of a today approach would say, how do you live in a Vanguard, Schwab, Core iShares world. But fundamentally the Schwab or Core iShares doesn't change the Vanguard comparison. Within the more nonbeta, nonexclusive indexing world, WisdomTree's pricing has just held up incredibly well. The market has also hovered around WisdomTree's pricing. You haven't seen a lot of change. So when we built the models, we were always positioning WisdomTree on an after-fee basis against the no-fee indexes, and we were adding value. So the -- what you're seeing today has -- does not change the dynamic. Now as Craig also mentioned, we have launched new funds at lower price points, which is appropriate against the new categories that we have entered, but -- at which was consistent with what we did 10 years ago. It's also one of the reasons why we have for the last decade been so aggressive in product pricing because in product launch schedules, so that you could -- you always will do better having started earlier. When you are the fourth or fifth in the category, you will tend to come out at a lower price point. So that's why we have always taken this approach to launch funds quickly, priced to be very competitive with existing stuff in the marketplace. So we don't want price to stand in the way. We don't think that it has, and the flows sort of indicate that we've done a good job on pricing. It's not to say that we can never lower price or would never lower price, but where we sit today, price is not something that has been holding back our growth.

I guess, the spirit of what I'm trying to ask is that we've seen pricing pressure accelerate elsewhere, we're seeing increasing competition pick up in Smart Beta, and so I guess, the concern might be is that the next shoe to drop is increasing competition here, which is going to lead to pricing pressure. And given that you guys are sort of on the verge of scale and seeing some scale pressure and the need to continue to invest, people are worried about that squeezing your economics. I guess, how do you intend to manage that in the marketplace?

Again, with differentiated product, getting to the market first, you did see iShares with some price reductions in Smart Beta. Those were actually started from a very high fee relative to their categories and sort of have been reduced to be in line with current pricing for many of the other players, including WisdomTree. So we feel good about the pricing on nonbeta exposures.

Our next question comes from the line of Keith Housum from Northcoast Research.

As you look at the change in the presidential administration, you obviously have had as recently in the past few days some thoughts about perhaps rescinding the fiduciary rule in April. I guess I'd love to have some of your thoughts in terms of what you're seeing with this administration and how it impacts not only the company but also the industry?

So just on -- just putting social issues aside and only talking about economics, so, one, lower taxes would be -- corporate taxes would be extraordinarily constructive for WisdomTree. So they are talking about a 15% or 20% corporate tax rate. As Amit indicated, we've had 40% tax rate, so a huge beneficiary of that. With respect to the fiduciary rule, which is at least being delayed, the growth in ETFs preceded the DOL rule. The ETF industry is taking market share just on the merits of the structure. The fiduciary rule proved to be an accelerant to what was already incredibly fast growth. Many of the distributors or platforms that were making changes under the fiduciary rule will probably find it hard to reverse some of the things that they have publicly said. Also those that were slow adopters to ETFs have moved closer, if not actually entered sort of the ETF realm. So that's very, very positive. I think more broadly pulling back regulation in general has increased consumer and corporate confidence, and you're seeing that in these flow numbers, which is very, very good. As flows into investment products come back, they're going to come back primarily into the ETF structure. That we're beneficiary of. So net-net, it feels like ETFs have always been not lightly regulated but the regulations that the prior administration was putting on asset managers was really trying to make things like the liquidity rule, make other structures more ETF-like. So really hadn't affected us much, but we think just pulling back regulation is just constructive for overall sentiment, which will be good for investing, which will be good for WisdomTree.

Great. If I can follow up, just a little bit on the change in your incentive compensation structure. Is this a change that you see as permanent? Or when the stock price starts to move forward, you guys can start going back to the way you start where you give incentive comp?

No, I wouldn't say it has anything to do with stock price. It more has to do with the level of compensation. Given that our incentive pool was down so much in '16, given our performance, we just felt it was appropriate to protect the lower end of the firm to give more cash as part of their compensation. The higher up you are in the organization, they continue to receive a higher portion of stock. So really that was the purpose of the change in mix.

Our next question comes from the line of Craig Siegenthaler from Crédit Suisse.

Just a follow-up on the S&P 500 China ETF. I see you guys have -- you have the UCITS version, you've been now marketing it in Germany, Italy, I think the U.K. too. But I don't think the U.S. version is out yet. And I wonder if that's delayed or if there's anything there sort of holding you up?

So we -- it will -- I think on the last call, we actually gave sort of a guidance of sort of the April time frame. I think it's more June-ish. We're on-boarding a new subadviser, so it's just taking a little bit of time. And because China hasn't really been in favor, we haven't felt the need to sort of rush it. But it's on target for probably towards the end of the first half of the year.

[Operator Instructions] Looks like we have no other questioners in the queue at this time. So I'd like to turn the call back over to management for closing comments.

Thank you, all, for your attention and for your interest in WisdomTree, and we'll speak to you in 90 days.

Thank you.

Ladies and gentlemen, thank you again for your participation in today's conference call. This now concludes the program, and you may now disconnect at this time. Everyone, have a great day.