The Wall Street Journal-20080128-Dreyfus Lends Its Clout to Foreign Bond- Cash ETFs- WisdomTree Gains Powerful Partner For New Products
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Dreyfus Lends Its Clout to Foreign Bond, Cash ETFs; WisdomTree Gains Powerful Partner For New Products
Full Text (426 words)More mainstream investment-management firms are trying to get a piece of the rapidly growing business of exchange-traded funds.
Dreyfus Corp., a unit of Bank of New York Mellon Corp., and WisdomTree Investments Inc. said Friday that they are teaming up to create ETFs for the international cash and fixed-income markets. The products will be co-branded and marketed by both firms.
ETFs, which are essentially index funds that trade like individual stocks, have been one of the hottest segments of the asset-management business. Last year, total assets in ETFs sold in the U.S. rose 45% to $608 billion spread over 629 offerings, according to research from ETF manager State Street Global Advisors.
New York-based WisdomTree manages about 40 ETFs that collectively hold assets of more than $4 billion. Its shares are traded on the Pink Sheets market, but the company has said it wants to relist on the Nasdaq Global Market.
The deal marks the entry of Dreyfus, best known for its lineup of mutual funds, into the ETF business. The investment-management firm, which manages more than $260 billion in assets, will contribute its distribution clout to the venture. Parent company Bank of New York Mellon is the subadviser for WisdomTree's stock ETFs.
"This is a very big deal in the ETF business," said Jim Wiandt, industry observer and publisher of IndexUniverse.com, adding the planned products "have great potential." He called the branding leverage with Bank of New York Mellon a "coup" for WisdomTree.
In recent years, WisdomTree and other firms have introduced ETFs that they say fine-tune traditional indexes that weigh stocks by their market capitalization. For example, the tracking benchmarks designed and used by WisdomTree focus on dividends and corporate earnings.
WisdomTree sees a "big opportunity" for ETFs that focus on the foreign bond and cash markets. "Despite U.S. cash being a $3 trillion market segment, today's U.S. investor is surprisingly limited in their ability to easily hold cash in non-U.S. cash investments," said WisdomTree Chief Executive Jonathan Steinberg.
In regulatory documents earlier this month, WisdomTree filed a family of cash ETFs for the U.S. and several foreign markets, including the Chinese yuan, Japanese yen and the euro. A unit of U.K. bank Barclays PLC manages exchange-traded notes, which are similar to ETFs, that track the dollar's moves against individual currencies, such as the euro, British pound and yen. Rydex Investments also offers currency ETFs.
WisdomTree last week said it plans to introduce an ETF for Indian stocks. If launched, the fund would likely compete with a Barclays ETN called the iPath MSCI India ETN.
