WisdomTree on Monday announced various enhancements to the WisdomTree Modern Tech Platforms Fund (PLAT), whose name has been changed to the WisdomTree Growth Leaders Fund (PLAT).
In addition to the name change, the expense ratio was reduced to 0.2% (down from 0.45%) and its methodology added growth screen criteria to emphasize the growth leaders aspect of the fund.
Jeremy Schwartz, Global Head of Research at WisdomTree, said platform companies are transforming business and the enhancements we’ve made to PLAT better position the fund in the important growth category.
“PLAT will continue to seek to provide exposure to high growth, mid and large market capitalization companies – more than the typical FAANG stocks – and now includes a growth screen criteria to emphasize the growth leaders aspect of it, in addition to providing lower fees,” Schwartz said.
PLAT seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Growth Leaders Index (the “Index”). The enhancements described herein associated with revenue growth, non-U.S. exposure and weighting mechanism are derived from changes to the Index. The Index is weighted based on a modified average of equal and market capitalization weights and is rebalanced annually.
Platform companies have penetrated the global economy and are now a dominant business model for the 21st century. Platforms create value through connecting interdependent groups (e.g., Uber connecting a rider with a driver), while traditional businesses create value through linear production or supply (e.g., Ford or Hertz that produce/buy cars for sales/rent). PLAT targets companies operating large, scalable networks that disrupt the competitive landscape.
While the traditional business model creates value through linear production of supply of a good or service, a platform business is a non-linear, asset-light model that creates value through connections.
WisdomTree believes that the key competitive advantage that platforms have relative to legacy businesses is their ability to scale quickly and efficiently beyond the capability of linear businesses.
At a certain size, the net benefit of further scale is limited for a linear business, but unlimited for a platform business. As platforms scale, they increase in value without increasing costs, translating to higher revenue-growth and margins.
Schwartz added the structural advantages of the platform-based businesses we seek to invest in can be reflected in financial metrics through robust revenue growth, margin expansion, substantial free cash flow generation and strong returns on capital.
“Relative to the companies in the S&P 500 Index, the constituents of PLAT have generated greater historical revenue growth essentially 3x higher than the typical S&P 500 companies with stronger margins,” Schwartz said. “The sales growth rates of these companies are also approximately double the growth rates in some of the most popular growth strategies.”
Jarrett Lilien, President and Chief Operating Officer at WisdomTree said, “We regularly review the methodologies in our ETF family, strategizing on index improvements and beyond, as part of WisdomTree’s goal of providing best-in-class product.”
Here is the summary of methodology and other enhancements:
- Name: WisdomTree Growth Leaders Fund (formerly, WisdomTree Modern Tech Platforms Fund)
- Expense Ratio: 20 basis points (bps) – a reduction of 25 bps from 45 bps
- Revenue Growth Eligibility: at least 7% revenue growth required (formerly, no requirement)
- Non-U.S. Exposure: Limited to 12%, China limited to 5% and domestic or Hong Kong listings (formerly, no caps)
- Weighting Mechanism: Modified average of equal and market cap weights with 9% individual security cap (formerly, equally weighted)
