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Mysterious ' Opaque WisdomTree ETF Filing

A regulatory filing recently from WisdomTree describing the Vident International Equity Fund was like few we've seen here, and calls for some light-hearted snark.

The paperwork was light on crucial details, and worse, the Web address of VidentFinancial.com, the company that's in partnership with WisdomTree, turned out to be mostly an empty shell instead of being informative.

It reminded me of an odd filing last fall from Nashville, Tenn.-based LocalShares detailing plans to launch an index equities ETF focused on Nashville companies. We called it the "The Wackiest ETF Filing Yet," in a blog, and we were justified, as the probability of that fund ever launching is close to nil.

But I'm tempted to say we may have a new winner in the strange and wacky filings department, though not because this fund WisdomTree put into registration won't ever launch, but rather because it's just so mysterious-and unnecessarily so.

Couldn't WisdomTree have waited until more pieces of the puzzle were clear, so that this filing would be as transparent as so much of the ETF world seems to be, on the whole?

Instead, this filing detailing the "Vident International Equity Fund"-an index ETF that will focus on developing-world and emerging-market equities-felt like a bit of a brick wall in terms of clarity. And as far as the much-touted transparency of the ETF industry goes, the filing is something of a black eye.

Unusual Details

The first thing that's odd about this Vident fund that WisdomTree put into the regulatory pipeline is that it won't even have WisdomTree's name on it when it goes live. That will be a first for WisdomTree, which you would think would be cause for explanation in itself, being that the company is publicly traded.

More confusing yet, Vident Financial, the firm that WisdomTree is working with to launch this ETF, will be developing the Vident International Equity Index underlying the fund.

WisdomTree isn't talking, because it's in the regulatory "quiet period" that the SEC requires until a fund's registration statement becomes effective.

But the external index provider seems really important, because WisdomTree, after all, made its name in the world of ETFs partly because it has developed its own "fundamental indexes" that screen securities for earnings and dividends.

Also, WisdomTree's business plan seems to be working just fine, as we discussed at length in a recent feature story detailing its rise to the No. 5 spot among ETF sponsors in part on the success of its blockbuster $8.5 billion WisdomTree Japan Hedged Equity Fund (NYSEArca:DXJ).

So why is it all of a sudden looking to an outside index provider on a fund it's putting into registration?

As noted above, the WisdomTree's paperwork did include a link to VidentFinancial.com, but it turns out that Vident's website is still under construction. But there was an email address on that, so I fired off a note asking:"Who are you, a new subsidiary of WisdomTree's, perhaps?"

"Vident Financial is the creator of the Vident International Equity Index (VIE), and is a separate company from Wisdom Tree," the emailed response said.

It was perfectly polite, but otherwise terribly light on information, noting, as officials at WisdomTree did, that securities regulations precluded commenting on anything else unless the effective date of the filing.

A Google search didn't help either.

So, Vident remains a mystery, except to the extent that it really does seem to exist and that it isn't, as the name might suggest, some kind of dental company.

So what is going on? Might WisdomTree be getting into the business of putting funds into registration for other companies, such as Vident?

It doesn't seem that way from the prospectus language, but who knows? And neither WisdomTree nor Vident will talk about it until summer, at the earliest, when the registration statement becomes effective.

Maybe the Vident mystery will end in a surprising twist that benefits investors, but the path getting there could have been paved with more of the openness for which the ETF industry is famous. After all, how can investors be educated when an apparent lack of transparency stands in the way?

At the time this article was written, the author held no positions in the security mentioned. Contact Olly Ludwig at oludwig@indexuniverse.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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