WisdomTree, a U.S. provider of exchange traded funds, is planning to open an office in Switzerland as it expands its presence in one of the most important banking markets.

WisdomTree, which started selling six different exchange traded funds (ETFs) on SIX Swiss Exchange a year ago, is planning to open an office in Switzerland. The U.S. company currently has two dedicated sales people for Switzerland working out of the London office.

«Switzerland is a key market with a high degree of sophistication,» Hector McNeil, co-CEO of WisdomTree Europe, told finews.ch in an interview. «Over time, as the market evolves we will consider building a local presence.»

As an issuer of fundamentally weighted ETFs, WisdomTree salespeople focus on client education with respect to methodology and investment style, often bringing research colleagues from both Europe and the U.S. to engage in more in depth discussions.

Receptive Audience

The ETF provider chose Switzerland as a key market because of the sheer amount of assets managed in the country: «Half of the private wealth management market is based in Switzerland and we can't just ignore that,» McNeil said, adding that it «is a very receptive audience and open to WisdomTree's strategies.»

With wealth managers moving to a fee-based business model, bankers had to broaden their portfolios and offer products including smart beta and passively managed ETFs. While the original ETF is based on the individual company's weight in a stock index, a smart beta-managed product applies a different parameter. At WisdomTree, ETFs are designed according to different themes such as income, small cap and export tilts and weighted based on the amount of dividends paid by the companies.

Changing the Way People Are Thinking

«Smart beta is changing the way people are thinking about ETFs,» McNeil told finews.ch. «Instead of just looking at how cheap an index is, investors start looking at measures such as risk and return.»

Unsurprisingly, WisdomTree is finding customers at Switzerland's pension funds as well. Managers are forced to find products that guarantee returns in times of low or zero interest rates. According to McNeil, they have shown a strong interest in the smart beta-based products presented by WisdomTree.

Rapid Growth

Since the company launched its services in Europe two years ago, WisdomTree increased its staff to 40 from 8, and McNeil expects further dramatic growth. Most operations are outsourced and the company is focusing on innovation and sales, keeping the company sleek.

Europe has been slower to jump on the ETF bandwagon than the U.S. cousins and thus has a lot of potential for growth, McNeil says.

Europe Is Catching Up

«There's a massive interest in ETFs, especially compared to mutual funds,» the co-CEO said. «Europe is catching up quickly and smart beta ETFs represent the cutting edge technology of the fund world.»

Investors in the U.S. have $2.5 trillion invested in ETFs, while the European cousins so far have put half a trillion into similar products, according to McNeal. WisdomTree started selling their products in Europe in 2014 after acquiring Boost, an ETF provider managed by McNeil and Nik Bienkowski. The two Boost managers were appointed co-CEOs of WisdomTree Europe and have remained so since.