WisdomTree has largely focused on equity investing. Source: WisdomTree.

Exchange-traded funds have revolutionized the investing world, attracting more than $2 trillion of investment capital from those looking for broad-based diversification in any of hundreds of different markets and sectors. Although it's not the biggest player in the ETF industry, WisdomTree Investments (NASDAQ:WETF) has worked hard to build a solid brand, with its ETFs largely focusing on niche areas that other providers haven't tapped into. On Friday morning, WisdomTree reported its fourth-quarter financial results, and although the company hasn't entirely made investors happy with its tepid earnings, rising revenue and assets under management point toward a promising future. Let's take a closer look at how WisdomTree performed last quarter and what is ahead for 2015.

A feeding frenzy for WisdomTree
WisdomTree has done a good job of generating revenue from its increasingly popular ETFs. For the quarter, total revenue climbed 15% to $49.6 million, beating the growth expectation of those following the stock by about 2 percentage points. WisdomTree cited substantial inflows for its line of ETFs as the primary factor driving revenue growth, although a slight boost in average advisory fees as a percentage of assets under management also contributed to the increase.

Source: WisdomTree.

As we've seen before, though, WisdomTree's earnings didn't fare as well, falling 42% from the year-ago quarter to $9.6 million, or $0.07 per share. All of those declines are due to the fact that WisdomTree started reporting income tax expenses on a GAAP basis and therefore included a $7 million expense item, even though the company still has net operating losses and so doesn't actually pay taxes in cash currently. Yet even when you take out the tax impact, a 1.2% gain in pre-tax income was much lower than the 35% growth seen in the prior quarter. That in part justified investors' response to the report, with shares falling 6.5% in the first hour of pre-market trading after the earnings announcement.

WisdomTree has grown substantially in many key areas. Assets under management for its U.S. ETF lineup climbed 12.6% from the end of 2013 to $39.3 billion, thanks to net inflow of $5.1 billion for 2014. Just in the past quarter, $4.5 billion came into WisdomTree's funds, giving it almost 4% of all industry inflows during the period. Investors in WisdomTree ETFs prefer its top-performing funds, with 87% of all assets it manages held by funds that have beaten their peer group in total return since their inception. At the same time, several WisdomTree ETFs have passed key asset milestones, and the company has launched several new ETFs both in the U.S. and in Europe, where it sees an especially strong opportunity for expansion.

CEO Jonathan Steinberg emphasized how important the big picture is for WisdomTree. "The success of the $2 trillion ETF market is undeniable," he said in the earnings release. "Our growing scale, cash flow, and overall resources will allows us to exploit the tremendous opportunities we see ahead."

What's on the horizon for WisdomTree?
WisdomTree will need to find the right balance on the expense side of its income statement. Expenses for the quarter soared 23%, with compensation costs increasing at double that pace. WisdomTree is also spending more on marketing and advertising, although the company moderated its promotional spending compared to the third quarter of 2014.

WisdomTree's hedged funds are still its main draw. Source: WisdomTree.

Still, what's particularly impressive about WisdomTree's performance is that it picked up assets even during a period in which the market worked against it. WisdomTree's funds lost more than $1 billion because of their market exposure during the quarter, yet that didn't seem to slow the pace of fund inflows. WisdomTree's international hedged equity funds have provided most of its growth, and as long as the U.S. dollar remains strong, those ETFs will be a compelling play for investors seeking foreign-stock exposure without wanting currency risk.

WisdomTree remains on track with its overall strategy, but investors need to look at its efforts to expand beyond what its ETF customers see as the company's particular areas of strength. With so many ETF users tending to pigeonhole providers into certain categories, WisdomTree runs the risk of being labeled as a company just for international investors rather than the broad-based asset manager that it actually is.

Editor's note: A previous version of this article incorrectly stated that WisdomTree had exhausted its net operating losses. The author and The Motley Fool regret the error.