WisdomTree Investments Inc has paid a price for being so dependent on its flagship Japan fund––as that market reversed fortune this year, shares of the asset manager fell nearly 30 percent and Citi analysts downgraded its stock.

But the company and many of its followers are undeterred, saying it can use its unique position in the white-hot exchange-traded fund space to recover from that hit and continue to grow.

As the only publicly traded asset manager focused exclusively on ETFs, WisdomTree continues to attract institutional buyers and analysts who see the company as a potential takeover target, as well as having growth prospects of its own.

At about $12.88 per share, the fund company is still selling at more than twice its price at the beginning of 2012, even after this year's sell-off.

But to resume last year's climb, it will have to persuade investors that it can build size in a broader offering of its funds and reduce its dependence on its Japan Hedged Equity Fund, known to investors as DXJ.

WisdomTree's share price nearly tripled last year on the back of the outsized success of DXJ. That fund gained nearly 40 percent in 2013, as Japanese stocks went on a tear, the yen fell against the dollar and investors piled in.

"They essentially had lightening in a bottle last year, where they had a fund that was well positioned at the right time," said Jason Weyeneth, a New York-based senior asset management analyst with Sterne Agee. "Certainly we'd like to see the shares of some other funds grow and see their overall assets diversify a bit."

Growing Beyond DXJ

DXJ now accounts for roughly one-third of WisdomTree's total assets under management. It ended 2013 with more than $12 billion in assets, up from just over $1 billion a year earlier. Since then, its net asset value has fallen 10.3 percent and the fund has given back nearly $1.4 billion in assets, costing the company some $6.6 million in revenue.

That pullback was a concern for Citi analysts, who last week placed a sell rating on WisdomTree, saying among other things that DXJ's growth "may not be fully repeatable."