The NZX-owned FundSource should announce a deal with Australian firm mfund Research this week to provide qualitative reports on New Zealand fund managers and products.
“We expect to write to FundSource clients on this matter in coming days,” an NZX spokesperson told Investment News NZ (IN NZ).
First reported by IN NZ in May, the NZX chief, Tim Bennett, later confirmed the group was negotiating with mfund after FundSource abandoned qualitative manager research that month.
FundSource sacked its in-house qualitative research in May following an agreement with UK-based data firm Financial Express to supply only quantitative information on NZ funds.
“We want to produce quantitative research [via NZX research arm FundSource],” Bennett told IN NZ in July. “And it would be useful to have qualitative coverage from someone independent of the NZX – much like our arrangement with Edison Investment Research for the NXT market.”
Darren Howlin, mfund founder, is well-known to the New Zealand funds industry in his former guise as research manager for Australian firm Lonsec. Howlin was previously responsible for Lonsec’s, now-defunct, NZ retail fund research, and led a KiwiSaver project for the firm. Lonsec, via its superannuation research arm SuperRatings, published its first KiwiSaver scheme rankings in February.
The exit of Lonsec and van Eyk Research (now absorbed into Lonsec) from the NZ market over the last few years combined with both FundSource dropping qualitative manager reports and Morningstar scaling back its presence has left a significant gap in market.
Privately, a number of NZ managers have expressed frustration at the lack of third-party fund research, which can limit distribution and growth opportunities, especially for new or boutique products.
“The lack of independent fund research is an impediment to the efficient functioning of New Zealand’s financial advisory industry,” one manager told IN NZ.
According to another industry participant with knowledge of the proposed mfund/FundSource arrangement, the deal can’t come soon enough.
“The industry was beginning to wonder if the mfund deal had fallen over,” he said.
With FundSource offering quant-only reports and Morningstar focusing on the Australian-owned big end of town, boutique NZ managers have been sounding out alternative research options.
For example, this June Pathfinder Asset Management hired Nelson-based JM Consulting – a one-man operation run by John Mellor – to produce a report on the boutique’s World Equity Fund.
“There’s a real void there,” Pathfinder director, John Berry, said at the time. “Advisers need some kind of third-party research for compliance purposes.”
Despite cutting its NZ operations to the bone, a Morningstar spokesperson said: “We continue to publish qualitative analyst ratings and research on managed funds and KiwiSaver options offered by AMP, ANZ, ASB, Asteron, Devon, Elevation Capital, Fisher, Grosvenor, Harbour, Mercer, Milford, Mint, Nikko, Russell, and Westpac. This has not changed.”
Neither Howlin nor the NZX were able to provide further details.