More products combined with increased adviser and investor education should fuel growth in the local exchange-traded fund (ETF) market, according to NZX chief, Tim Bennett.
“The key drivers of ETF growth offshore have been product proliferation plus adviser and retail education,” Bennett said.
He said with 10 Smartshares ETFs already listed and about a dozen more slated for release before 2016, the NZX delivered on the “product proliferation part”.
“Now we have to move ahead on the adviser and retail education side,” Bennett said.
In a presentation last week, the NZX said it would expand on an existing “limited digital marketing” campaign targeting retail investors that has proven reasonably successful to date.
Direct investments in Smartshares increased first half of 2015 (v PCP) by more than 400 per cent,” the presentation document says. “Regular savings plan increased by over 300 per cent.”
The retail campaign would be “broadened and focused on investor education”, the NZX presentation says.
As well, the NZX planned to spark interest in ETFs among independent financial advisers with a “focus on cost-effective asset allocation” and “volume rebates”.
In the medium term, the NZX strategy would be to “support self-directed asset allocation” via ETFs and KiwiSaver, the NZX document says.
However, in the short-term Smartshares growth has been underpinned by the recently-acquired NZX subsidiary SuperLife. According to NZX metrics released last week, SuperLife accounted for $166 million of the total $604 million in Smartshares ETFs.
Bennett said SuperLife would also seed the new Smartshares products scheduled for release this year. The NZX presentation lists nine new global equity ETFs scheduled for release this quarter with further NZ sector, fixed income and cash products lined up for launch in the final three months of 2015.
Bennett said not all SuperLife funds would be switched to ETFs “and we’re not changing its asset allocation”. However, he said SuperLife would probably switch its cash and fixed income allocation to ETFs as Smartshares products became available.
According to the most recent SuperLife accounts, its KiwiSaver scheme has over $55 million in cash and local fixed income with a further $20 million plus in offshore bonds. At the same time, the $1.2 billion SuperLife superannuation scheme reported about $340 million in cash and NZ fixed income and another $210 million in global bonds.
Bennett also confirmed the NZX had put in an expression of interest for the Reserve Bank of New Zealand-owned NZClear platform.
“We’re also doing more due diligence on [its proposed purchase of fund admin platform] Apteryx,” he said. “At this stage we have no further acquisitions planned in the funds management infrastructure space.
“We see our role as an investor in parts of infrastructure where there is a gap in the market and we can support growth.”