The NZX-owned Wealth Technologies is poised for an influx of $20 billion or more after signing a ‘letter of intent’ to transition all Craigs Investments Partners custodial assets to the platform.
In its annual results presentation last week, the NZX confirmed Craigs had committed to the previously-flagged platform move.
Craigs was the foundation client for the new Wealth Technologies platform, shifting the administration of almost $1 billion across in 2018 from its in-house managed funds business, QuayStreet.
However, the main game for Wealth Technologies was to secure the vast Craigs investment book – held in discretionary investment management service (DIMS) portfolios or direct securities – to fast-track platform scale. Craigs currently runs its money on technology built by pioneering NZ firm, Chelmer. (Earlier in February Chelmer announced a deal with Northland advisory firm, Yovich and Co Wealth Management.)
Last year Wealth Technologies struck platform agreements with boutique advisory firm, Saturn Wealth, and the $3 billion plus broking house Hobson Wealth (formerly known as Macquarie.
Both Saturn and Hobson are slated to shift assets from Aegis (now owned by MMC) this year. ASB revealed a, probably tax-effective, $28 million loss on the Aegis sale last October, putting the likely purchase price at about $50 million.
Currently, Wealth Technologies – headed by Lisa Brock – has about $2.3 billion under administration, split roughly evenly between its new system and legacy platform (acquired in 2015 under the Apteryx name). NZX is encouraging all platform clients across to the new system.
According to growth projections included in the NZX presentation, Wealth Technologies funds under administration (FUA) should hit about $20 billion by mid-2020. The group has forecast FUA to reach between $35 billion to $50 billion by the end of 2023.
But the growth has come at a cost. Wealth Technologies booked an $880,000 loss last year, the NZX accounts show, are rising personnel costs ($5.4 million gross) swamped revenue of almost $1.7 million (up 60 per cent year-on-year).
“Personnel costs (gross) have increased reflecting the levels of product refinement, extension of core platform and preparations to migrate new clients in 2020, with Wealth Technologies’ capitalised labour at $3.39m (2018: $3.13m) and capitalised overhead being $0.64m (2018: $0.65m),” the NZX presentation says.
The platform business soaked up 12 of the 18 new permanent roles created across the NZX last year, the report says, that also saw four extra staff added to the Smartshares headcount.
Smartshares, meanwhile, banked a tidy profit of more than $6 million in 2019, buoyed by funds under management (FUM) jumping more than $1 billion over the year to just shy of $4 billion.
NZX reported total revenue across the Smartshares KiwiSaver, superannuation and exchange-traded fund (ETF) business of just under $12.9 million compared to $11.4 million in 2018.
Expenses also rose in the NZX funds arm over the 12-month period by almost 19 per cent to $6.8 million plus.
The NZX funds business, headed by Hugh Stevens, also incurred some extra expenses as it restructured its SuperLife fund range as stand-alone portfolio investment entity (PIE) products.
“SuperLife Invest funds were segregated and unitised, to support multi rate and foreign investor PIE capability,” the NZX presentation says. “Administration of these Funds has been outsourced. Overall this has opened up the wholesale market and reduced operations risk and widened the product offering…”
During the year, Smartshares launched eight new BlackRock-managed ETFs in addition to expanding its superannuation offering in Nauru and Tonga.
Given its recent growth-rate, Smartshares has set a modest end-of-2023 FUM target of $5 billion “through positive net cash flows, market returns and by targeting consolidation options (including stand-alone schemes and sub-scale master trusts)”.
Although the stock exchange operator has refocused on ‘core’ business activities in the last couple of years, NZX chief, Mark Peterson, said in a release the group backed both Smartshares and Wealth Technologies for further growth.
“Our Core Markets and Corporate costs grew in line with inflation, while we have chosen to invest more significantly in both our Funds Management and Wealth Technologies businesses to take advantage of new customer opportunities during the period,” Peterson said.
Total NZX operating earnings jumped almost 10 per cent in 2019 to $31.4 million but the figure “is expected to be in the range of $30.0 million to $33.5 million” in 2020, the release says.
NZX shares rose 0.7 per cent on Friday to close at $1.44.