After a series of delays the NZX has further pushed out the investment platform boarding time for its first major client as a bigger deal with Hobson Wealth heads into the never-never.
In its annual report released last week, the NZX says the group’s Wealth Technologies platform (formerly Apteryx) purchased in 2015 for $1.5 million has slated a late 2018 arrival for “our first large customer”, Craigs Investment Partners.
“Despite the dedication of the team, progress on-boarding our first large customer to the platform has been delayed, however core platform development is expected to be completed in Q2 and to go live with that customer in Q3,” the NZX report says.
Originally announced in August 2016, the Craigs deal was expected to bring more than $600 million across to the Wealth Technologies platform last year followed by a reported $3 billion or so courtesy of the former Macquarie NZ business, Hobson Wealth.
However, technical challenges have postponed the Craigs transition while the Hobson deal – alluded to in previous NZX dispatches – does not rate a mention in the latest annual report.
“Our foundation client Craigs Investment Partners is expected to go live in Q3 2018 and as stated at our investor day Hobson Wealth paused their project due to a competing priority,” an NZX spokesperson said.
Hobson was not available for comment.
In the interim the residual Wealth Technologies funds under administration (FUA) – which include funds managed by Apteryx-originator, NZAM – fell 9.2 per cent over the 12 months to the end of January, according to the latest NZX statistics.
“Client numbers remain the same, however there was a decrease in FUA which drove down revenue,” the NZX annual report says.
The NZX platform reported administration fees of about $1.16 million over the year and ‘development fees’ of $180,000.
Wealth Technologies future growth rate “is assumed to be within a range of 10% to 195% during the forecast period”, the report says.
“The Company considers this reasonable given the start-up nature of Wealth Technologies and based on the continued interest from potential customers.”
Despite the platform delays the NZX reported solid results for its funds business as both KiwiSaver and superannuation provider, SuperLife, and exchange-traded funds (ETF) unit, Smartshares hit new highs.
Collectively, SuperLife and Smartshares drew in revenue of almost $13.5 million over the year – split $7.8 million and $5.6 million, respectively – representing an annual increase of 15.7 per cent against expenses of just under $3.5 million (down about 4.7 per cent year-on-year).
“The reduction in fund expenditure was due to the renegotiation of some variable costs, which more than offset the cost increase arising from growth in FUM,” the report says.
While SuperLife remains the major investor in Smartshares products (about 66 per cent of the total $2 billion plus under management), external client numbers were rising.
“Smartshares direct unit holders increased 37% in 2017 on the prior year,” the NZX spokesperson said. “We are starting to see uptake from institutional investors (mirroring international trends) and continued growth from advisers and online direct providers. InvestNow and Sharesies are welcomed new entrants and we are starting to see meaningful flows from both.”
The stock exchange operator remained committed to fund research unit, FundSource, incorporated into the NZX data and insights team last year.
“A key theme of the refreshed strategy [announced by new CEO Mark Peterson last year], and subsequently our full year results, was to reinforce that we are focused on areas and opportunities that support the growth of our core markets business,” the spokesperson said.
The NZX annual report also reveals it made a final payout of almost $10 million to previous SuperLife owners – the Aventine Group shareholders, Michael Chamberlain and Owen Nash – in February.
“The Group and the Aventine Group Limited reached an agreement in January 2018 that the Superlife earnout payment amount is $9,969,932 (being $8,000,000 earnout plus $1,969,932 interest),” the report says.
Chamberlain resigned official NZX duties at the end of last year (while Nash remains in a transitional role). However, the Aventine Group remains the fourth-largest shareholder in the NZX register with its more than 4.6 per cent stake picked up as part of the SuperLife sale in December 2014.
Greg Bright is publisher of Investor Strategy News (Australia)