The NZX has signaled a two-year spending program lies ahead as the group integrates its in-house investment administration platform with the Smart funds operation.
NZX chief, Mark Peterson, told shareholders at the group’s annual meeting earlier this month that while the stock exchange didn’t “expect any major cost surprises” in 2025, the internal funds and admin rewiring would absorb capital.
“… over the next two years we do need to make some investment into our Smart business to make the most of the opportunities in front of it,” Peterson said.
“We have a growth opportunity in Smart that requires a more efficient and scalable operating platform, and we can utilise our market-leading capability within Wealth Technologies.”
Ultimately, he said Wealth Technologies would deliver an “improved and modern service proposition” for the Smart funds as well as a “synergy benefit” for the group.
Adding Smart funds to the in-house platform would also almost double the Wealth Technologies funds under administration that stood at more than $16.8 billion at the end of March.
In total, the Smart suite (comprising exchange-traded funds, SuperLife KiwiSaver, workplace superannuation and QuayStreet) reported over $13.2 billion of funds under management (FUM) as at March 31.
“Despite recent global asset price volatility, we remain focused on hitting our goal of $15-$20 billion of FUM by the end of 2027,” Peterson said.
He told shareholders the funds and platform businesses had changed the group’s “revenue mix” as the two complementary operations significantly outpaced growth of the more traditional NZX services.
According to the NZX March quarter results, Smart and Wealth Technologies reported respective revenues of about $12.1 million and $2.9 million over the first three months of 2025, equating to almost half of the total group income for the period of just under $30.8 million.
Smart revenue for the quarter rose 13.7 per cent compared to the same period last year while Wealth Technologies saw income growth of more than 50 per cent.
All other NZX divisions reported either flat or negative revenue growth for the March 2025 quarter on a year-on-year basis.
Wealth Technologies hit a milestone of cash-flow breakeven from external clients last December but the complex technological beast has soaked up at least $30 million in development capital to date.
Peterson told shareholders that the NZX “capitalises the staff cost and a portion of [Wealth Technologies] overhead relating to client transitions”.
“This has, and continues to, result in a meaningful capital investment into the business, and it is pleasing it has now reached cash flow breakeven from external client activity,” he said.
At the same time, Wealth Technologies spending translates to a “significant rise in the amortisation charge” that has acted as a drag on net profits: the platform accounts for almost half of the total NZX amortisation.
“The investment into NZX Wealth Technologies and the associated amortisation over time is the ‘cost’ of building this business,” Peterson said. “It is an investment for the future we believe will have significant earnings and NPAT upside over time.”
Wealth Technologies landed 22 new clients over the last two years including 12 in 2024.
The NZX rebranded the Smartshares ETF and funds business under the Smart banner last year with plans to extend the naming convention to its SuperLife (including KiwiSaver) and employer super arms soon: however, the actively managed QuayStreet will retain its own identity.
And the exchange is expected to offload its $120 million UK pension transfer scheme next month.