The NZX-owned Wealth Technologies investment platform is still aiming to hit a high-end $50 billion of funds under administration (FUA) in two years despite missing its 2020 target.
In its annual results released last week, the NZX reported Wealth Technologies FUA of just over $7 billion, which was up more than 200 per cent year-on-year but well below the $20 billion forecast.
“Whilst there has been a delayed delivery of the platform compared to original plans, we now have a scalable platform with a highly skilled operational team,” the NZX says in its investor presentation.
The NZX release shows Wealth Technologies FUA on track for $20 billion this year, rising to a range of between $35 billion and $50 billion by 2023.
According to the NZX report, with a “strong pipeline” of clients “the 2023 aspirational targets [for Wealth Technologies] remain valid”.
As at the end of last year, the investment administration service counted 11 clients overall including four – Craigs Investment Partners, JB Were, Hobson Wealth and Saturn Advice – on its new technology platform.
In January this year, long-time Wealth Technologies client, Public Trust, confirmed it would shift about $680 million from the legacy platform to the new tech system.
Since buying the platform previously known as Apteryx in 2015 for about $1.5 million, the NZX has spent many millions more on upgrading the technology. Wealth Technologies has an ‘intangible asset’ book value of just over $16 million, most of which relates to software.
“FUA based revenue would have to reduce by 21% (2019: 24%) in the forecast period (where FUA is expect to increase 880%) to indicate an impairment in the intangibles carrying value,” the annual report says. “The Company considers the FUA growth assumptions reasonable given the start-up nature of Wealth Technologies and based on the continued interest from current, future and potential customers.”
The platform reported a net loss of $264,000 last year on revenue of about $2.4 million.
But after losing money every year since joining the NZX family, “2021 will see positive operating earnings” for Wealth Technologies, the investor presentation says.
“… we will continue to develop and enhance the platform, and will commence moving those clients on the legacy platform to the new platform,” the NZX says.
If Wealth Technologies has some catching up to do, the other NZX financial services play, funds management division Smartshares, is well in front of target.
Smartshares, including SuperLife, hit its 2023 goal of reaching $5 billion in funds under management (FUM) two years ahead of schedule.
Hugh Stevens, Smartshares chief, said the manager had seen growth across all client segments spanning direct, third-party platforms (Sharesies and InvestNow), financial advisers and institutions.
Stevens said new external cashflows into the Smartshares exchange-traded fund (ETF) had quadrupled over the last two years to reach over $800 million.
As at the end of January this year, total Smartshares FUM rose above $5.3 billion with external ETF clients comprising just over $2 billion (up almost 50 per cent year-on-year).
In addition to the strong retail flows, Stevens said the passive manager had picked up several institutional and wholesale clients who can now access the strategies via three separate channels: on-market ETFs; the recently established unlisted SuperLife versions of the funds; and, discrete mandates.
“Institutions have realised that we can come to the party on fees while still providing them access to that are NZ-domiciled and regulated as retail offers,” he said.
However, despite increasing revenue growth to almost $13.7 million in 2020 (compared to $12.8 million last year), Smartshares net profit fell about $400,000 over the annual period to settle at $5.6 million as expenses rose by $1.2 million.
The manager incurred extra costs in marketing and product restructuring last year, the NZX says, as well as other compliance expenses.
During the year, Smartshares reimbursed some investors due to “legacy issues” in the SuperLife product range, Stevens said. He said the group worked with supervisor (Public Trust) and the Financial Markets Authority to address the problems.
In a note to affected KiwiSaver members this February, SuperLife said: “Until recently, our product disclosure statements disclosed SuperLife’s fixed-dollar fees, but did not note that these fees were stated net of an income tax deduction applied in calculating the portfolio investment entity (PIE) taxable income allocated to you and that the total amount that SuperLife actually received was the gross amount based on an income tax deduction claimed in relation to your PIE allocated taxable income. This was, however, disclosed in the annual tax statements provided to you.”
SuperLife subsequently refunded members “an amount equivalent to the amount of the income tax deduction” up until the error was amended in a new product disclosure statement.
“Member based revenue has decreased due to a historical pricing provision which more than offset the increase in investor numbers in 2020 of 6.0%,” the NZX results presentation says.
The NZX is also developing a “fund pitch” to attract more listed investment products to the market, the strategy document says.
And among a string of new partnership arrangements, the NZX says it “recently contracted independent investment research network, SmartKarma, to offer coverage to companies as they list and strengthened our relationship with CMC Markets, providing more trading opportunities and liquidity for our listed companies”.
Overall, the NZX reported a more than 20 per cent increase in annual net profit of $17.6 million last year during a period that included record retail trading activity, a costly systems hack and a formal separation of its regulatory operations into a stand-alone company.
James Miller, NZX chair, said in a release: “Never before has the value of having access to capital been so evident for New Zealand businesses. We have also seen the most significant re-engagement with equities as an investment class in the past 30 years.”