The NZX would consider partnering with other entities – including advisory groups – to market its SuperLife KiwiSaver scheme, according to the group’s interim chief, Mark Peterson.
“We’re open to finding someone else to sell our KiwiSaver,” Peterson said. “For example, it could be white-labeled by financial advisory firms.”
He said with both the NZX SuperLife products and expanded range of its Smartshares exchange-traded funds (ETFs) now bedded-down “our intention is to step on the gas”.
“We’re putting increased marketing resources into the ETFs and KiwiSaver products,” Peterson said. “The distribution piece in KiwiSaver is critical for growth.”
The NZX annual report released last week reveals solid expansion in both Smartshares and SuperLife over calendar year 2016 with total funds under management (FUM) up 14.4 per cent and 15.8 per cent, respectively. However, excluding the more than $1.2 billion of SuperLife money (equating to about 75 per cent of all SuperLife investments), Smartshares external FUM was up 10.7 per cent over the year, ending the period at $487 million.
Meanwhile, the SuperLife KiwiSaver scheme (now incorporating the defunct NZX Smartkiwi) grew by more than 20 per cent over the year to about $610 million as the group’s superannuation FUM increased 17 per cent to just over $1 billion.
The NZX report notes SuperLife netted some 4,302 members during the year, of which 75 per cent “of these were added
in November 2016 with the migration of [four] new superannuation mandates to SuperLife”.
As well as looking for new distribution angles for the SuperLife KiwiSaver scheme, which has traditionally grown on the back of its core employer superannuation relationships, Peterson said the 23-strong Smartshares ETF range – up from just five products late in 2015 – was due some extra sales oomph this year.
He said Smartshares ETFs were gaining traction as advisers and brokers assimilated them into their portfolio construction processes with further growth expected in those markets.
Peterson said the direct investor market also offered promise for the Smartshares range, which cover a broad spectrum of asset classes.
“If you have a reasonable understanding of how markets work – and a minimum of about $200,000-$300,000 to invest – our ETFs provide a low-cost way to build a diversified portfolio,” he said.
An upgraded online direct channel– possibly veering towards robo-advice – was also on the agenda, Peterson said.
“That’s a natural conclusion if you look at our product set,” he said. “But first and foremost we have to lift sales.”
Smartshares returned an operating profit of just under $1 million in 2016, generating revenue of $4.6 million (about $1 million more than the previous year) against costs of $3.6 million ($2.3 million in 2015).
After shelling out $20 million upfront for SuperLife in 2015, the NZX is also starting to see a return on the funds management group, which reported a net profit in 2016 of over $1 million on revenue of $7 million (compared to $6.4 million 12 months previously). Former SuperLife owners, Michael Chamberlain and Owen Nash, are also odds-on to receive the final $10 million cash sales bonus at the end of this year. The pair already split an additional $5 million in NZX shares issued last year.
Barring a market catastrophe, SuperLife is almost guaranteed to meet the December 31, 2017 FUM target of $1.57 billion given the group already manages close to $1.7 billion.
“Based on the expected probabilities of achieving the earnout, taking into account historic growth rates, the Group has accrued for 95% (2015: 90%) of the $10.0 million of contingent consideration (present valued) that will be paid at the end of the three year period if the 11% growth target is met,” the NZX report says.
However, the former owners of Apteryx – the platform now known as NZX Wealth Technologies – were not so fortunate after just failing to meet conditions for the contingent $2.5 million bonus payment (already reduced to $1.3 million in the NZX books). Under the 2016 agreement, the NZX was liable for the bonus (in addition to the original $1.5 million purchase price) if the investment platform accrued over $3 billion under administration by the end of March this year.
While NZX Wealth Technologies has since signed deals worth a collective $2.5 billion under administration with Craigs Investment Partners and Hobson Wealth, the funds will not transition prior to the bonus deadline. Hobson, previously the Macquarie NZ equities business, will contribute close to $2 billion of the total funds under admin.
Peterson said the NZX would focus on transferring the two new platform clients before taking on any new business.
“We’re positive about the level of enquiries we’re seeing but we want to be disciplined about how we grow NZX Wealth Technologies,” he said. “We don’t want to take on too much, too soon.”
The almost $1.5 million loss (on revenue of $1.4 million) reported by NZX Wealth Technologies combined with a further $1 million in Financial Markets Conduct Act transition costs dragged the group’s fund services division about $300,000 into the red.
Peterson said the NZX also remained committed to its research division, FundSource, with a number of new qualitative manager reports due to be published shortly.
As at the time of writing, NZX shares were down about 0.9 per cent.