The NZX plans to squeeze more value out of its $35 million funds management purchase SuperLife in 2018 including opening up third-party KiwiSaver distribution and cross-selling the traditional superannuation offering to the exchange’s “issuer base”.
In its ‘Investor Day’ presentation last week, the NZX notes “go forward” initiatives next year to “cross-sell and innovatively market” the $700 million SuperLife KiwiSaver scheme by developing new distribution channels and front-end investor tools.
“We are looking to introduce [SuperLife] investment tools in 2018 to ensure we continue to enhance the service offering we provide our current and potential customers,” an NZX spokesperson said. “In addition to this, we will continue to work with third party distribution partners, such as financial advisers, to extend our reach where it is mutually beneficial.”
The SuperLife KiwiSaver scheme has historically piggy-backed off group’s strength in the employer market where its corporate super scheme has carved out a successful niche, growing to almost $1.2 billion as at the end of September this year.
While it is a sunset market, the NZX estimates of the $26 billion in old-school super funds about $9 billion is up for grabs as employers and other sponsoring entities look to exit the now tightly-regulated sector. SuperLife hired “additional sales resource” earlier this year to service the corporate superannuation market.
However, the NZX says the SuperLife KiwiSaver scheme offers the best long-term prospects with “potential growth to $300 billion” over the next 20 years.
“At [roughly] 15 per cent funds under management CAGR [compound annual growth rate], the holding cost of the business [is] not onerous,” the NZX says.
As well as riding the government-mandated KiwiSaver “growth escalator” the NZX also says it is poised to take advantage of any “industry rationalisation” in the years ahead.
Importantly, too, the SuperLife KiwiSaver scheme remains the main growth engine of the NZX-owned exchange-traded fund (ETF) Smartshares range. SuperLife represented about 70 per cent of the approximate $2 billion Smartshares holdings as at the end of October.
Nonetheless, the NZX notes that the number of direct Smartshares unit-holders increased by almost 80 per cent over the last three years with half of applications from market virgins getting a common shareholder number (CSN) for the first time. Over the 12 months to the end of September, Smartshares investment from adviser groups was up 21 per cent, the NZX says.
The exchange operator also notes increased flows from direct fund distribution platforms InvestNow – set to break through $200 million under management following its buyout of RaboDirect last month – and millennial-focused Sharesies, which recently clocked up $5 million and over 8,000 members.
Meanwhile, the NZX’s own fund platform – Wealth Technologies – has hit a temporary hiccup in its growth plans with the Hobson Wealth (née Macquarie) “paused”.
“Hobson Wealth is undertaking a review of its trading system with the intention to implement a new platform by mid-2018,” the NZX spokesperson said. “As such they decided to pause the NZX Wealth Technologies project until the new trading platform is implemented.”
With existing funds under administration of about $1.2 billion (largely inherited following its purchase of the-then Apteryx platform for $1.5 million in 2015) and the imminent transition of Craigs Investment Partners money, NZX Wealth Technologies will hit $2 billion next year.
From 2018 to 2021 the NZX projects the platform could grow funds under admin to $54 billion as its “reference site” goes live and the “broker capability extension” is completed.
Post 2021, the NZX says white-labeling and direct investor access represent a “potentially significant opportunity” for the Wealth Technologies platform.
Elsewhere, the NZX also flagged further expansion of its current TF range with a ‘green bond’ – targeting carbon-fighting energy initiatives – fund possibly on the cards.
“NZX is currently working on several initiatives to support the development of green bonds, including a guidance note which will be released before the end of the year to assist issuers who may be thinking about issue green bonds,” the NZX spokesperson said. “The development of indices and ETFs is a longer term opportunity we will explore further once New Zealand’s green bond market has developed and matured.”
Although not mentioned at the Investor Day performance, the NZX fund research subsidiary FundSource has been subsumed under a new data-focused structure.
“The key theme of NZX’s Investor Day presentation was to reinforce that we are focused on areas and opportunities which support the growth of our core markets business, as part of this we have created a data and insights team which FundSource is part of,” the spokesperson said.
It is understood FundSource, which offers advisers access to data supplied by UK provider FE and qualitative reports from Australian firm Research IP, generated about $450,000 in revenue over the last financial year.
In a statement, Mark Peterson, NZX chief, said the exchange had embarked on a get-fit, fat-reduction strategy with a return to “core” business objectives as a trading outfit.
“We are refocused on our core markets business, which is NZX’s fundamental growth platform, and the basis of our social licence to operate,” Peterson said. “Our success is linked to New Zealand’s success, and we will grow opportunities aligned to this advantage, including our debt, dairy derivatives, and environmental and energy markets.”