The NZX-owned Smartshares index funds business is on the hunt for an institutional salesperson at it takes another tilt at the wholesale market.
Hugh Stevens, Smartshares chief, said the group was looking for a business development manager to grow its institutional client base.
Aside from its major in-house client, SuperLife, Smartshares is largely a retail investor business with a handful of wholesale relationships. SuperLife represents about 70 per cent of Smartshares total funds under management (FUM), which hit $3 billion last week.
However, Stevens said there was a growing demand from wholesale clients – such as financial advisory and broking firms – for index fund products in line with global passive investment trends.
“We’ve already shown that we are prepared to offer [discounted] pricing to institutional or wholesale investors,” Stevens said. “But we want to better support institutional clients.”
Smartshares lost its last major institutional client, the NZ Superannuation Fund, in 2009 when the sovereign wealth fund stripped about $400 million from manager’s then $665 million FUM.
Since then the group slowly consolidated a retail client base across a limited product set of five Australasian equity funds before the NZX bought SuperLife late in 2014 for $35 million.
SuperLife money poured into the original Smartshares range but also seeded 18 further index products released by the NZX over 2015/16.
Stevens said the 23 products were available as both exchange-traded funds (ETFs) under the Smartshares brand or as traditional open-ended managed funds via SuperLife. The SuperLife versions may be more tax-effective for wholesale/institutional investors given ETFs are taxed at a flat 28 per cent rather than varying according to underlying investor rates.
Regardless, Smartshares has seen rapid growth over 2018 buoyed by rising share markets and solid flows from both SuperLife and external retail investors.
The funds business added almost $500 million since June this year when FUM stood at just over $2.5 billion. According to NZX figures, external Smartshares FUM grew at just over 39 per cent during the 12 months to June 30 compared to 32.5 per cent for SuperLife.
Stevens said the relatively stronger growth in external Smartshares FUM was partly fueled by increased flows from new direct-to-consumer platforms InvestNow and Sharesies.
Both InvestNow and Sharesies appear among the top 10 shareholders for some of the Smartshares ETFs. For example, Sharesies – essentially a reseller of a small number of Smartshares funds (plus the Pathfinder global equities product) – represents about 0.56 per cent of the NZX 50 ETF while InvestNow accounts for almost 2.2 per cent of the MIDZ (NZ mid-cap fund).
Last week TradeMe confirmed it had taken a small stake in Sharesies, which also includes former NZX chief, Tim Bennett, among its growing register.
Stevens said Smartshares pricing would also move down as each fund gained scale. The group cut costs across a range of ETFs last year after lowering fees on the flagship NZX50 fund (now valued at almost $500 million) from 0.75 per cent to 0.5 per cent in 2016.
“We’ll look at further fee reductions [for the NZX50] and cash funds near the end of the year,” he said.
Last week the NZX also confirmed the worst-kept secret regarding the sale of its research arm, FundSource. It is understood FundSource bids closed off a couple of weeks ago with the sales process set to be finalised before the end of September. NZX bought FundSource – the sole NZ-owned fund research business with a long history in the industry – from parties associated with NZ Funds , in 2006 for about $900,000. FundSource hosts its annual awards this Wednesday at the NZME iHeart Lounge.