The NZX has pencilled-in a “simplification” and rebrand across its combined Smartshares and SuperLife product range as well as a quartet of new exchange-traded funds (ETFs) for release by year-end.
In its half-year results presentation last week, the NZX revealed a plan to simplify the Smartshares fund structure and rationalise its product range on a “phased basis” starting in the last quarter of 2024.
“… we are aiming to upgrade the ETF website, rebrand the ETFs, and launch 4 ETFs,” according to presentation notes. “This is the first phase of our rebrand strategy across Smartshares & SuperLife which will continue into 2025.”
Smartshares currently has about 40 ETFs that are also offered in unlisted format under the SuperLife brand. SuperLife, which the NZX bought in 2014 for $35 million, operates a suite of diversified funds, life-stage options, KiwiSaver and superannuation schemes as well.
The NZX slapped the SuperLife label, too, on its late 2021 purchase, the ASB employer superannuation master trust.
Meanwhile, the NZX says the shift of its other funds management brand, QuayStreet, to the Smartshares “services and operating model” is continuing to release “synergies”.
The stock exchange bought the-then $1.8 billion QuayStreet from Craigs Investment Partners in November 2022 (completing the following February) for $25 million plus earn-out provisions set to almost $19 million to the purchase price.
However, Mark Peterson, NZX chief, told investors last week that the Craigs-sourced QuayStreet fund inflows “post-acquisition have been slower than expected to this point, but the size of the opportunity remains”.
“Consequently, NZX’s reassessment of the probability of achieving the net FUM inflow target by November 2024 has reduced, resulting in a $7.3 million reduction of the QuayStreet earnout provision,” Peterson said. “While earnout- related net FUM inflows are lower than expected, QuayStreet is nevertheless performing strongly with net inflows building and revenue ahead of the acquisition business case.”
In fact, downgrading the QuayStreet earn-out provision to Craigs almost doubled the NZX net profit for the first half of 2024.
“The net profit after tax (NPAT) of $15.3 million increased 119.0% year-on-year,” the group’s interim six-month report says. “Excluding the accounting adjustment to the fair value of the QuayStreet earnout provision, the underlying net profit after tax was $8.0 million, a year-on-year increase of 10.9%.”
Despite the setback, the NZX says the QuayStreet business is performing well with a reassessment of the likely Craigs earn-out targets planned for the end of next year.
Peterson said the Wealth Technologies investment platform was on track to “becoming cash flow positive” after shifting five previously flagged advisory group clients aboard in the first half of 2024.
Wealth Technologies secured two new clients during the six-month period, due to transition by year-end.
“Overall, the pipeline remains strong and we are actively progressing discussion with further potential clients,” the presentation says. “We remain confident the growth from the new business will ensure NZX Wealth Technologies meets its cash flow objectives.”
After all confirmed clients are on-platform, the business would deliver almost $13.5 million of annual recurring revenue, according to NZX projections.
As at the end of July, total Wealth Technologies funds under administration (FUA) hit $14.8 billion.
Near-term customer transitions would take the FUA figure above $20 billion, the NZX data shows: including contracted “clients with longer term migration dates” Wealth Technologies was on course for more than $60 billion on-platform – albeit under to-be-confirmed status.
The platform is also slated to receive some in-house money.
“Smartshares’ revised operating model includes transforming business systems to achieve efficiencies across the NZX Group, including moving Smartshares’ funds on to the NZXWT funds administration platform,” the NZX told investors.
Overall, the Smartshares fund division represents the single-largest revenue and profit line for the NZX after pulling in almost $21.3 million of income during the first six months of the year: secondary markets trading was the next-highest income-generator on $12.2 million for the half-year.
The NZX share price was flat following the half-year report release but it has risen sharply since July this year from about $1 to $1.38 at the close last week.