NZX is understood to be shopping around the Wealth Technologies investment platform following a string of activities in the sector.
In a statement, Simon Beattie, head of NZX’s investor relations and communications department, said the exchange “has a longstanding policy of not commenting on market speculation.”
“NZX sees significant growth opportunities in the NZX Wealth Technologies business,” said Beattie.
As informed to investors last week, NZX expects Wealth Technologies’ Funds Under Management (FUA) to quadruple by the end of 2024, pushing the target date forward by a year from previous projections. .
Platform FUA is on track to reach $40 billion by December 2024, according to a NZX presentation, with “large contract clients participating in FY23F and FY24F and other high and medium confidence levels. We are encouraged by the outlook.” Beattie said the prospect’s details remain confidential for now.
New large platform clients are reserved for Software as a Service (SAAS) treatment rather than the more profitable “full custody and operations” business. According to the presentation, Wealth Technologies earns 0.25 to 15 basis points on SAAS clients, but 5 to 22 basis points on full custody services.
As of October 31, the NZX platform reported just over $10 billion under management of clients including JB Were, Hobson Wealth, Saturn Advice, Stuart Carlyon, Public Trust and Craigs Investment Partners.
Most of Craigs’ funding for Wealth Technologies comes from funds managed by QuayStreet, which NZX bought last week in a deal that could cost $50 million. Craigs has transitioned to SS&C’s “Aloha” system to manage his remaining $26 billion of client funds, which are typically held directly in individual accounts or discretionary investment management service portfolios.
As reported last week, the stock exchange purchased a controlling interest in the $1.6 billion QuayStreet business for an upfront payment of $31.25 million, with an additional $18.75 million in earn-outs for “three years of net FUM from the Craigs network. Based on the influx,” NZX told. CEO Mark Peterson told investors.
After the purchase, Peterson said, “there is no immediate change for QuayStreet’s customers,” but over time, “Smartshares has worked to adjust and improve the product with input from Craig and the customer, and funds will continue to flow to the customer.” to meet the needs of and represent value for money”.
However, the deal marks a sharp turn to active management for the passively oriented Smartshares, which has built a diverse portfolio of exchange-traded funds (ETFs).
“The QuayStreet Fund will be offered as a premium product set that complements Smartshares’ existing systematic, passively managed product offering,” said Peterson.
Combined with $1.8 billion of FUM acquired through $25 million acquisition Of last year’s ASB Employers Superannuation Master Trust, Smartshares should hit nearly $10 billion after digesting QuayStreet. However, his passively managed ASB Master Trust Fund is a better fit for the current Smartshares index strategy, which is currently undergoing a transition process.
NZX will also have another KiwiSaver scheme onboard after it takes control of QuayStreet early next year.
“Smartshares will assume management responsibility for the QuayStreet KiwiSaver scheme and QuayStreet Fund in late February 2023. Craigs has agreed to provide services to Smartshares to ensure a seamless transition for Craigs and QuayStreet clients.” said Beattie.
“Smartshares intends to maintain QuayStreet KiwiSaver as a standalone scheme.”
NZX-owned SuperLife KiwiSaver (the new default provider) reported about $1.8 billion under management at the end of October, while the QuayStreet scheme had about $250 million.
QuayStreet, which has a distribution deal with Craigs, will be absorbed by Smartshares over the next three years and will cost about $4 million in integration costs, according to NZX presentations.
NZX analysis suggests that local fund managers need between $15 billion and $20 billion to reach optimal efficiency, Peterson said.
NZX has been offering index ETFs since the late 1990s and built a larger passive empire in 2014 with its $30 million purchase of SuperLife, but the narrative is changing again with QuayStreet’s foray into the boutique active management space. It has been changed.
Smartshares biggest earner For the NZX in the September quarter: The fund business is projected to account for more than 40% of group earnings in the second half of this year, compared with 21% in the first six months of 2022.
However, NZX’s investment management and expansion into management will incur significant costs, including ongoing costs and acquisition costs.
NZX’s chief financial officer, Graham Law, told investors last week, “We are facing cost pressures, but we have been managing costs to limit or postpone our growing cost base.” .
“Inflationary pressure on costs has forced us to aggressively manage or reschedule our activities,” Law said.
About 67% of NZX’s costs are staff related. Across the group he has just over 290 people, with Smartshares around 70 and Wealth Technologies around 80.
Since purchasing the platform, formerly known as Apteryx, for $1.5 million in 2015 from parties related to the now-deceased NZAM hedge fund manager, NZX has invested more than $30 million to build its new technology system. Posted capital development costs.
https://investmentnews.co.nz/investment-news/nzx-ponders-platform-sale-quaystreet-scale/ NZX considers platform sale, size of QuayStreet