NZX focus on ETFs

NZX will launch three new exchange-traded funds over the next three or four months, its chief executive says.

Tuesday, February 17th 2015, 2:16PM

by Susan Edmunds

NZX today reported its full-year results for the year ended December 31.

Revenues for the year of $65.2 million were up 3.8% on 2013, driven by growth in NZX’s capital markets and funds management businesses.

Chief executive Tim Bennett said: “2014 was a good year across all of our businesses. Excluding the impact of the Government share offer programme in 2013 and 2014, new capital listed was up 87.1%, agri advertising revenues were up 8.1% and fund management revenues were up 10.5%. We also completed the acquisition of SuperLife, which will accelerate the development of the exchange-traded funds market in New Zealand.”

In January, NZX completed its largest acquisition to date, purchasing passive superannuation funds manager SuperLife.

SuperLife and Smartshares together have nearly $1.7 billion of FUM and, of this, more than $400 million is in KiwiSaver funds.

Bennett said ETFs provided simple, transparent and low-cost investment options for investors.

A broader range of traded products in New Zealand would also increase liquidity in the market.

Bennett said: “NZX is focussed on creating a vibrant exchange-traded funds business within the NZX Group that will ultimately increase market liquidity, stock lending opportunities and provide greater choice and cost effective diversification for investors. Our success here will be driven by the introduction of a broader product offering, lower costs, and effective distribution and marketing efforts which are now under way.”

He said he was looking forward to growing the ETF part of the business of 2015.

By the end of the year, NZX would aim to offer a range of asset classes including fixed interest and equities in New Zealand and offshore, he said.

Bennett said NZX was working with external providers to develop a broad range of ETFs that were tradeable on the NZX. “We expect to launch three new funds in the next three or four months and have a much broader range by the end of the year.”

Growth in ETFs could come from other parts of the market.

He said lots of KiwiSavers were in cash and fixed interest investments and high net worth individuals were investing offshore. There were also opportunities in the $100 billion under management in the NZ funds management sector.

NZX is recruiting for someone to lead the ETF side of the business.

During 2014 Smartshares funds under management grew by 40.4% while units on issue were up 45.9%. Excluding the two new ETFs launched in December, FUM and units on issue were up 15.7% and 11.1% respectively.

Sam Stanley, head of exchange products at NZX, expected strong demand for ETF products from the market. In other countries, such as Australia, demand for passive investments had grown exponentially, at the expense of actively-managed options. "They're a small part of the market but their growth is significantly higher. New Zealand will follow but a while behind."

He said the new NZX products were due to be launched before Easter. "With the two that launched before Christmas, the five new products doubles the number of products we have had since about 1996 in the space of six months. We have a pretty aggressive pipleline of products to come to market Hopefully that will raise interest levels."

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