NZX Smartshares lifts FUM 29% in six months ended June

NZX says its Smartshares subsidiary “continues to go from strength to strength,” reflecting positive cash flows and returns as well as the QuayStreet acquisition.

Friday, August 25th 2023, 10:51AM

Funds under management (FUM) at June 30 were up 29.1% since Dec 31 at $10.67 billion. Excluding QuayStreet, FUM was up 10% with net cash flows up 2.7% and a market return of 7.3%.

Smartshares contributed $7.9 million to NZX's earnings before interest and tax in the six months ended June, up from $4.6 million in the same six months a year earlier.

The business includes the SuperLife business and the ASB Superannuation Master Trust – NZX aquired the management rights for the latter in February last year.

NZX is targeting 14% growth in FUM this year, excluding acquisitions, and a 22.8% compound annual growth rate, excluding acquisitions, over five years.

In the month of June, Smartshares launched five new exchange-traded funds (ETFs), giving investors more options.

NZX says the ETF penetration rate in New Zealand remains low compared to the US and Europe.

Smartshares ETF trading accounted for 6.1% of the value traded on NZX in the six months, up from 5.7% in calendar 2022.

NZX expects the KiwiSaver growth profile will significantly increase total FUM.

NZX completed the QuayStreet acquisition in February, paying a mix of shares and cash totalling $31.25 million and with a potential earnout of $18.75 million.

It added about $1.6 billion to FUM when the purchase was announced in November last year and chief financial officer Graham Law says it experienced “significant funds growth” in the six months.

It contributed $632,000 between February and June to NZX earnings.

Smartshares' new chief executive, Anna Scott, starts in early September. Her previous role was chief operating officer at Hobson Wealth.

NZX Wealth Technologies

The Wealth Technologies arm signed up five clients in the first half which will be transitioned onto the platform through the rest of this year and into 2024.

“The pipeline remains strong for the second half of 2023 and 2024 and we remain confident of being cashflow (and net profit) positive by late 2024,” NZX says.

Funds under administration grew 8.7% in the latest six months with net cash flows up 0.9% and a market return of 7.8%. But the business lost $3.1 million, up from a $2.1 million loss in the previous first half.

The Wealth Technologies long-term growth prospects continue to strengthen, it says.

While NZX did consider whether a strategic partner could enhance the Wealth Technologies business, this is no longer a priority and discussions “with a limited number of parties” have concluded.

QuayStreet accounted for about a third of the 16.9% increase in total NZX revenue to $54 million.

Additional amortisation, including relating to NZX Wealth Technologies client migrations and Smartshares acquisitions were mostly the reason the stock exchange operator's first-half net profit fell 5.6% to $7 million.

Its operating earnings were up 15% at $20 million, tracking towards the upper end of NZX's full-year guidance of $36 million to $40.5 million.

Tags: NZX