Smartshares Grows Funds Under Management by 8.2% Amid Market Recovery

Highlights:

• Significant FUM Growth: Smartshares, part of NZX Limited (NZX: NZX), increased its funds under management by 8.2%, reaching NZ$11.88 billion between December 2023 and June 2024, with market improvements contributing 6.3% to this growth.
• Quay Street Brand Expansion: Despite slower-than-expected growth in a challenging economic environment, Quay Street, acquired by NZX in 2023, is seeing net inflows build and revenue exceed acquisition projections.
• Wealth Technologies Success: NZX’s Wealth Technologies platform experienced a 23.2% growth in funds under administration, reaching NZ$14.21 billion, with continued strong client interest and new migrations driving future revenue expectations.

FUM Growth and Market Performance

NZX Limited’s (NZX: NZX) Smartshares funds management business reported an 8.2% increase in funds under management (FUM), reaching NZ$11.88 billion between December 2023 and June 30, 2024. This growth was driven by a 6.3% improvement in market conditions. By the end of July, Smartshares' FUM had further increased to NZ$12.3 billion, according to Chief Executive Mark Peterson.

Quay Street Products and Revenue Impact

Smartshares has introduced several new products under the Quay Street brand in collaboration with Craigs Investment Partners, which sold the Quay Street business to NZX in February 2023. Although the cash flows from these products are beginning to build, Chief Financial Officer Graham Law noted that Quay Street’s growth has been slower than anticipated due to challenging economic conditions. As a result, NZX has written back NZ$7.3 million of the potential NZ$18.75 million earnout provision for the period ending November 2024 and will reassess the targeted earnout for 2025.

Despite this, Peterson highlighted that Quay Street is performing well, with net inflows increasing and revenue exceeding the acquisition business case.

Wealth Technologies Platform Expansion

NZX's Wealth Technologies platform also showed strong growth, with funds under administration rising 23.2% to NZ$14.21 billion in the first half of 2024. This increase was fueled by new client migrations and cash flows, accounting for 16.7% of the growth. The platform has migrated five new clients in six months, bringing the total to 25 active clients, with two more signed up.

NZX expects annual recurring revenue of NZ$13.47 billion once all contracted clients are fully migrated, and the company remains optimistic about future growth from new business in Wealth Technologies.

Revenue and Earnings Growth

Smartshares contributed NZ$21.3 million to NZX’s total revenue of NZ$57.9 million, with revenue growing by NZ$3.3 million (6.1%) and operating earnings increasing by NZ$0.8 million (4.1%) to NZ$10.7 million. Meanwhile, the Wealth Technologies business saw a 2.2% rise in revenue to NZ$4.2 million, with operating earnings up 6.9% to NZ$1.4 million, although it still reported an operating loss of NZ$3.2 million.

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