NZX Smartshares's funds under management topped $4 billion last year, aided by strong returns from a bull market. Photo / File
NZX Smartshares's funds under management topped $4 billion last year, aided by strong returns from a bull market. Photo / File
Smartshares, the NZX-owned business that runs exchange traded funds (ETFs), superannuation and KiwiSaver services, said its funds under management hit $4 billion last year - up 35 per cent or more than $1 billion over the previous year.
The business, which is run separately from the NZX, said thegrowth has come from strong inflows to Smartshares' Exchange Traded Funds (ETFs) and the SuperLife superannuation and KiwiSaver schemes, together with the returns generated for investors.
The investment community has long argued the virtues of active funds management - where stocks are selected on their merits - and passive, where stocks are bought and sold purely in accordance with their relative weighting on an index, often through ETFs.
Smartshares chief executive Hugh Stevens said the the year-on-year growth was "best possible advertisement for index-tracking funds".
He noted the rise of passive investment globally due to both strong performance and typically lower management fees.
While ETFs are currently less than 4 per cent of the total value of listed equities and funds traded on-market in New Zealand, in the US index-tracking funds overtook the value of actively-managed stock funds in the second half of 2019.
NZX Smartshares funds under management grew by 35 per cent last year. Photo / File
"We see plenty of further growth potential in New Zealand with an increasing number of investors benefiting from low fees while gaining immediate diversification from Smartshares ETFs, and advisers using them as key building blocks of bespoke portfolios for clients," he said.
Nearly 120,000 New Zealanders invested in Smartshares' products, either directly or via SuperLife's Invest, KiwiSaver, Workplace Savings and UK Pension schemes, or through financial advisers and investment platforms such as Sharesies, InvestNow and ASB Securities.
Thom Bentley, Smartshares' client director - institutional, said the $1 billion improvement came from a combination of new inflows into its fund and the market's strong performance last year.
"The ETF business grew by 60 per cent last year, well ahead of the total business," he said. "That was a big part of the growth - a combination of market returns and new inflows.
"We are starting to see a lot more acceptance of ETFs as a tool for investors to gain access to the market," he said.
"It speaks to a lot more acceptance in the retail market about the benefits of ETFs and how easy they are to access," he told the Herald.
The NZX has faced criticism that the NZX should stick to running the exchange and encouraging new listings rather than offering passive investment alternatives.
Bentley said the original intention of Smartshares was to encourage more investment into the local sharemarket.
"And it's hard to argue that that objective has not been met," he said.
"That's a significant part of the business but at the end of the day, the NZX is a listed business and it needs to deliver returns to shareholders. Smartshares is a growing part of that."
Last year Smartshares - which has a separate board from the NZX - represented about 20 per cent the wider NZX company's turnover.
"What Smartshares is about is providing simple access to the sharemarket in a cost effective way, so we don't see that being a conflict between the two businesses," he said.
Bentley said Smartshares was not "dogmatic" about all the funds being passive - its global and New Zealand bonds funds are actively managed.
