… as NZX taps PIMCO and Nikko for ETF mandates

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Aaron Jenkins
PIMCO has picked up NZ$120 million (A$114 million) in seed money as manager for the soon-to-be-launched Smartshares new global fixed income exchange-traded funds (ETFs).
According to offer documents for the Smartshares Global Bond Trust, the NZX-owned ETF operator would tip in “an initial deposit of $120 million in cash” to fire up the fund, due for lift-off next week.
An NZX spokesperson confirmed its subsidiary funds management arm, SuperLife, would seed all four of the new Smartshares products announced last week – as per its previous round of ETF launches this year.
While the world’s largest fixed income manager, PIMCO, scored the global bond mandate, Smartshares selected Nikko Asset Management as manager for the new NZ Bond and NZ Cash ETFs, also scheduled to hit the NZX boards on November 12.
The Smartshares New Zealand Property Trust – the fourth of the group’s new ETFs – will track a newly-designed S&P/NZX Real Estate Index, the offer document says.
With the exception of the NZ Cash ETF, which carries an annual management fee of 0.33 per cent, all the new Smartshares products have been priced at 0.54 per cent, plus some establishment fees.
Despite the index-hugging nature of ETFs, the Smartshares PIMCO-managed product will target a 1 per cent outperformance of the NZ dollar hedged Barclays Global Aggregate benchmark over rolling three-year periods. The NZ Bond Trust has a target to “outperform” the S&P/NZX A-Grade Corporate Bond index over rolling three-year periods while the NZ Cash ETF is also expected to beat its benchmark – the NZX 90-day Bank Bill index – on rolling one-year periods.
BNP Paribas provides custody and fund admin to the new ETFs with Trustees Executors taking on trustee duties.
With the latest round of fund launches, Smartshares now has 23 ETFs on offer.
In a statement, Aaron Jenkins, NZX head of funds management, said: “These four new Smartshares ETFs mean investors now have access to a comprehensive selection of global and domestic ETFs across the main investment asset classes of Cash, Bonds, Shares and Property.”
According to the latest NZX quarterly results, the Smartshares ETF business grew 9.5 per cent over the three-month period to the end of September. Of the total NZ$909 million invested in Smartshares products at September 30, NZ$482 million was sourced via SuperLife, the NZX data shows.
SuperLife reported funds under management of $1.3 billion, split between NZ$434 million in its KiwiSaver fund (up 19.8 per cent over the previous 12 months) and almost NZ$900 million in the traditional superannuation product (an increase of 2.9 per cent year-on-year).
Over the quarter, the NZX reported funds management revenue of over NZ$2.4 million (up almost 250 per cent compared to the September 2014 quarter) and NZ$7.28 million in the 2015 calendar year to date, representing a 280 per cent increase over the same period last year.
For the first time the NZX accounts also included revenue from its recently-purchased funds administration platform, Apteryx. According to the NZX accounts, Apteryx – previously known as Amadeus and owned by NZ Assets Management before being bought out by individuals associated with the firm last year – contributed NZ$345,000 in revenue over the quarter.
The NZX paid NZ$1.5 million for Apteryx this August “with a further NZ$2.5m payable if funds under administration reaches NZ$3.0b and annualised revenues reach $3.0m by September 30, 2016”, according to an announcement at the time.
An NZX spokesperson said Apteryx was a “valuable industry technology solution that will provide excellent infrastructure for the financial adviser community”.
“We are busy marketing the product to prospects,” the spokesperson said. “We haven’t got an update beyond that at the moment.”
The NZX was also still awaiting approval from the UK tax department to transfer a dozen members of its now-closed Smartkiwi KiwiSaver scheme into other funds.
-David Chaplin, Investment News NZ

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