Forsyth Barr flags fee pressure and overvalued wealth tech at NZX

NZX’s funds management fees are coming under greater competitive pressure and the share market operator has spent more on its wealth tech platform than it’s actually worth, according to Forsyth Barr analyst Ben Crozier.

Crozier also thinks investors have under-appreciated that over the last five years NZX’s earnings before interest, tax, depreciation and amortisation (ebitda) have shifted from 90% coming from capital markets to about 40% coming from funds management.

“With funds management generating lower returns, more cyclical earnings and higher competitive pressures, it represents a lower-multiple earnings stream,” he says.

He notes the emergence of other lower-priced KiwiSaver passive fund operators, such as Simplicity and Kernel Wealth, which have taken “meaningful share of the passive KiwiSaver market” and are putting pressure on the fees charged by NZX funds management division Smart.