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Research prospects good: Stanley

As the funds management industry grows in New Zealand, the demand for good quality research will grow with it, says the head of NZX research arm FundSource.

Saturday, February 22nd 2014, 6:00AM

NZX on Friday posted a 22% increase in net profit for 2013 to $12.1 million.

Sam Stanley said it had been a strong year for FundSource.

He said it was reported as part of NZX's data services, of which it was a small component.

Data revenues were down 0.9% to $8.9 million. NZX said that was due to primary data distributors declining 7.7% during the year to 24. Real-time data terminals increased by 6% to 7921, which NZX said indicated renewed interest in capital markets.

He said a focus had been on maintaining its clients base and growing its reach. “It’s a pretty competitive industry but we managed to grow the business and the number of clients.”

FundSource was trying to raise the value of its brand, he said. Focus had been put on going out and meeting clients, something that had not been done often enough in the past, he said.

“That’s been well received, as has the quality of our research.”

There were no new credible research houses entering the market, he said, but those that were operating in the space were strong competition.

“But the funds management industry is growing strongly, with KiwiSaver and the capital markets appreciation we’ve seen, FUM has grown. The demand from the market for good quality fund management research is growing.”

The FMA’s requirement for independent research would also boost research houses, he said.  “There’ll be more demand for research rather than less. As funds grow they’ll see the necessity to get their product out there and have analysts visiting.”

Meanwhile, revenue for SMART shares - the NZX's exchange traded fund (ETF) - was up 8.8 per cent. NZ chief executive Tim Bennett said more investors were willing to invest across a range of asset classes, and the exchange's ETFs were benefiting because of that.

NZX's fund services brought in $2.458 million in revenue for the year, up from $2.260 million a year earlier.

The launch of two new funds management products in 2014 is anticipated to drive growth in funds management beyond 2013 levels.

“The medium-term growth opportunities are significant across most of the businesses that NZX is involved in, in the capital markets the impact of KiwiSaver and an increased savings rate is underpinning a structural shift in the supply of capital," Bennett said.

"Coupled with this, the Financial Markets Conduct Act provides the flexibility to introduce different types of marketplaces. In addition, the opportunity to develop a meaningful derivatives business remains a key area of focus for NZX.”

Bennett said the growth in KiwiSaver was expected to result in double-digit growth in the funds under management in New Zealand.

“NZX is currently the sole provider of exchange traded funds in NZ which are significantly under-represented in the investment environment here relative to overseas.”

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