NZX stands by funds business

Elevation Capital founder Chris Swasbrook this week called for the stock exchange operator to sell its funds business and focus on its core operations, slashing spending and reducing head count.

It said NZX’s non-core business segments, such as funds services, were generating about 30.5% of revenue but only 10% of operating earnings. The businesses were subscale, had few barriers to entry and lower margins than NZX’s core business, it said, but at the same time NZX was having trouble growing them.

Being an exchange market operator was a different business to operating a funds service firm, Elevation said, requiring different management and board skills. But spun off, that new funds management company would compete fully in the marketplace via the acquisition of active funds management businesses, private equity and/or venture capital businesses. It could also develop a fund seeding and incubation business to capitalise on investment made in regulatory compliance.

NZX chair James Miller responded with a letter to shareholders, in which he said the board was conscious of the need to improve returns to shareholders.