Inside Money: Apteryx the administrator, or robot in disguise

Apteryx is the clever person's name for kiwi. Photo / Andrew Warner

Apteryx is the clever person's name for kiwi - the "only surviving representative of the order Apterygiformes", according to the internet.

And, in what may be a clever deal, last week the NZX bought one - or agreed that it might purchase the investment administration business now known as Apteryx.

Like its half-blind, nocturnal, flightless namesake, Apteryx the administrator isn't one for strutting about in public. Outside a certain sub-genre of financial professionals, the brand is unknown - even under its former name of Amadeus Asset Administration (which was a division of multi-management firm NZ Assets Management).

This week the NZX revealed more about its plans for Apteryx, including the purchase price ($1.5 million with an 'earn-out' based on the platform tripling its funds under administration - or FUA - to $3 billion by next September).

In an investor presentation, the NZX put the potential size of the market Apteryx rustles about in at $50 million per year in revenue. Collectively, Apteryx's two would-be rivals in the game - Aegis and FNZ - pulled in about $30 million from providing NZ investment 'wrap' services (collating, transacting and reporting on fund and share portfolios for financial advisory clients and institutions).

Apteryx could "significantly reduce entry barriers for new advisers, improve adviser efficiency and reduce compliance costs", the NZX presentation says.

A more intriguing possibility is that the system could also form part of a direct-to-consumer fund sales engine. According to my sources, Apteryx is already working on a direct investor product (as distinct from adviser-controlled) - so it's not such a stretch.

Elsewhere in the document, the NZX lays out its medium term objective of supporting "self-directed asset allocation" into exchange-traded funds (ETF) and KiwiSaver.

Whether a kiwi-centred robo-adviser can survive the evolutionary struggle ahead is the question.

The NZX is bulking up on both: via its newish acquisition, Superlife (which includes a mid-tier KiwiSaver scheme), and; its growing range of Smartshares ETFs - 10 to date with over a dozen, mostly offshore equities products, slated for release by year-end.

"Smartshares are not positioned to leverage either proprietary or intermediated retail distribution without the development of a stronger distribution proposition," some, probably well-remunerated, independent consultant told the NZX in July 2013.

The presentation document shows the NZX is attempting to redress its distribution failings by making a move into the advisory space: dealing with the humans, and probably the robots too. A popular emerging robo-investment model in the rest of the world marries simple, front-end asset allocation software with ETF-based investment portfolios.

In one Powerpoint slide, the NZX plots the "evolution of the adviser regime", which includes the observation that a "'Robo advice' regime for digitalised personalised advice delivery" is coming - the term is even highlighted in red on the accompanying graph, so it must be important. Whether a kiwi-centred robo-adviser can survive the evolutionary struggle ahead is the question.