Calastone continues to grow throughout Australasia following the strong reception from New Zealand where several of the nation’s leaders in funds management are now sending and receiving orders across the network.
New Zealand lit up as our 29th market in May 2016, following demand from Australian and international fund managers wanting a safer and more seamless interaction with the market. Like all new Calastone markets, incumbent and archaic practices such as fax, phone and email had been the traditional, yet inefficient means of order-routing in New Zealand, presenting counterparties with considerable risks, unnecessary costs and a curtailed opportunity set.
Within months of our launch however, major investment platforms Aegis and FNZ, and fund administrators MMC and Public Trust were transacting domestic and international orders automatically. We’ve just expanded this connectivity with the addition of major platform Rabobank. This critical mass of order ‘senders’ augers well for increased buy-side participation, spanning the domestic market and international funds looking to expand distribution reach to New Zealand.
Our strong market momentum has also helped raise discussions around inefficiencies and risks that preside in the market, including the current transfer impediments associated with New Zealand’s NZ$35 billion national retirement savings scheme, KiwiSaver.
If a KiwiSaver member requests that their savings be transferred to a new provider, their current provider has 35 days to make the transfer after receiving notice, however this can often be too tight a deadline for firms due to archaic processes and systems. We are hoping to fast track a solution for this by leveraging the successful launch of our Transfers Solution in Australia where connectivity has already seen the typically two-week in-specie transfer process be completed in some instances in just 14 minutes.
By adapting this Australian solution to the KiwiSaver market, we expect to reduce the processing time it takes to move member data between KiwiSaver providers from weeks to days. With 2.5 million active KiwiSaver account holders and an average of 150,000 transfers per annum, there is a significant opportunity to improve efficiency and reduce cost for providers and their members. We expect to be able to launch a solution for Kiwisaver mid-year.
In addition to Kiwisaver, we are in early discussions with platform providers in New Zealand around automating the movement of holdings across platforms which would eliminate laborious paper-trails and avoid exposure to market movements while the transfer is executed. As transfers do not trigger a Capital Gains Tax event in New Zealand, like they do across the Tasman, it is somewhat a less painful process for domestic participants, but nevertheless, it is an area where automation can bring greater efficiency.
The experience of introducing and growing Calastone in New Zealand has been incredibly exciting and rewarding. Calastone’s technology is a genuine game-changer for New Zealand’s managed funds sector, bringing operational scale and connectivity to firms without the need for them to build or reengineer supporting systems. We are the ‘universal adapter’ that allows participants of all sizes and jurisdictions to seamlessly transact orders, regardless of what middle office systems they use.
We are excited about the progress and potential in New Zealand and look forward to continuing to collaborate with clients to develop technology solutions across all aspects of the transaction lifecycle and back office.