IXT Limited (ASX:IXT) Managing Director, Holly Grofski discusses the company's funds management service, which covers everything from establishment to operational and distribution services, the size of the market opportunity, strategy and IPO.
Jessica Amir: Hi I’m Jessica Amir for the Finance News Network. Today I’m with IXT Limited (ASX:IXT) Managing Director, Holly Grofski. Hi Holly, welcome to the Network.
Holly Grofski: Thanks for having me.
Jessica Amir: For those who haven’t heard of IXT, just give us a quick introduction?
Holly Grofski: IXT actually stands for Intelligence Times Technology. And the reason we’ve called it that is because we actually provide software and software-enabled services, for fund managers. So particularly for fund managers looking to bring a fund to market, or someone who already has a fund in the market. It’s a very complex regulatory space; so all our solutions and services are a combination of intelligence and technology. And we’re actually in the market at the moment; we’re doing a capital raise of $7 million. We’re looking to actually list on the ASX in December.
Jessica Amir: Before we talk about your products and services. Maybe you can tell us how big the funds management business is, the industry, and about the opportunity?
Holly Grofski: Well it’s big; it’s $1.6 trillion. And it’s actually growing every year by about 10 per cent year-on-year, according to the IBIS reports that are out in the market at the moment. What’s crazy is that Australia is actually positioned perfectly for this industry. One, because of our regulatory regime, it’s so robust. But also because of our superannuation, which is just a funnel of cash into the funds management space year-on-year.
What we’re seeing actually on top of this growth is the challenge that a lot of fund managers are facing. Is not how to bring the compliance factor into the adaption of the technology, rather than the adoption of that technology, which is really crucial. So when you add that in with the increased pressure on costs, as performance from traditional investments are real. It has been failing for the last decade and likely will continue to fail for the next few. You’re really competing against a lot of ETF funds and a lot of funds that have low costs internationally.
So you’ve got a lot of smaller managers who are going, how do I compete? How do I bring my product to market that’s a little bit different? I know there’s an appetite for it, but where do I go to get my services to bring that fund to life? And that’s where we’re competing, because a lot of big end of town, this is how they do business, they won’t change for the little guys. So we’re helping bring some products to life that may not of actually made it, including for example one of our clients called, CoVesta, which is a fractional property fund. It actually gives first homebuyers a chance to get in the market.
So we’re really excited, because we can bring that big end of town compliance and Regtech robust processing systems, but help bring innovative products to market for consumers, who really really want them.
Jessica Amir: Now can you tell us about the two businesses that you’ve purchased, starting with GFM Management?
Holly Grofski: So GFM Management is what’s called in the industry, an independent responsible entity. Or RE for hire, which is what people tend to search for. And they’re really critical to bringing your product to life; they’re necessary as a trustee and for compliance oversight. The second product is FUND.ID. Now FUND.ID is a pure fund administrator, but it’s also a fantastic technology play. We’ve actually had to build our own on board in software, for the client experience to be seamless. And we’re actually the only one in the market right now that can, hand on heart say, that we offer a straight through client process experience, because of these two acquisitions.
Jessica Amir: Now can you tell us about your strategy and who your competition are?
Holly Grofski: What I love about our strategy is probably the more less obvious fact, which is actually the industry is becoming more and more siloed. So for your typical fund manager who says, hey I’ve got a great idea, I want to take a product to market. They go and then see a lawyer who then gives them a whole bunch of directions, in 10 different directions that they then have to go. Whether it’s – they need lawyers, they need auditors, they need an insurance company.
What we can do compared to all of our other competitors who can’t, or just choose not to for some reason, is actually be a strategic partner. For all these fund managers who say, we’ve got a great product, help me bring it to market. That’s one of our biggest competing abilities that we’ve got, that we’re looking forward to challenging the current market incumbents with. A lot of them are too big, if I can say it’s probably care for the smaller end of town, and actually offer services that are competitive.
That combined with our end-to-end, straight through processing for clients, means that when our independent fund managers, secure their clients and distributions and other services we offer, and that’s a huge competitive advantage also. But we actually make sure that those clients get on board it. That pain of a client being on board it is taken away, compared to our competitors who simply just don’t have the same technology, to compete right now.
Jessica Amir: Now to the IPO. How much are you looking to raise and how will the funds be invested?
Holly Grofski: We’re looking to raise $7 million or $3.7 as a minimum, at a value of 20 cents per share. This will give the company a market cap of somewhere between $18-20 million, once we list in late December. What we intend to spend those monies raised on is R&D for our tech, to keep us ahead of the competitors, as we currently think we are, and also on some potential acquisitions. We think we can use those funds and our listing, as a way to help corner the market over the next two years, in a way our competitors who are siloed in their services to the market, currently can’t even try to do.
Jessica Amir: What are the key dates and how can people get involved?
Holly Grofski: If people want to invest, they can reach out to their broker or they can reach out to our lead manager, Sequoia Financial Group (ASX:SEQ). Or they can visit our website.
Jessica Amir: Lastly Holly. Why should people consider investing in this IPO?
Holly Grofski: IXT is actually a great combination of financial services and Regtech. Which means we’re going to see significant growth, or we think we’re going to see significant growth within the next two years. We’ve got enormous pipeline contracts. We’ve got enormous market to go and chase and shoot fish in the barrel, so to speak, in securing those contracts. Because we have the technology they're wanting to solve their pain points. We have a fantastic Board; some of the members on it have worked internationally. We’ve got one there Ralph Horne; he’s actually grown one of his companies from three products to 33, across 23 different jurisdictions.
So we’ve got fantastic Board. We’ve got management that’s aligned with shareholders. I’m not going anywhere, I’m significantly invested in this company and I see the growth potential, and also the growth in the next 12 months that’s going to fall into place. So I think it’s a nice asset for people who are looking to invest in tech, but tech that actually solves a problem. Tech that’s not just glossy, tech that the market actually wants and a market that’s $1.6 trillion in size, so that’s why.
Jessica Amir: Good luck with the IPO; we’re looking forward to seeing you come on. Holly Grofski, thank you so much for your time.
Holly Grofski: Thank you very much.