The Kiwi Wealth KiwiSaver Scheme has become part of a select group of KiwiSaver providers investing in private equity. It joins Booster, Milford Asset Management, Simplicity, and CareSaver in incorporating unlisted New Zealand entities into their portfolios.
Kiwi Invest has become a cornerstone investor in Movac’s new technology fund by investing $54m in Movac Fund 5 – a $250m fund that backs New Zealand tech start-ups and growth companies. If you are a member of Kiwi Wealth’s KiwiSaver Scheme, you will now be supporting a range of New Zealand founded tech start-up companies.
Kiwi Wealth retail and product general manager says this is the start of the KiwiSaver fund’s progression into a more diversified portfolio. By allocating a small section of Kiwi Wealth’s KiwiSaver fund into Movac Fund 5, KiwiSaver members can invest locally and have the chance to access better return outcomes.
KiwiSaver industry opinions
Clive Fernandes, director of National Capital, noted that the move comes with both advantages and challenges. “I believe the venture capital market can yield greater returns if start-ups succeed, and it also enables KiwiSaver members to support local businesses. However, investing in local tech start-ups comes with higher risks due to the elevated rates of start-up failure.”
Booster principal, David Beattie, via a comment on the industry website Good Returns was of the opinion that lack of liquidity was not a significant issue for KiwiSaver when allocating only 1%-5% into Private Equity assets. “In our experience, the three main ‘challenges’ are: 1) daily pricing of the investments so that equity is maintained between daily money inflows and outflows; 2) daily income accruals for PIE attribution and PIR tax purposes; 3) high fees (typically 2% +20% performance fee). For a lot of private equity investments, these three issues are often deal breakers.”
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