The Kiwi Wealth KiwiSaver Scheme has joined a small group of KiwiSaver providers who have allocated funds to private equity. It joins KiwiSaver providers such as Booster, Milford Asset Management, Simplicity, and CareSaver who include unlisted NZ entities in their investment 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 said the move had both positives and negatives. “I believe the venture capital market can allow for greater returns if the start-ups succeed, it also allows KiwiSaver members to help local businesses. On the other hand, investing in local tech start-ups entails higher risk due to the high rates of start-up failure.”
Booster principal, David Beattie via a comment on the industry website GoodReturns 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.”