Private equity, not govt mandates, KiwiSaver’s future: Managers

New Zealanders’ KiwiSaver savings would do more for the country if they were used in private equity deals, fund managers say.

Finance Minister Grant Robertson, speaking at Russell Investments’ annual conference, said New Zealand needed to do better at keeping KiwiSaver  money in New Zealand.

He said central and local government could help by packaging up projects such as infrastructure development so fund managers could get the yield they need. Work was under way in that area, he said.

John Berry, of Pathfinder Asset Management, said he would not support moves to push fund managers to invest their money in any particular location.

“That’s the fund manager’s call – they’re acting in the best interests of their clients. They need to assess the risk and return relative to that. You can’t just politically mandate a certain percentage to be held in New Zealand.”

But he said there was merit to the idea of more private equity investment.

“The money that is invested in New Zealand should be accessible to small-to-medium businesses and high-growth companies.”

Some KiwiSaver managers are already doing this – Booster and Milford are two. Booster last year took stakes in two wineries through its Booster Tahi fund.

It was a way to help members’ returns and support New Zealand business, chief investment officer David Beattie said.  About 5% of Booster’s KiwiSaver funds on average would go to direct investments but that would increase over time.

“We think KiwiSaver does lend itself to being able to support unlisted businesses in New Zealand.”

KiwiSaver was a long-term investment vehicle so Booster could use that certainty to allocate funds to less-liquid direct investments with a reasonable degree of confidence.

But he said it would not be able to put a lot in to private deals because the scheme allowed members to change at will and there was the requirement for daily unit pricing.

“The concept is one that is a natural benefit that KiwiSaver money should be able to be used to support New Zealand.”

It was a more expensive approach, too.

Beattie said there was a lot of talk about the growing size of KiwiSaver putting pressure on fees but he said instead of automatically defaulting to the need for those fees to drop, the market could consider what more could be done.