KiwiSaver

Generate is the third KiwiSaver scheme to invest in venture capital putting $20 million into New Zealand’s largest VC firm Movac.

The investment will go towards Movac’s Growth 6, a later-stage VC fund for private Kiwi tech companies needing to grow.With $3.5 billion in KiwiSaver funds under management, this first foray into VC will form a small part of Generate’s Australasian equity allocation, with exposure across all of its KiwiSaver funds except the defensive fund.

Sam Goldwater, Generate’s lead portfolio manager and executive director, says the move looks beyond the current volatile economic cycle. “VC is a long term investment and Movac will invest the funds over the next few years. Our long term strategy involves investing a small portion of our funds in Kiwi venture capital, in particular innovative Kiwi tech companies.New Zealand is producing some incredible technology companies, we want our members to be part of that and help fund NZ Inc. I wouldn’t surprise us to see other KiwiSaver funds make similar investments.”

Movac Partner Mark Vivian says Growth 6 has attracted more than $100 million in the past ten weeks including $70m from NZ SuperFund (it’s third with Movac) and $20 million from Annuitas, which manages the Government Super Fund and National Provident Fund.

“As KiwiSaver schemes grow they’re looking for more or higher return asset classes to invest in. Private company investment in VC can be a pretty good investment over four to ten years plus. We see about 300 investment opportunities a year, by and large in New Zealand or if not they have a New Zealand connection.

“In volatile times we actually see entrepreneurship increase. Obviously because people are restructured out of existing employment, and also because people see obvious gaps in the market. All four of our funds have been top decile globally when it comes to cash returns.”

In 2020 institutional KiwiSaver fund Kiwi Wealth put $54m into Movac’s Fund 5, along with NZ Super Fund ($70m) and NZ Growth Capital Partners ($30m) which manages the Government’s Elevate NZ Venture Fund.

Movac investments include Tradify (job management), Alimetry (gastric ailment solutions), Dawn Aerospace (green propulsion tech), ZeroJet (world’s first electric jet propulsion for boats), and Atomic (low-code customer experience platform).

Not-for-profit KiwiSaver Simplicity was the first KiwiSaver provider to dip into the VC world when it committed $100m and took a small stake in  Icehouse Ventures in 2019. The Icehouse. It has now invested $25m of that and separately it has put $10m into private equity with two companies, Quantify Optomics which tests fiber optic cables, and Reliable Foundations, a provider of residential concrete foundations. All private equity and VC investment is done through Simplicity’s wholesale fund which is entirely funded by its KiwiSaver Growth Fund and Growth Investment Fund. Simplicity head Sam Stubbs says annualised returns since the fund launched three years ago are 9.5%.

“This is a logical well proven asset class for patient and long term investors. We’re very patient animals so we’ll take our time. KiwiSaver providers should absolutely look at this area. KiwiSaver members should be rewarded for having their money locked up. They should be in higher risk, more illiquid investment and get higher returns from long term money in the form of VC, private equity, infrastructure and housing. Most KiwiSaver providers are lazy and want to keep that liquidity.”

Big KiwiSaver managers continue to ramp up use of digital tools to steer jittery investors and beleaguered KiwiSaver members onto the right investment path.

New Zealand’s second largest KiwiSaver provider ASB is launching a new KiwiSaver advice tool on its mobile app and online banking platforms and Kiwi Wealth has incorporated the Atomic.io messaging system into its online portal.

ASB Head of KiwiSaver Distribution, Hamish Davidson, sees ASB has seen a lot more correspondence in the past 12 months around market volatility.

“With Covid, KiwiSaver customers right across New Zealand tended to overreact and change their funds which may or may not have been the right thing to do. So we’ve tried to engage with a lot more people over the phone. This time not as many have moved to more conservative funds as they did when Covid broke out.”

Davidson says partnering with BlackRock has provided more access to information which the bank has shared with customers.

“We know for a fact there are still a lot of people in New Zealand who don't necessarily understand KiwiSaver or don't use it as effectively as they possibly could.”

ASB research in the third quarter shows Kiwi are not confident in their retirement plans with 64% believing they need to be saving more for retirement and around a quarter (27%) having a clear idea how much money they’ll need. Of the almost 1000 New Zealanders surveyed, only 23% say they have a good overall understanding of KiwiSaver.

The digital tool will allow customers to do a bit of a sanity check themselves and self-service with personalised information on the right KiwiSaver fund and contribution level. They will also be able to make changes but if they still need to talk to someone they will call and talk to a specialist.”

Meanwhile Kiwi Wealth says it is already seeing customer behaviour change through use of its new messaging platform.

Chief executive, Rhiannon McKinnon, says during periods of market volatility, making short-term decisions can cost investors significant returns over the long run.

“Our commitment to reach customers on their terms and with the right support helps them make good decisions to grow and protect their long-term wealth.”

Kiwi Wealth has sent 1.4 million targeted, personalised messages with information. McKinnon says of the viewed messages, 25% have led to direct action, such as using digital advice tools to review their fund choices and risk appetite.

A recent test showed a 22% increase in customers using digital advice to help them select the right fund.

Kiwi Wealth joins ANZ, BNZ, Kiwibank and Southern Cross Health as users of the Atomic messaging platform. Digital advice tools are also available from BetterSaver, kōura Wealth, Nikko Asset Management and Milford Asset Management.

One day after Sharesies announced its entrance into the KiwiSaver market early next year, 7000 people have joined its waitlist, the bulk of them existing members of the online investment platform.

Sharesies has a team of 15 to 20 people working on the main build of its KiwiSaver scheme which will include funds focused on active growth, indexed funds and ethical funds alongside conservative, balanced and growth. Pathfinder, SuperLife and Pie Funds are locked in as providers and there are ongoing talks with other fund managers.

Sharesies KiwiSaver members will be able to spread their investments across multiple funds, says Sharesies co-founder and joint CEO Leighton Roberts.

“We've worked really hard on our brand to connect with people and support them in good decision making. We’ve got an audience now that we think is engaged, all right level.”

About 65% of Sharesies customers are under the age of 40 and skewing older over time and Leighton says they’re finding more of their customers are coming to the platform through financial advisers.

“Sharesies research has found that many customers feel locked out of advice due to lack of confidence or the expense. We want people to have good outcomes and advice is part of that. We’d like to work with advisors because we now have the reach to an audience that is  really engaged and interested.”

Kantar research done for Sharesies last month found that the platform's users were more likely to switch KiwiSaver providers in the past at 54% to get better returns and lower fees, compared to 40% of the general public. Its users were also more likely to make larger contributions to KiwiSaver with almost half saying they contribute more than the minimum 3%. More than half of Sharesies investors also believed they would need more than a million dollars to fund their retirement compared to 39% of New Zealanders in general.

“We've been doing that research for the last three or four years, and people are really building confidence. Things like switching comes from confidence, things like putting more than your minimum contribution, again, comes from feeling confident about what you're going to be doing and what you're going to get out of it.”

But Roberts says Sharesies does not encourage or drive switching behaviour. “Our ethos has always been small amounts over a long period of time, which sums up KiwiSaver perfectly. All that being said, you know, it is diligent for people to look at who their providers are at any time and make sure that it still suits their needs.”

Given the younger demographic, ethical investment is likely to be popular with Sharesies members but there’s a lot of confusion about what constitutes ethical.

“I think we can all agree that ‘responsible’ has become a bit of a tagline. Early research showed us that responsible was such a hard word to engage someone with because responsible to me and responsible to you are quite different. In our founding group, the six of us, none of us could agree what it means.

“We'd like to talk more about supporting people to invest in line with their values. So we will be making it clear, transparent and upfront about what people’s money will be going into and that way people can make a good decision on that. All that said, one of the funds we've got on is the Pathfinder Fund, which has won the sustainable response investing award in New Zealand for the last couple of years”

Currently the Shares investment platform is used by more than 10% of New Zealanders with $2 billion funds under management.

Sharesis has been granted a managed investment scheme licence and plans to roll out a KiwiSaver scheme next year.

Sharesies will be launching a KiwiSaver scheme in the first half of 2023 with Kiwis able join the waitlist for early access.

The KiwiSaver scheme is described as a natural step in Sharesies evolution since it launched in 2017 and its co-founder and 3EO, Leighton Roberts says it was always their intention to broaden offerings to include a range of money opportunities so everyone can grow their long-term wealth whether they have $5 or $5 million.

“KiwiSaver is an amazing initiative and we’d like to see people become more engaged with theirs. It’s where most Kiwis are regularly investing, yet when we asked people about their Kiwisaver account many didn’t feel connected to this investment.”

Since launching, Sharesies has helped to build a more confident and experienced community of investors by removing the barrier that prices and jargon people out of other financial markets and it aims to do the same for KiwiSaver members.

“Sharesies believes in encouraging and supporting people to take more control of their financial destinies. We’re starting with the basics like we did with share trading by offering a choice of funds and in time we’ll be adding more fund options,”

We’ve partnered with a number of experienced fund managers to provide a range of active and passive managed funds, covering conservative, balanced and growth style, plus an ethical focus.” says Roberts.

Mint Asset Management head of sales and marketing, David Boyle says the scheme is an iteration of where KiwiSaver is evolving and it comes down to distribution channels and the range of platforms and ways to access it.

“I see it as part of the way we get more Kiwis saving. I think it’s a good start and the thing about getting more people connected to their KiwiSaver is not a bad thing if they haven’t been before, but as balances grow they are going to need more face to face with an adviser in the future I think.
He says the scheme shouldn’t be a surprise given Sharesies large customer base-especially with younger people.

“I don’t see it as a negative or something that will materially impact the advice sector, I just see it as another area of access to a product and we want to see more Kiwis use it. But we need it to get started and all credit to any organisation that has the ability to give face to face advice or an option that sits and fits with people's current needs. It's an evolving industry and digital is just part of it.

It's not a silver bullet when it comes to advice but I think it’s a great way to compliment it. “

Sharesies wil provide practical information and educational content to help grow confident investors and it aims to be as transparent as possible which includes letting members look under the bonnet of their KiwiSaver account to see how it ticks.