KiwiSaver

Kiwi Wealth KiwiSaver has committed up to $50 million to leading investment firm Pioneer Capital with a focus on New Zealand businesses exporting high-value products and services in large international markets.

The commitment is part of Pioneer Capital’s latest $300 million fund –  Pioneer Capital Partners IV – and sees Kiwi Wealth joining cornerstone investors such as the NZ Super Fund ($100 million invested) and Ngāi Tahu Holdings ($30 million), with funds being drawn down as underlying investments are made.

The news follows last year’s announcement of Kiwi Wealth KiwiSaver Scheme’s cornerstone investment in the Movac Fund 5, a technology fund of venture capital firm Movac.

Its latest investment is designed to give KiwiSaver members more access to private business in the high-growth export sector.

Kiwi Wealth retail and product general manager Melissa Vasta says Pioneer Capital has a strong track record in an investment market where there are few players in New Zealand.

"This is good news for 'NZ Inc' and follows the direction of travel for global investment and the delivery of value to shareholders," she says.

"Kiwi Wealth KiwiSaver Scheme members will know that some of their investments are being held in companies that are generating value for the New Zealand economy, creating local jobs and delivering good
returns.

"While this is a small allocation of our total KiwiSaver funds, it represents a significant opportunity for internationally focused Kiwi businesses to continue to make their mark on the world stage.”

Since it was founded in 2005, Pioneer Capital has invested in 23 Kiwi businesses that have an aggregate annual revenue of over $1 billion, of which over 85% is earned outside New Zealand.

Kiwi Wealth chief investment officer Simon O’Grady says the agreement with Pioneer Capital represents another step in Kiwi Wealth’s burgeoning series of private equity investments.

He says Pioneer Capital sits attractively in the mid-stage between start-ups and the mature end of the market, focusing on expansion capital for high-value export enterprises with established operating bases – in particular, health and wellness, premium food and beverage, and technology-enabled businesses.

Pioneer Capital managing director Randal Barrett says Kiwi Wealth is one of the only KiwiSaver providers to give its members access to private businesses in New Zealand, which make up the vast majority of New Zealand’s economy by proportion of GDP and industry diversity.

“In the pandemic economy, private equity-owned businesses have had the luxury of being tightly held and governed so they can make quick decisions and move to avert risk and take advantage of opportunity.

Barrett says Pioneer Capital Partners IV will make its first few investments into high-value export-focused companies within a year and, as an open-ended fund, can take a long-term view with these and additional investments.

“New Zealand is incredibly well placed in the world markets; its profile has risen and in the sectors in which we focus many New Zealand companies are internationally competitive and have grown to scale very quickly in large markets.

"Our goal is to turn these companies into mini-multinationals, with operations on the ground locally and capability around the world."

Kiwi Wealth KiwiSaver has committed up to $50 million to leading investment firm Pioneer Capital with a focus on New Zealand businesses exporting high-value products and services in large international markets.

The commitment is part of Pioneer Capital’s latest $300 million fund –  Pioneer Capital Partners IV – and sees Kiwi Wealth joining cornerstone investors such as the NZ Super Fund ($100 million invested) and Ngāi Tahu Holdings ($30 million), with funds being drawn down as underlying investments are made.

The news follows last year’s announcement of Kiwi Wealth KiwiSaver Scheme’s cornerstone investment in the Movac Fund 5, a technology fund of venture capital firm Movac.

Its latest investment is designed to give KiwiSaver members more access to private business in the high-growth export sector.

Kiwi Wealth retail and product general manager Melissa Vasta says Pioneer Capital has a strong track record in an investment market where there are few players in New Zealand.

"This is good news for 'NZ Inc' and follows the direction of travel for global investment and the delivery of value to shareholders," she says.

"Kiwi Wealth KiwiSaver Scheme members will know that some of their investments are being held in companies that are generating value for the New Zealand economy, creating local jobs and delivering good
returns.

"While this is a small allocation of our total KiwiSaver funds, it represents a significant opportunity for internationally focused Kiwi businesses to continue to make their mark on the world stage.”

Since it was founded in 2005, Pioneer Capital has invested in 23 Kiwi businesses that have an aggregate annual revenue of over $1 billion, of which over 85% is earned outside New Zealand.

Kiwi Wealth chief investment officer Simon O’Grady says the agreement with Pioneer Capital represents another step in Kiwi Wealth’s burgeoning series of private equity investments.

He says Pioneer Capital sits attractively in the mid-stage between start-ups and the mature end of the market, focusing on expansion capital for high-value export enterprises with established operating bases – in particular, health and wellness, premium food and beverage, and technology-enabled businesses.

Pioneer Capital managing director Randal Barrett says Kiwi Wealth is one of the only KiwiSaver providers to give its members access to private businesses in New Zealand, which make up the vast majority of New Zealand’s economy by proportion of GDP and industry diversity.

“In the pandemic economy, private equity-owned businesses have had the luxury of being tightly held and governed so they can make quick decisions and move to avert risk and take advantage of opportunity.

Barrett says Pioneer Capital Partners IV will make its first few investments into high-value export-focused companies within a year and, as an open-ended fund, can take a long-term view with these and additional investments.

“New Zealand is incredibly well placed in the world markets; its profile has risen and in the sectors in which we focus many New Zealand companies are internationally competitive and have grown to scale very quickly in large markets.

"Our goal is to turn these companies into mini-multinationals, with operations on the ground locally and capability around the world."

A recent complaint investigated by Financial Services Complaints Limited (FSCL) has highlighted the need for personal finance advice before making hasty decisions around changing KiwiSaver fund types.

The warning comes as FSCL found in favour of a KiwiSaver provider after a member made the panicked decision to change their fund type from growth to conservative because of the impact of the Covid-19 pandemic and the resulting market-wide downturn last March.

“It is usually not recommended to switch funds immediately when there is a sudden market downturn, because then any losses are crystallised,” says FSCL chief executive Susan Taylor.

"While it is understandable that people panic when there is market volatility, it is wise to wait it out as the market will inevitably improve," Taylor says.

Janet, 60, had contacted her KiwiSaver provider in late 2019 to make sure she was in the right KiwiSaver fund to reach a target balance by the time she was 65.

Her provider gave her the relevant information, as well as a link to an online KiwiSaver calculator to make her decision and she chose to remain in the growth fund.

In mid-February 2020, Janet’s KiwiSaver balance was $90,000, however, by March 23, as New Zealand headed into the first level 3 and 4 lockdowns, her balance had fallen to $74,000.

Janet panicked and requested her provider move her into a conservative fund. The provider warned her that market downturns and corrections were common, and it was a matter of waiting out the pandemic-induced downturn.

Over the next few months, Janet requested a large amount of information including what steps the provider had taken to minimise the effect of the pandemic on investors.

Collecting the information took the provider time and in July 2020 Janet complained that not only had her provider caused her KiwiSaver balance to drop significantly by March 2020, the delay in getting the information she requested also meant that she had not moved back into the growth fund, which had recovered relatively quickly after the March 2020
downturn.

“One of the fundamental factors that influenced our decision is that the provider could not have predicted the impact of the pandemic on the market," says Taylor.

"It could also not be determined whether having the information Janet requested would have made a difference to her decision to stay in the conservative or move back to the growth fund.

“In each respect, Janet was looking at what had happened in the market retrospectively. It would have been impossible for the provider to proactively contact all their customers in early 2020 to advise there could be a decrease in their balances if the pandemic continued to escalate,” Taylor says.

While the FSCL did find the provider could and should have done more to suggest Janet seek advice from a financial adviser, it would have been impossible to know whether Janet would have done this had it been suggested to her.

The time it took to give Janet the information she requested was fair, given the complexity of the information she required.

“Janet could have asked for more information about how the growth fund was performing after March 2020, but she did not. We also found that this information was freely available on the provider’s website, so she could have made an informed decision to move back to the growth fund earlier if she wanted to,” says Taylor.

“A number of New Zealanders took the action Janet did in early 2020 and moved from a growth to a conservative KiwiSaver fund, which unfortunately would have led to crystallising their KiwiSaver losses.

"Best practice is to not panic if there is a market shock. Wait it out. If you are not sure what to do, seek personalised advice from a financial adviser who is best placed to give you advice tailored to your needs,” Taylor says.

Fresh off its merger with Alvarium, Pathfinder has announced that its award-winning KiwiSaver fund is going carbon neutral and changing its name.

Pathfinder will become the first KiwiSaver manager to offer carbon-neutral funds – cementing its place as a leader in ethical funds management.

CEO John Berry said eliminating C02 emissions from its KiwiSaver funds is a natural progression for the fund manager.

Berry told Good Returns “What we have agreed to do is to buy carbon credits that are linked to fuel efficient stoves that are being put into homes in sub-Saharan Africa. They have gone into close to a million houses and are massively fuel efficient and safer for the families.”

CIO Paul Brownsey said “The reason why we like this offset programme is because it is good from a perspective of reducing carbon credits, as well as being a really strong social impact case.

“In the developing world around four million people die prematurely every year because of inhaling pollution from cooking stoves.”

But Brownsey says going carbon neutral is not only about stoves, “To have a viable carbon offset policy you actually have to work to reduce your carbon emissions.

“Because of the companies that we invest in and the companies that we don’t we have always had much lower emissions than a lot of the rest of the market. But we thought that we had already gone a long way to reducing our carbon emissions so we wanted to take the next step and make ourselves carbon neutral.

“We have calculated the carbon emissions of all the companies that we invest in. We came up with a number based on our ownership, then increased it by 50% in case we missed any numbers anywhere.

“Then we have contracted to buy these carbon credits which will offset our emissions for the 2020 calendar year.

“Moving forward we are going to do this every year.”

Pathfinder made sure that the cost of becoming carbon neutral did not fall on its investors, Berry says.

“The cost is something that we as the managers are going to bear, it is not going to be passed on to our members. It is just an add-on benefit of investing with us.”

Pathfinder also announced the renaming of its CareSaver KiwiSaver to Pathfinder KiwiSaver.

A fitting rebrand for a fund forging a new, carbon-neutral path in the New Zealand KiwiSaver market.