Kiwi Wealth to invest up to $50 million in Pioneer Capital

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

"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."

KiwiSaver funds bankroll community housing

Generate and Caresaver KiwiSaver are backing a community housing initiative seeking to raise $100 million in funding for as many as 300 low-cost houses, much of it to be built on unused urban church land.

Community Finance said it had reached the halfway stage of its Aotearoa Pledge targets, with cornerstone commitments of $10m each from the two KiwiSaver providers and ANZ Bank, while Forsyth Barr, Lindsay Foundation and WEL Energy Trust have contributed a combined $11m.

Chief executive James Palmer said the platform, established in 2019 with the backing of the Lindsay Foundation, the Tindall Foundation, the Matua Foundation and Christian Savings, was hoping to see other fund managers, community foundations and businesses "step up this year".

Its latest campaign follows the successful launch of its Salvation Army community bond last year, which raised $40m for the construction of 118 mixed-use homes in Royal Oak, Westgate and Flat Bush, near Auckland.

While that effort comes in at about $339,000 per house, it is known the Salvation Army contributed significantly on top of the funds borrowed from Community Finance.

The return for Generate, which bought $20m worth of those bonds, is 2.3% per annum. Community Finance said it typically charges less than 0.65% to manage the investments, lending and impact reporting.

Palmer said the model is "an efficient and robust solution for financing large scale affordable housing developments and is proven to deliver".

Community Finance said it has $1b in community housing projects on its books across Otago, Canterbury, Wellington, Hawke's Bay and Auckland.

It hasn't confirmed any of the new sites under the latest scheme, outside of several sites in the Waikato, under the WEL community bond investment.

Economist and Community Finance director Shamubeel Eaqub said it was exciting to see private capital in the pledge, as "the housing crisis is too big to be solved by philanthropic funds alone".

"When we can unleash the investments of ordinary New Zealanders, to the benefit of housing New Zealanders, we can move the dial.” 

Responsible investment’s gender gap

Women are 10% more likely than men to switch KiwiSaver providers if their funds are invested in industries they do not support, a new survey shows.

The research from Mercer found that nearly 75% of members said access to responsible investment was an important feature of the scheme.

“Investment performance is top of mind for investors across the market, however we found that a growing number of members also want their money invested responsibly and in line with their personal value. Women in particular are more likely to rate access to RI options as one of their top five important features when compared to men” said Sarah Whitelock, consumer wealth leader, Mercer New Zealand.

“Across the board we see women express significantly higher levels of concern about where their funds are invested than men. So much so that women are more likely to switch KiwiSaver providers if their funds are invested in industries they do not support, suggesting investments need to align with their beliefs. Further to that, just over one in five (22%) women are more likely to disagree that their KiwiSaver provider offers a sufficient number of RI options, which tells us there is an opportunity for providers to more clearly demonstrate and communicate their commitment to RI.”

She said the research showed that funds that were invested in a way that targeted responsible or sustainable outcomes did not come at the cost of performance.

Mercer found that KiwiSaver members were most frequently concerned about investments in weapons, pornography, gambling and tobacco. Women were 16% more concerned than men about where their funds were invested, on average. One in five women said their KiwiSaver provider did not offer a sufficient number of responsible investment options.

Women rated communication material as the most important feature of a KiwiSaver scheme, followed by investment performance, while men rated investment performance first, followed by fees.