NZ Super to invest $180m in SMEs

Direct Capital, Pioneer Capital and Movac will each manage between $35m to $83m.

The New Zealand Superannuation Fund (NZ Super) will invest as much as NZ$260 million ($180 million; €173 million) over the next decade in local small and medium enterprises (SMEs), according to a statement.

NZ Super will invest up to NZ$90 million in Auckland-headquartered firms Direct Capital’s Fund V, and up to NZ$120 million into Pioneer Capital’s Fund III. Additionally, the investor will also commit up to NZ$50 million into Movac’s Fund IV.

According to NZ Super, the three mandates target different parts of the private equity market in New Zealand, with Direct Capital operating at the larger end of the growth spectrum, Pioneer targeting mid-market companies seeking international growth, and Movac focused on earlier stage, high growth technology companies. Each fund is expected to invest in between eight and 15 individual companies.

“New Zealand continues to provides attractive investment opportunities in small to medium-sized companies which are high growth, typically internationally focused, and able to benefit from the expertise that these managers can provide,” said NZ Super Fund chief investment officer Matt Whineray. “External managers are a logical and efficient way for the Fund to get access to the growth opportunities in this sector.”

Whineray also added that the fund will continue to focus its efforts on listed equities and larger scale investments (NZ$100 million or more), along with the Fund’s rural and timber holdings.

Direct Capital manages more than NZ$800 million through seven funds and three affiliate programs, according to PEI data. The firm also reportedly raised NZ$375 million last week for Fund IV. Meanwhile Movac raised NZ$105 million for its fourth fund to invest in Kiwi technology companies.

Pioneer Capital invests a minimum of NZ$10 million in New Zealand businesses focused on international markets.

NZ Super, which manages about NZ$32 billion for New Zealand retirees, has invested in the SME sector since 2005, with previous fund investments delivering net returns of about 15 percent per annum.

The fund allocates about 5 percent of its portfolio to private equity, 71 percent of its overall portfolio in global and New Zealand equities, 11 percent in fixed income, and 6 percent in timber. Infrastructure, public and private markets, as well as rural farmland receive a combined 9 percent.

As at 30 November, the fund has more than NZ$4.9 billion invested locally including forest management company Kaingaroa Timberlands, technology services company Datacom, and NZ banking group Kiwibank.