NZL Super to back smaller growth companies

The NZ$14.9 billion ($10.7 billion; €7.3 billion) New Zealand Superannuation Fund has broadened its private equity investment mandate to include managers investing in smaller companies in New Zealand.

The 'expansion capital strategy', as it is called, reflects the super fund’s view that there is a large pool of smaller high-growth companies in the country that are constrained by a shortage of short-term equity, NZL Super noted in a statement.

To implement its new strategy, the pension fund will access investments in the segment by appointing managers with a relevant investment focus and track record. It will seek to back companies with an enterprise value of between NZ$15 million and NZ$50 million through commitments to these managers.

The super fund is currently assessing potential managers for the implementation of its strategy, Paul Gregory, head of communications at NZL Super, told PEI Asia. Investments made by underlying funds will primarily support the expansion of companies through strategic acquisitions, technology upgrades or market expansion.

The fund noted its expansion capital strategy is consistent with its global private equity strategy and with its response to a ministerial directive on investment in New Zealand, which required the guardians of the super fund to eventually increase its investments in New Zealand to 40 percent of its total portfolio.

NZL Super currently allocates 1.1 percent of its assets or about NZ$150 million to private equity. It has a 5 percent target allocation to private equity and a target range of 0 percent to 10 percent. Of this target, the fund targets an allocation of between 5 percent and 10 percent to private equity in New Zealand.

Thus far, NZL Super has committed capital to funds of funds managed by Adams Street Partners and HarbourVest Partners. It has also made commitments to Coller Capital, Kohlberg Kravis and Roberts, Direct Capital, Apax Partners and AMP Pencarrow.

In July, NZL Super hired US-based Hamilton Lane to provide it with advice on private equity strategy and the due diligence of private equity fund managers.

In the same month, the fund agreed to commit NZ$100 million to New Zealand-based infrastructure investment manager HRL Morrison’s Public Infrastructure Partnership Fund, which aims to raise NZ$500 million over the next 12 months.

Jenny Blinch contributed to this article.