Pioneer seals NZ$40m from NZ super fund

Pioneer Capital is the third domestic manager with a focus on SMEs expanding globally to receive a commitment from the New Zealand Superannuation Fund.

Auckland-based Pioneer Capital Partners has secured a NZ$40 million (€24 million; $31 million) commitment from the New Zealand Superannuation Fund, according to a statement from the domestic institutional investor. 

The commitment takes Pioneer closer to its $150 million hard cap, on which it is expected to close soon, according to the statement. Other LPs include New Zealand institutions, private investors and the Pioneer management team. 

The private equity vehicle, the firm’s second, will invest in privately-owned, small- and medium-sized New Zealand businesses that are expanding in large international markets. Fund I, a NZ$70 million vehicle with a 2007 vintage, is fully invested, according to PEI's Research & Analytics division. 

“Our investment capital, with a target range of $10 – $30 million per investment, is primarily designed to fund [SME] expansion, which may include acquisitions. It may also provide a bridge to public markets or a change of ownership. Key for us is the calibre of management and the nature of the international markets in which they are expanding their business,” Pioneer managing director Randal Barrett said in the statement.

Matt Whineray, general manager of investments at New Zealand Superannuation Fund, added that local businesses need to expand offshore to grow due to the country’s limited market-size. 

The challenges that most New Zealand companies face is that to grow to a certain size [they] have to go offshore… Where the [fund] managers can assist is in the know-how, context and relationships.

Matt Whineray, general manager of investments, New Zealand Superannuation Fund

He told Private Equity International, “The challenges that most New Zealand companies come up against is that to grow to a certain size [they] have to go offshore and in doing that you have different markets, different legal systems, a new set of relationships to develop. We’re trying to assist the capital part of that, which has been scarce, and where the [fund] managers can assist is in the know-how, context and relationships.”  

Moreover, opportunities to partner with Chinese companies are becoming increasingly common as China steps-up its overseas investment. Recently, The Carlyle Group exited Chinese dairy company Yashili International, having improved its operations by establishing a factory in New Zealand to access high-quality dairy products.

Whineray said that Australia and China are the most popular destinations for New Zealand companies to expand to. 

The New Zealand Superannuation Fund has made similar fund commitments previously, investing $30 million with Pencarrow Private Equity in 2011 and $30 million with Waterman Capital in 2010. 

The fund has NZ$20.45 billion in assets under management, according to PEI's Research & Analytics division. It invests in fund managers globally, and currently has about 18 percent of its assets under management allocated to alternative assets. About 3 percent of its total AUM is committed to private equity funds worldwide, according to the firm. 

Whineray added that the fund is not planning to increase its allocation to private equity, but will invest in the asset class to strategically access specific opportunity sets, such as SMEs looking for expansion capital. He says the fund would prefer to have “fewer but deeper relationships” with GPs.