Venture capital attracts another KiwiSaver

Generate is the third KiwiSaver scheme to invest in venture capital putting $20 million into New Zealand’s largest VC firm Movac.

Friday, December 16th 2022, 5:57AM

by Andrea Malcolm

The investment will go towards Movac’s Growth 6, a later-stage VC fund for private Kiwi tech companies needing to grow.With $3.5 billion in KiwiSaver funds under management, this first foray into VC will form a small part of Generate’s Australasian equity allocation, with exposure across all of its KiwiSaver funds except the defensive fund.

Sam Goldwater, Generate’s lead portfolio manager and executive director, says the move looks beyond the current volatile economic cycle. “VC is a long term investment and Movac will invest the funds over the next few years. Our long term strategy involves investing a small portion of our funds in Kiwi venture capital, in particular innovative Kiwi tech companies.New Zealand is producing some incredible technology companies, we want our members to be part of that and help fund NZ Inc. I wouldn’t surprise us to see other KiwiSaver funds make similar investments.”

Movac Partner Mark Vivian says Growth 6 has attracted more than $100 million in the past ten weeks including $70m from NZ SuperFund (it’s third with Movac) and $20 million from Annuitas, which manages the Government Super Fund and National Provident Fund.

“As KiwiSaver schemes grow they’re looking for more or higher return asset classes to invest in. Private company investment in VC can be a pretty good investment over four to ten years plus. We see about 300 investment opportunities a year, by and large in New Zealand or if not they have a New Zealand connection.

“In volatile times we actually see entrepreneurship increase. Obviously because people are restructured out of existing employment, and also because people see obvious gaps in the market. All four of our funds have been top decile globally when it comes to cash returns.”

In 2020 institutional KiwiSaver fund Kiwi Wealth put $54m into Movac’s Fund 5, along with NZ Super Fund ($70m) and NZ Growth Capital Partners ($30m) which manages the Government’s Elevate NZ Venture Fund.

Movac investments include Tradify (job management), Alimetry (gastric ailment solutions), Dawn Aerospace (green propulsion tech), ZeroJet (world’s first electric jet propulsion for boats), and Atomic (low-code customer experience platform).

Not-for-profit KiwiSaver Simplicity was the first KiwiSaver provider to dip into the VC world when it committed $100m and took a small stake in Icehouse Ventures in 2019. The Icehouse. It has now invested $25m of that and separately it has put $10m into private equity with two companies, Quantify Optomics which tests fiber optic cables, and Reliable Foundations, a provider of residential concrete foundations. All private equity and VC investment is done through Simplicity’s wholesale fund which is entirely funded by its KiwiSaver Growth Fund and Growth Investment Fund. Simplicity head Sam Stubbs says annualised returns since the fund launched three years ago are 9.5%.

“This is a logical well proven asset class for patient and long term investors. We’re very patient animals so we’ll take our time. KiwiSaver providers should absolutely look at this area. KiwiSaver members should be rewarded for having their money locked up. They should be in higher risk, more illiquid investment and get higher returns from long term money in the form of VC, private equity, infrastructure and housing. Most KiwiSaver providers are lazy and want to keep that liquidity.”

Tags: KiwiSaver