New Zealand's Super Funds invests in private equity - Asian Venture Capital Journal

The New Zealand Superannuation fund will become one of the cornerstone LPs in Direct Capital’s Direct Capital IV, committing NZ$50 million ($30 million) to a fund dedicated to investing in New Zealand companies.

Adrian Orr, chief executive officer of the Guardians of NZ Super, said they had been seeking high-quality opportunities to invest domestically. Super Fund is already an investor in the Direct Capital III Fund and the AMP-Pencarrow Private Equity Fund, which has a similar mandate.

Orr added: “We can assist New Zealand businesses to recapitalise and expand. Direct Capital has an established and experienced team; they have a proven track record of adding value and generating good returns for investors.”

Direct Capital IV was launched at the end of November 2008, to invest in mid-sized private companies “that typically require further capital to continue growing their business, expand into Australian, or release capital for their owner,” as the firm said in a statement at the time. Direct Capital has followed a similar investment strategy since its inception nearly 16 years ago.

“The private equity market in New Zealand is substantially larger than the listed equities market, and more representative of the economy”, said Ross George, MD at Direct Capital. “For example, of the DeloitteTop200 companies, 80% of them are unlisted. In the mid-market sector that we invest in, there are an estimated 1,500 companies with annual revenues exceeding $25 million ($15 million). Each of those companies will have growth or succession plans requiring capital”.

The fund will be investing over the next 5 years, an extension of the initial plans for investment over three years.

Currently 18% of Super Fund’s assets, which totaled NZ$11.6 billion ($6.9 billion) at the end of March, are invested in the country, but the National Party last year said that it would direct the fund to have at least 40% in domestic investment going forward.

Orr addressed this new mandate saying “We will continue to consider opportunities of appropriate quality and scale, arising from the private or public sector, along side good partners, and build on long-term relationships; in particular, private markets, infrastructure, recapitalization and expansion capital”.