Direct Capital gets NZ$50m commitment from the New Zealand Superannuation Fund - Alt Assets

Direct Capital, a New Zealand-based private equity firm, has received a NZ$50m cornerstone investment for its Direct Capital IV fund from The Guardians of New Zealand Superannuation.

The fund, Direct Capital’s fourth private equity vehicle to be raised since its establishment in 1994, will invest in mid-sized private New Zealand companies that typically require further capital to continue growing their business, expand into Australia, or to assist with ownership succession.

Adrian Orr, CEO of the Guardians, said they had been actively seeking high-quality opportunities to invest in New Zealand. “We are pleased to be announcing this investment which will help us with our purpose, to assist future governments to meet the future costs of New Zealanders’ superannuation.

“We are also pleased that in serving that purpose we can assist New Zealand businesses to recapitalise and expand. This was an excellent opportunity. Direct Capital has an established and experienced team, they have a proven track record of adding value and generating good returns for investors,” Orr added.

Managing director of Direct Capital Ross George said, “We are very pleased to have the Guardians as our cornerstone investor. Through the fund the Guardians will be able to utilise their long-term investment horizon and patient capital to play a direct role in assisting New Zealand Inc to grow.”

Direct Capital IV will be investing over the next five years and the Guardians’ commitment will be drawn down over that period.

The Guardians already have significant investments in New Zealand, with some 18 per cent of their portfolio invested in New Zealand equities, infrastructure, property, timber, other private equity and fixed income. These include an existing investment with Direct Capital in Direct Capital III and another with the AMP-Pencarrow Private Equity Fund, with a similar mandate relating to expansion capital and management buy-outs.

The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to partially provide for the future cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the government is allocating on average NZ$2bn a year to the fund over the next 20 years while the cost of superannuation is relatively low. As at 31 March 2009 the value of the fund was NZ$11.5bn. The fund is expected to grow to around NZ$109bn by 2025.

Direct Capital has raised more than $600m from institutional investors over 15 years. Investments include companies such as New Zealand King Salmon, Ryman Healthcare, EFT-POS New Zealand, Airwork, EziBuy, Max Fashions, Go Bus, Innovair, Paper Coaters, New Zealand Pharmaceuticals, and Express Logistics.