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Movac fund secures Kiwi Invest backing

In a first of its kind move for a KiwiSaver investment group, Kiwi Invest has entered the venture capital market through Movac Fund 5.

Thursday, September 24th 2020, 6:00AM 3 Comments

by Daniel Smith

Simon O'Grady

The Kiwi Wealth KiwiSaver Scheme has now become a cornerstone investor in venture capital firm Movac’s new technology fund. It marks the first time an institutional player within the KiwiSaver space has entered the growth and venture capital ecosystem at this scale.

Speaking to Good Returns, Kiwi Invest chief investment officer Simon O’Grady said that the decision to go with Movac “goes back to the principles of making private equity successful. Is there an opportunity pipeline? Can you get access to it? Can they bring value and management to those investments? Movac ticks all these boxes very strongly.”



Movac Fund 5 is a $200 million-$250 million venture capital fund which has a specific New Zealand focus. Kiwi Invest has committed up to $54 million in capital over the lifetime of the fund. It joins contributions from NZ Super Fund ($70 million), NZ Growth Capital Partners (up to $30 million), with the balance from experienced entrepreneurs, family offices, individual investors and several iwi.

O’Grady says that Kiwi Invest’s entry into the private equity sphere is “part of a long-term strategy to recognise that KiwiSaver funds will have to get invested more into the private and unlisted sectors to get better access to good return outcomes”.

“Private equity enables you to access what I call idiosyncratic risk. That is risk that is predominately about the individual investment and its ability to execute. As opposed to structural exposure to risk that you get in the listed market. You get strong diversification out of private equity.”

This diversification is key for Kiwi Invest’s strategy in these markets. O’Grady said that: “Every one of these funds are unique. This Movac fund is mainly focused on proven business models, series A-B expansion. This creates a pipeline for other investments, and is far less risky for a KiwiSaver fund to be involved in.”

O’Grady says that it is about time KiwiSaver funds looked to private equity to diversify their portfolios. “I think NZ markets are maturing. This is an exciting opportunity, it’s the first real match into the tech innovation sector for KiwiSaver capital. I’m looking forward to seeing the outcomes.”

Tags: investment kiwi wealth Kiwibank KiwiSaver technology venture capital

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Comments from our readers

On 24 September 2020 at 10:45 am Gordon Gecko said:
In a move the first of its kind for a KiwiSaver investment group.....Ummm wrong....Simple google serach of KiwiSaver and Private Equity shows this is not a new move for the industry....

https://www.stuff.co.nz/business/112029338/sir-stephen-tindall-simplicity-the-icehouse-and-100-million-for-startup-companies?rm=m

https://www.goodreturns.co.nz/article/976516945/caresaver-makes-private-equity-investments.html

Milford have been in Private Equity for some time as this 2015 article shows https://www.goodreturns.co.nz/article/976502940/private-equity-a-role-for-kiwisaver-part-2.html

On 24 September 2020 at 4:23 pm John Milner said:
Although it's great to hear additional funding will be made available to NZ start-ups who demonstrate innovation, I'm not sure whether using KiwiSaver funds is appropriate in private equity. Even Donald Trump has still set limitations to who can invest within private equity. Promises of high returns and a lack of liquidity is not something the average saver should be exposed to.

I guess it's not really an issue when it's not your own money.
On 25 September 2020 at 9:51 am DavidBeattie said:
@John Milner - lack of liquidity is not a significant issue for KiwiSaver when allocating only 1%-5% into Private Equity assets. In our experience, the three main 'challenges' are: 1) daily pricing of the investments so that equity is maintained between daily money inflows and outflows; 2) daily income accruals for PIE attribution and PIR tax purposes; 3) high fees (typically 2% +20% performance fee). For a lot of private equity investments, these three issues are often deal breakers.

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