Fisher Funds is targeting an allocation of up to 10 per cent into private equity (PE) for its KiwiSaver schemes via a mix of global third-party managers and local direct investments.
Currently, Fisher has about $18 billion under management across three KiwiSaver schemes, implying a $1.8 billion tilt to private equity at maximum but the manager is easing into the asset class with a $1 billion commitment over the next few years including $300 million tagged for NZ businesses.
Ashley Gardyne, Fisher chief investment officer, said the global allocation would ultimately flow through about 20 private equity managers in various regions with the process already underway.
“In our global private equity programme we commenced investing in March and have now invested in two global PE funds,” Gardyne said. “One of these funds was a UK based mid-market private equity fund, and the other was a US lower mid-market private equity fund with a focus on the financial service sector.”
He said middle-sized companies generally offer better long-term returns for PE investors.
At the same time Fisher plans to build up a directly managed portfolio of eight or so NZ private companies valued in the $30 million to $70 million range.
Fisher has just one direct NZ private holding at the moment in the solar energy firm, Lodestone, but largely access the asset class through local PE players including Movac, Pioneer and Direct Capital.
In total, the manager has about $150 million of existing NZ private equity investments.
Gardyne said the growing Fisher in-house direct PE portfolio would “complement” any local external manager allocations to the asset class.
Fisher hired ex Macquarie and Jarden private markets specialist, Michael Walmsley, last year to lead the PE charge. Jennifer Chee also joined Fisher from Jarden as part of the new private equity team.
William Fletcher, who came to the Fisher alternatives desk last year from Goldman Sachs, has been scoping out global private equity managers, too, Gardyne said.
He said the “people intensive” Fisher PE team would likely reach about six over time.
Last week the Takapuna-based firm began the asset allocation change by adding more PE exposures to four KiwiSaver strategies, comprising growth, balanced, aggressive and equity funds.
Fisher runs similar investment strategies across three KiwiSaver schemes (including the now closed-to-new-members Fisher Two).
According to Gardyne, the long-term nature of KiwiSaver lends itself to a meaningful level of PE investment where potential higher returns from the asset class can add significantly to member retirement savings.
Fisher has estimated longer-term annualised returns from PE at 15 per cent net of fees.
Global PE has been one of the consistent top-performers in the Mercer NZ periodic table of investment returns, ranking second over the 10 years to the end of 2024 in the latest edition.
KiwiSaver schemes are also well-placed to manage the liquidity risks posed by PE, he said, where regular inflows should cover any redemptions.
And structuring PE portfolios of various vintages would also ease liquidity issues, Gardyne said, as underlying funds exit investments and distribute returns.
For the time-being Fisher is also staying away from more illiquid venture capital (VC) holdings that the NZ government is trying to encourage KiwiSaver schemes to invest in.
“We might eventually do some VC, maybe after five years as we increase the PE level to 10 per cent,” Gardyne said.
But he said despite the more complex liquidity management required by PE and VC assets, KiwiSaver should retain the current simple member transfer rules.
“I don’t think KiwiSaver schemes [with PE etc] need special work-out tools such as gating,” Gardyne said. “The beauty of KiwiSaver is that it is simple and members can transfer to other schemes whenever they want.”