Booster has upped the alcohol content of its KiwiSaver scheme after adding another wine-maker to the private equity portfolio held via the Tahi fund.
Last week, Booster finalised the purchase of the Hawke’s Bay-based Sileni Estates – founded by Sir Graeme Avery – in a deal that will see the wine brand share shelf space with Awatere River Wine Company (of Marlborough) and Nelson’s Waimea Estates.
The Booster Tahi limited partnership fund, launched last year, invested $25 million in Awatere and Waimea before taking a stake in Bay of Plenty avocado producer, Sunchaser, this May. Some of the money is sourced from a range of Booster’s KiwiSaver and other investment funds, bringing a private equity exposure to the portfolios. The Booster KiwiSaver scheme has about 2 per cent of its roughly $1.5 billion invested in the Tahi limited partnership fund
According to the latest disclosure statements, the Booster Tahi fund – a retail fund that flows into the private equity limited partnership vehicle – has about $1.5 million under management.
In a panel at the recent Financial Services Council (FSC) conference, David Beattie, Booster principal, said private equity investing was highly-compatible with KiwiSaver.
Beattie said the long-term nature of superannuation savings matched the need for patient private equity capital with many opportunities available in the NZ market.
He told the FSC audience that traditional NZ private equity firms “hadn’t done themselves any favours” in gaining support from KiwiSaver funds with high-fee structures that typically followed the ‘2 and 20’ model – 2 per cent ongoing plus 20 per cent of capital gains.
The Booster Tahi fund has a total fee of up to 1.89 per cent if it meets all performance targets.
Booster had allocated around $100 million to date to NZ private equity, Beattie said. KiwiSaver funds could reasonably invest between 5-10 per cent in private equity without taking on too much liquidity risk, he told the FSC crowd.
Despite the lack of continuously-updated prices, Beattie said private equity holdings could be regularly-priced through market comparisons and accommodated into free-flowing funds like KiwiSaver.
However, Therese Singleton, AMP head of sales and advice, told the FSC panel private equity was still “too out there” for KiwiSaver investors – many of whom struggled to understand even vanilla financial products.
In the meantime, Paul Foley, Booster executive chair, told Hawke’s Bay press that the Wellington-based investment firm had to “right-size” the Sileni business to fit its portfolio.
“This has meant that Booster has not been able to buy the existing company or the business as a whole,” Foley says in the report. “Booster has selected the parts of the existing business that it believed it could combine into a profitable go forward business. This has meant that some parts of the existing business will remain with the vendor company (and it has been talking to the suppliers, lessors or growers involved about the impact on them).”
A handful of disgruntled grape-producers said they had Sileni supply contracts cancelled following the sale, local Hawke’s Bay media reported.