The new $300 million local venture capital mandate awarded to the NZ Superannuation Fund (NZS) represents a “vote of confidence” in its “commercial expertise and track record”, according to Catherine Savage, chair of the board overseeing the almost $43 billion entity.
Under the arrangement revealed in last week’s budget, the NZS would administer the proposed $300 million fund with fellow government-owned NZ Venture Investment Fund (NZVIF) to invest through underlying managers targeting local growth businesses in the $2 million to $15 million valuation range.
“We look forward to working cooperatively with Ministers and NZVIF to put the new mandate in place. We will bring our knowledge of global best practice investment frameworks to this process,” Savage said in a statement.
Operational details of the fund-of-funds would remain under close wraps until the empowering legislation was in place and “commercial negotiations with NZVIF” were completed, she said.
“We do not anticipate any disruption to the management of the NZ Super Fund. This is an entirely separate mandate,” Savage said.
Of the $300 million earmarked for the new fund, $240 million would be diverted from regular government contributions flowing to NZS, which have been cut to $9.6 billion from a forecast $11.6 billion over the next five years.
The NZVIF would throw in the remaining $60 million to the new fund, which would likely adopt a different model than the government’s current venture fund approach.
Under its existing rules, the NZVIF can “invest up to $25 million into a new venture capital fund providing there is at least matching private sector support, a demonstrable track record, and an experienced team” with a target 10-year time frame to exit.
The government set a 15-year lifetime limit for the new NZS-run venture capital fund with any remaining principal, accumulated returns and the $60 million NZVIF ante to “be returned to the Crown to fund superannuation”.
Currently, the NZVIF manages $195 million in the Venture Capital Fund – now featuring Movac, Pioneer Capital and Global from Day One as underlying managers – and a further $50 million in a Seed Capital Fund (where it works with a range of ‘angel’ partners).
While who had final say on selecting the underlying managers for the new $300 million fund remained unclear, the capital influx would undoubtedly provide a boost to the sector.
Interestingly, one of the potential contenders for the new splash of government money could be the recently-launched AmpliPHI Ventures, founded by former NZVIF senior investment managers, Chris Jagger and Aaron Tregaskis.
Jagger and Tregaskis, previously NZVIF investment directors, both left the government agency earlier this year to launch their new business.
AmpliPHI is looking to build the country’s “leading venture capital fund”, according to a recent investor presentation, with an “existing pipeline of the very best early stage companies”.
Last month, NZVIF promoted analysts George Liddell and Owen Woodhouse to investment managers.
Elsewhere in the ‘wellbeing budget’, the government allocated about $1.4 billion for NZS contributions over the next fiscal period, close to $450 million to the Government Superannuation Fund, and almost doubled the Earthquake disaster fund top up to $174 million.
Also last week, NZS released the mostly-glowing results of its latest ‘stakeholder’ survey.
The survey, conducted by Colmar Brunton, found NZS continued to deliver “strong performance, engagement and leadership”.
However, local respondents also expressed concerns that the NZS relationship with government was “not fully open” while its “knowledge sharing within the New Zealand capital markets is inconsistent”.
The report also notes last year’s leadership change – where deputy Matt Whineray, replaced the outgoing chief, Adrian Orr – had ruffled some respondents.
“Stakeholders feel there is a need for the Guardians’ senior leadership team to undertake outreach as much as possible during this transition period,” the report says. “This will help bring clarity to stakeholders, especially those based overseas, about the Guardians’ future direction and also ensure continuity where relationship owners have changed positions or left the organisation.”
The stakeholder survey reprises a similar exercise carried out in 2015.
