State-owned KiwiSaver provider Kiwi Wealth is to invest in the technology sector through a fund run by venture capital firm Movac.
Kiwi Wealth, which manages more than $5 billion in KiwiSaver investments and is the sixth-largest provider, has committed up to $54 million to the new Movac Fund 5 technology fund.
The Movac Fund 5 is a $200m to $250m growth capital fund which has a New Zealand focus and will invest in technology start-ups and growth companies.
Venture capital funds support early-stage companies as they grow, with capital available for later funding rounds as well as investing in later-stage companies.
Kiwi Wealth will invest in the fund alongside the New Zealand Superannuation Fund, which is putting in $70m, New Zealand Growth Capital Partners, which are investing up to $30m, alongside other private investors and several iwi.
Simon O'Grady, chief investment officer at Kiwi Wealth, said it saw the investment as an important first step towards a series of private equity investments and the beginning of a pipeline of work over the coming years.
"Our investment team may look to build and diversify in this sector, based on the manager, geography and asset type from an investment perspective."
He said Movac, which was founded in 1998, had been selected after a thorough due diligence process.
"Movac has a talented and experienced investment team, sound and well-tested processes, and a strong track record in supporting successful New Zealand tech start-ups and growth companies, helping them to grow their businesses globally."
Kiwi Wealth is not the only KiwiSaver provider to start investing in private equity. CareSaver, Booster and Milford Asset Management also invest directly into private companies.
O'Grady said the market was changing and those providing capital are having to venture more into the private, unlisted sector to seek returns on investment.
"Kiwi Wealth saw that it was the right time, with the right manager, and in the right sector for this investment."
The investment will be staggered over time as Movac goes through the process of selecting companies for funding and working directly to move them through the growth stages
Phil McCaw, managing partner at Movac, said he was delighted to have Kiwi Wealth on board as a cornerstone investor.
"For many years I've been a vocal proponent of KiwiSaver managers allocating a small portion of their funds to the New Zealand venture capital sector. Not only has there been the potential for exceptional returns as we've experienced to date, but it's also where fantastic innovation and job creation occurs.
"It is great to have a major KiwiSaver investment manager in the growth and venture capital ecosystem supporting the rapid expansion of local businesses. This long-term alignment is innovative and shows leadership and a new maturity in New Zealand tech and the investment sector."
First close of Movac Fund 5 will be September 23, and second close on October 23.