The rise of KiwiSaver investment in private equity and what it means for you – The Prosperity Project

Fisher Funds chief investment officer Ashley Gardyne says investing in private equity has the potential to deliver better returns. Photo / Supplied.

More KiwiSaver providers are making moves into private equity investments, opening what was once an asset class exclusively for the rich to everyday investors.

Fisher Funds is the latest to ramp up its involvement in this area, setting up a private equity team and committing more than $1 billion of KiwiSaver funds over the next few years – with several hundred million of that to be invested in New Zealand businesses.

Private equity involves investing in profitable companies that aren’t listed on the sharemarket and is part of the investment mix for many offshore pension funds.

Fisher Funds chief investment officer Ashley Gardyne told Nadine Higgins on The Prosperity Project podcast that it has the potential to deliver better returns.

“There has been a premium of sort of 3-5% higher return compared to the listed sharemarket,” he says.

It does come with more risks, including that it can be a less liquid asset class, but Gardyne says that can be easily managed in the KiwiSaver context.

“If it’s a small allocation within a KiwiSaver fund, it doesn’t stop [members] from switching or anything like that.”

While private equity once had a reputation as being the domain of corporate raiders who would strip a company’s assets, Gardyne says it’s evolved significantly and is now an $8 trillion sector.

“There are a lot of management teams that actually like to be owned by private equity firms… they can provide more capital as they need it to grow, they can provide expertise and insights,” he says.

With $110b – and growing – in KiwiSaver, and few new listings on the NZX, Gardyne says this shift is important.

“Either the money will continue to flow offshore, or it will have to go into the private market.”

It also has the potential, he says, to strengthen the local sharemarket.

“You might have more businesses at a size that are ready to list on the sharemarket and at that point they might be a bit more professionalised in terms of systems and boards and governance.”

Listen to the full episode of The Prosperity Project for more

The podcast is hosted by Nadine Higgins, an experienced broadcaster and a financial adviser at Enable Me.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes are released every Monday.