KiwiSaver provider goes direct

Booster buys stakes in wineries

AKiwiSaver provider has bought stakes in two wineries in its first direct private company investments. KiwiSaver funds typically invest money into companies listed on a sharemarket because the shares can be sold more easily making the investment more liquid.

But Booster, New Zealand’s eighth largest KiwiSaver manager, said it had decided to start investing directly because it wanted to support New Zealand businesses.

The fund manager has used some money from its KiwiSaver funds, other non- KiwiSaver investment funds it manages and some private clients’ money to buy 100 per cent of Waimea Family Estate Wines and a 40 per cent stake in the Awatere River Wine Company through its limited partnership investment vehicle Booster Tahi.

Louis and Peter Vavasour now own 60 per cent of the Awatere River Wine Company and Louis Vavasour will be chief executive of both that business and Waimea.

Brendan Doyle, a director of Booster’s investment management company, would not say how much money it had invested in buying the winery stakes citing commercial sensitivity.

But he said the percentage of its KiwiSaver money being used for direct investment was small and would remain in the low single digits.

According to Morningstar, Booster had $1.17 billion in KiwiSaver assets under management as of March 31.

Doyle said Booster decided to start looking into direct investment at the start of this year after the company itself found it hard to access investment capital.

Booster wanted to help grow New Zealand’s small and medium-sized business sector, he said.

“We are wanting to re-engage New Zealand savings into New Zealand businesses. There is a need for capital to help businesses grow.”

At the same time the company saw the potential to make a higher return through diversifying its investments.

The size of Booster’s funds under management also meant it now had sufficient scale to consider the move.

While a direct investment in a company was less liquid, Doyle said Booster was actively managing its investments to ensure there was enough liquidity across the entire KiwiSaver portfolio.

Booster’s KiwiSaver members were told of the change in investment strategy when it sent out its annual statements in May and June this year.

Doyle said the two wineries had complementary businesses but it would also be looking to invest in other sectors — like hospitality and tourism.

He said he was not aware of any other KiwiSaver providers undertaking direct investment. “We think we are being innovative.” It also gave small investors access to investments they could not usually access.

Chris Douglas, director manager research ratings at Morningstar, said private equity investments were not commonplace in KiwiSaver but they could play a role in a portfolio.

“We are seeing private equity investments become more common in managed fund investment globally,” Douglas said. “The key issue that KiwiSaver providers need to manage is the lack of liquidity in these investments, and the ability for their clients to easily switch out of their products. So it needs to be weighted accordingly.”