Rail ‘very attractive’ to KiwiSaver funds
The time is ripe for KiwiSaver funds to get on board with infrastructure projects such as light rail, a fund manager says.
The Government on Wednesday said it would start accepting offers from outfits wanting to invest in two Auckland light rail lines with a combined length of about 50 kilometres.
At the same time, in an unprecedented move, the New Zealand Superannuation Fund, a $38 billion retirement nest egg owned by the Crown, put its hand up as an interested investor.
About $6b would be needed for the project, with the Government and the Auckland Council already committing $1.8b.
The NZ Super Fund has just $5b invested domestically so, if it became the Government’s preferred choice, the light rail project would potentially double the size of its New Zealand investment portfolio. It has identified Canadian organisation CDPQ Infra as a potential partner.
But there is another financial giant also on the lookout for investment opportunities: KiwiSaver industry.
Sam Stubbs, managing director of KiwiSaver provider Simplicity, said the KiwiSaver industry was perfectly positioned to invest in domestic infrastructure projects like Auckland light rail.
‘‘These are the sort of projects that will be very attractive to KiwiSaver funds,’’ Stubbs said.
Launched in 2007, the total amount of funds invested in KiwiSaver was $35b in the year to March 2017, most of which was invested in financial markets.
By 2030 that figure was forecast to reach $200b, Stubbs said.
Such a large amount of capital needed somewhere to go and many of New Zealand’s 25 KiwiSaver providers would be looking the domestically for investment opportunities, he said.
‘‘We would rather invest in New Zealand than overseas.’’
Brian Gaynor of Milford Asset Management said KiwiSaver funds would like to get behind infrastructure projects if they made good commercial sense.
But scheme members needed the ability to easily transfer their funds, he said. If a fund lost too many members it could reduce its capital and jeopardise projects.
Compared with other countries, New Zealand retirement funds were lacking domestic investment opportunities.
‘‘We’re way behind the rest of the world in terms of the commercial sector participating in roading and rail,’’ Gaynor said.
NZ Funds chief investment officer Michael Lang said the idea of KiwiSaver providers investing in private infrastructure assets was fraught with danger.
It risked eroding the trust of members because there would be less transparency than financial markets and less flexibility for members to switch funds, he said.
‘‘Putting unlisted infrastructure assets into KiwiSaver risks undermining the fragile relationship of trust.’’