Venture capital firm Movac has secured investment from the Kiwi Wealth KiwiSaver Scheme to become a cornerstone investor in the new Movac Fund 5 technology fund. It marks the first time an institutional player within the KiwiSaver space has entered the growth and venture capital ecosystem at this scale.

Movac Fund 5 is a $200-$250m growth capital fund which has a specific New Zealand focus and will invest over time in technology start-ups and growth companies. Its design allows it to support early stage companies as they grow, with capital available for later funding rounds, as well as investing in later-stage companies.

The Kiwi Wealth KiwiSaver Scheme has committed up to $54m in capital over the lifetime of the Fund. It joins contributions from NZ Super Fund ($70m), NZ Growth Capital Partners (up to $30m), with the balance from experienced entrepreneurs, family offices, individual investors, and several iwi. First close of Fund 5 will be 23 September, and second close on 23 October.

Founded in 1998, Movac is a well-established and resourced venture capital firm in the technology sector and was selected by Kiwi Wealth after a thorough due diligence process.

Simon O’Grady, Chief Investment Officer, Kiwi Wealth, says, “Kiwi Wealth views this as an important first step towards a potential series of private equity investments and the beginning of a pipeline of work over the coming years to build out this asset class. Our investment team may look to build and diversify in this sector, based on the manager, geography and asset type from an investment perspective.

“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.

“The market is changing and those providing capital are having to venture more into the private, unlisted sector on behalf of those seeking returns on investment. Kiwi Wealth saw that it was the right time, with the right manager, and in the right sector for this investment.”

Melissa Vasta, GM of Retail and Product, Kiwi Wealth, says, “Investing in Kiwi technology start-ups and growth companies is great for growing NZ Inc, adding jobs to the local economy.

“Over the past 15 years, New Zealand tech companies have made their mark on the world proving their ability to build smart technology. By allocating a small percentage of our total KiwiSaver funds to Movac’s Fund 5, our members are fuelling the next wave of Kiwi innovation, with the opportunity to enjoy the returns of supporting Kiwi success stories.”

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. Fund 5 is focused on backing this process in a graduated way, supported by thorough due diligence by all parties.

The longer-term nature of the investment is consistent with the Kiwi Wealth KiwiSaver Scheme’s function as a long-term savings vehicle. It offers an opportunity for returns while remaining a small proportion of the diversified growth assets in the Scheme.

Phil McCaw, Managing Partner at Movac, says, “We are pleased to have successfully raised Movac Fund 5, and delighted to have Kiwi Wealth on-board as a cornerstone investor – this is also the introduction of Kiwi Wealth to venture capital investment.

“I’m delighted to have the support of Kiwi Wealth as a cornerstone investor in Movac Fund 5.  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.

“I congratulate the Kiwi Wealth team for showing true market leadership in the sector with their significant investment in a venture capital fund like Movac Fund 5, and we look forward to working hard on their behalf to deliver great investment results.”

NZ Super Fund Head of External Investments and Partnerships Del Hart says its investment in Fund 5 highlights its continued commitment to identifying commercially attractive opportunities to invest in New Zealand.

“This investment will help support the growth of local technology businesses that are high growth, typically internationally focused and will benefit from the management expertise and connections that come from an experienced and successful fund manager like Movac.

“Fund 5 is our second investment with Movac, following a $50m investment in Fund 4 in 2016 and, along with mandates with other local investment managers, represents an efficient way for the Fund to gain access to growth opportunities in small-medium sized New Zealand growth businesses.”

New Zealand Growth Capital Partners Investment Director James Pinner said the significant investments from institutional investors demonstrate that New Zealand venture capital is a viable and investable asset class.

“The hope is that other institutional investors – and other KiwiSaver funds in particular – will meaningfully invest in this asset class. What is also pleasing is the level of private investment being raised. The government’s requirement for the Elevate NZ Venture Fund is that it must invest alongside at least matching private capital. Elevate’s initial $10 million has been matched by $150 million of private capital and we expect there to be ratio of over seven times as much private capital as our investment at the Fund’s final close.”