KiwiSaver

Generate KiwiSaver makes another investment into private equity.

Generate KiwiSaver Scheme is committed US$25 million in to Australian-based HEAL Partners Fund II which specialises in health and education investments.

The fund  isca late-stage growth and follow-on fund, and has raised A$200 million and is targeting A$350million to A$500 million in commitments.

Generate has now committed more than $120 million into private equity and venture capital funds over two years after having previously committed capital locally into Movac and Icehouse Ventures’ growth funds and also into a US private equity infrastructure fund.

The HEAL fund has made completed two investments, and is finalising two more.

The investments includes $52 million in Removery, the world’s leading tattoo removal platform and only tattoo-removal platform of scale globally, and a $30 million investment in The Fertility Partners, Canada’s largest IVF clinical network and one of the largest fertility platforms in North America. 

The fund is targeting a portfolio of around eight investments in total.

Generate Investment Management co-Founder and chief investment officer, Sam Goldwater, has been appointed to the Fund II Limited Partner Advisory Committee. He joins existing members including Rick Cohen, representative of Elliott Investment Management L.P. The committee is made up of investors in fund who are independent of HEAL and not investors in Fund I.

“We were impressed with the calibre of the HEAL team, were attracted to the differentiated deal flow and the high growth sectors which the fund is investing in," Goldwater says. "The fund’s follow-on approach also provides us with a high degree of visibility to where funds will likely be deployed.”

Milford, Generate and Simplicity KiwiSaver have each enjoyed massive growth in assets under management over the last five years.

In the five years to March 2024, Milford added around $6.5 billion in assets with a 40% per annum growth rate, while Generate and Simplicity also enjoyed high growth rates of 35% and 47% respectively, according to analysis by Melville Jessup Weaver.

While Australian bank-owned providers saw significant increase in assets (ranging from around $3.5b  for BNZ to almost $7b for ANZ), this came at relatively low rates of growth.

For the financial year to March 2024 and allowing for aggregate ownership of multiple schemes by ANZ, Fisher Funds and NZX; ANZ retained great market share at 19%. Below that several positions were traded over the year with Fisher Funds leapfrogging ASB for second place, Milford passing AMP for fifth and Generate pipping Booster for eighth.

However, KiwiSaver remained a very skewed market with the largest three owners accounting for about 50% of members, and the largest ten accounting for about 90% of members.

Among the smaller providers, big movers were Sharesies (up seven spots) and Kernel (up four). In terms of absolute growth, Milford, Fisher Funds, ANZ and ASB each increased by over $2 billion AUM. When considering the percentage gains, the leaders were Sharesies (which started from a near zero base), Kernel, Kōura, Aurora and KiwiWRAP – each of which more than doubled its assets.

In terms of membership growth, the biggest winners for the year in absolute terms were Milford, Generate and Simplicity. At the smaller end of town, Sharesies, Kernel, Kōura and Aurora all saw substantial growth from  lower bases.

This year saw little change in the market make-up, with no new entrants. However, five schemes have been rebranded in recent months: Kiwi Wealth to the Fisher Funds Plan, Nikko to GoalsGetter, Juno to Pie, Select to JMI Wealth, and Lifestages to SBS.

The number of default members rose slightly from 325,000 to 341,000 but as at 31 March 2024, only about 10% of KiwiSaver members were classified as default, down from almost 25% in 2011.

Member profiles

Digging into membership profiles, the highest average member balance went to adviser-led KiwiWRAP ($173,300), although at around 400 members, it was one of the smallest providers. Also at the high end MAS ($86,200), Craigs ($82,900) and Miford ($75,900) members had relatively high average balances compared to the national average of $33,500.

KiwiWRAP also had the highest proportion of members contributing at year end at more than 90%. Second was the restricted NZ Defence Force which was narrowly ahead of Kernel (over 85%) for each.

 

Two of the newer KiwiSaver schemes chalked up larger losses in their latest financial year.

But while Sharesies KiwiSaver scheme had about 5,000 members at March 31, it has since reached about 8,000 members and needs about another 5,000 to join to allow it to break even, according to Sharesies co-founder and chief executive Leighton Roberts.

Roberts says his company only went public with its KiwiSaver offer in December last year, suggesting momentum towards break even is on its side.

The KiwiSaver vehicle, Sharesies Investment Management, reported a net loss of just over $1 million for the year ended March, up from the previous year's $331,000 loss, according to accounts published with the Companies Office.

While the accounts show net equity at balance date of $123,000, suggesting the company will need more capital in a hurry, Roberts says the parent company will tip in further equity as needed.

The KiwiSaver company's revenue climbed from just $1,000 in the year ended March 2023 to $534,00 in the year ended March this year.

Sharesies currently has about 700,000 members using its share trading platform, up from nearly 600,000 this time last year, providing it with an audience for its KiwiSaver offering.

Koura Wealth, which allows its KiwiSaver investors to choose between nine different funds, one of which is a bitcoin-based fund, filed accounts with the Companies Office showing it lost $1.7 million in the year ended March, up from the near $1.5 million net loss the previous year.

The accounts show its equity holders contributed another $1.2 million during the latest year, bringing their total contributions to $6.1 million.

After accumulated losses of just over $6 million, Koura Wealth had equity of $107,000 at March 31.

But it does appear Koura is making progress, with revenue rising to $655,000 in the latest year from $305,000 the previous year.

The accounts note that Koura has a related-party relationship with Hobson Wealth, which stock broking firm Forsyth Barr bought late last year for an undisclosed sum.

Hobson Wealth former principal Warren Couillaut's Audrey Investments owns 14.8% of Koura, according to Companies Office records.

Hobson provided Koura with brokerage, execution and accounting services during the year and Koura was also a sub-tenant of a property owned by Hobson.

The accounts show key management personel were paid $378,000 in the year ended March, up from $268,000 the previous year.

ASB CEO Vittoria Shortt would like to see change when it comes to KiwiSaver policy and is interested in developing the product.

Shortt says she’s very happy with the scheme and the bank's strategic partnership with Blackrock as underlying asset manager has yielded pleasing results which will be evident when it puts out its investing climate report.

This year ASB KiwiSaver members have made $1.7 billion in contributions and investment returns have seen the fund grow by $1.5b, she says.

On the policy front she would like to see KiwiSaver made compulsory and changes to contribution rates. She says both of these have made a massive impact in Australia and I think New Zealand could do the same.

From a provider perspective, it will be interesting to see what different investment categories will open up at scale, as in Australia.

“We want to make sure KiwiSaver conversations are as simple and easy as possible so we are removing barriers from people thinking about saving for their future, because it's not easy… it's not always front of mind for people.

“When they want a home, people are really clear that they want a home. But trying to convince people to think about their retirement when they're 20 is more challenging.”

Hence ASB is focused on helping people make small, everyday steps with their KiwiSaver. 

As for private equity allocation in KiwiSaver, she is interested although it’s not something ASB has executed so far.

“I am genuinely interested in the development of KiwiSaver. And I guess, you just have to look across to Australia to see the ways that the big super funds are participating there. I'm interested in understanding what it takes to, in an appropriate way, participate in supporting the country, so yes although we haven’t done anything specific.”

Currently ASB is neck and neck with Fisher Funds in the battle for KiwiSaver market share. Morningstar’s KiwiSaver report for the second quarter of this year put ASB in third place, just behind Fisher, both with 15.1% of the market and assets of $16.8b each.

Fisher outdid ASB for fee revenue with $160.1m compared to ASB’s $100.3m.