Fisher Funds Management has big ambitions to invest $1 billion into private equity over the next three years, which chief investment officer Ashley Gardyne says might ultimately prove to be a boon for public markets if it gets those businesses ready for listed life.
The country’s third-biggest KiwiSaver scheme provider has been quietly building its capabilities in private assets since hiring Jarden alumni Michael Walmsley to head its private markets unit, and today unveiled plans to lift its exposure to those assets to 10% across its $17.72 billion under management over the next three-to-five years.
The lack of new listings both at home on the NZX and abroad has made those private assets more important to superannuation fund managers, as constant inflows of client money need to be deployed and generate a big enough return to justify that investment.
The fund manager’s private markets team is focusing on private equity, where it will use mid-market external managers rather than the mega-firms such as Apollo Global Management or Blackstone, and invest directly into local firms.
Fisher’s chief investment officer Ashley Gardyne said there are 1,000 domestic businesses worth between $20 million and $100 million which for one reason or another have stayed in private hands, and the fund manager is keen to find those firms capable of stepping up their growth, with a view to investing between $30 million and $70 million in minority or majority stakes.
“There are great businesses here that fly under the radar,” Gardyne said in an interview.
Unintended consequences
While that might not immediately support new listings on the NZX, Gardyne said it may help with the supply of potential candidates for initial public offerings when the KiwiSaver-backed PE units start eyeing up a cash return on their investments, having got them prepared for the greater scrutiny required by continuous disclosure obligations.
“As more private businesses start to be bought by PE for a bit longer, you create more of a pipeline for the IPO market,” Gardyne said.
Stock exchange operators around the world have been pondering how to break the drought in IPOs, with Australia’s ASX poised to welcome Virgin Australia back to its bourse in one of the larger listings of recent years, while the New York Stock Exchange debut for stablecoin issuer Circle Internet impressed with the price more than doubling. The Hong Kong Exchange has stepped up its activity, including the recent addition of EV battery maker CATL in the biggest listing of the year.
The Australian Securities and Investment Commission has been grappling with the tensions between public and private markets this year, and this week published submissions on a discussion document examining the health and future of markets across the Tasman.
Financial data multinational Bloomberg said in its submission that private markets were typically the domain of wholesale investors in Australia, with growth driven by the perception that private assets tend to outperform public markets. As they grow retail investors become increasingly exposed, primarily through their superannuation funds.
“During recent years, Australia's superannuation funds have become increasingly dominant and concentrated, and expected to exceed ASX market capitalisation during 2025,” Bloomberg said. “These funds make substantial use of private assets, with allocations up to approximately 40% (domestically and internationally), and funds have made public statements that this allocation will increase.”
New challenges
Bloomberg said that exposure for retail investors posed challenges for investors gauging the suitability of those assets, and how transparent and liquid the investments should be.
A lack of transparency on valuation – exacerbated by the limited trading – is seen as a growing risk. And while the lack of fluctuations in daily valuations have been a boon for investors through heightened periods of uncertainty, they’ve also led to a disconnect between how much investors are willing to pay for public assets compared to private.
The liquidity question for KiwiSaver fund managers is currently before the Ministry of Business, Innovation and Employment, which has been sitting on its recommendations to commerce minister Scott Simpson since the consultation closed in February.
Fisher’s Gardyne said his funds will be able to manage the liquidity question of potentially hard to sell and buy assets internally, given the private equity exposure will be limited to the aggressive, growth, balanced and equity funds and a relatively small portion of members’ money.
And KiwiSaver’s broader foray into the world of private equity might be well-timed.
Private asset managers around the world are coming under greater pressure to provide cash returns to their investors, and US universities – once the cornerstone of institutional investors – have been reining in their endowment funds’ investment portfolios as they come under closer scrutiny from the White House.
Fisher’s Gardyne said that’s made it easier to engage with firms which had previously had a wide range of investors to pick and choose from.
“People are finding it harder to raise money around the world,” he said. “That’s a good time to get started.”
Ultimately, the exposure to private equity will need to prove its value for money, with Gardyne saying it’s typical to expect an annual return of 15% or more from the asset class, which is why it carries a heavier fee.
“You might pay 8 basis points more once the programme is really up and running, and as a result you get an extra 50-to-100 basis points,” he said. “That’s a big benefit in retirement.”
Reporting by Paul McBeth. Image from Tech Daily on Unsplash.
