Super Fund gives $30m boost to smaller firms

Stephen Tindall is among Waterstone's shareholders. Photo / Martin Sykes

Small and medium-sized businesses could get a hand-up from the taxpayer under plans by the New Zealand Superannuation Fund to invest $30 million in a fund targeting private companies.

The $15.9 billion "Cullen fund" yesterday allocated the money to private equity investors Waterman Capital to invest in a new $75 million fund.

The private equity fund, which is the second raised by Waterman, will be used to invest in Kiwi businesses valued at between $10 million and $50 million.

Waterman Capital executive director Chris Marshall said it was only months away from using the money to invest in its first company.

"We are looking at some exciting opportunities out there."

Marshall said the fund would invest in between seven to nine companies with around $7 million to $8 million allocated to each.

"We don't target specific industries. But what we look out for is good management, the market position, track record, growth potential and characteristics of the industry."

The fund was particularly interested in any company with strong export potential.

Marshall said there was a deep pool of around 3500 companies which had revenues of more than $10 million but many tended to be overlooked by bigger investors.

"These companies often require additional capital and expertise to take the business to the next level. We see our role as partnering with business owners to overcome these problems and grow wealth for all stakeholders."

Waterman's first fund has already invested in some well-known Kiwi names including Guthrie Bowron and David Reid Homes.

The Super Fund, which was set up in 2003 to help pay for the future costs of retiring New Zealanders, will join some other well-known names in backing Waterman.

Waterman's shareholders include wealthy South Island family the McConnons, Stephen Tindall and David Levene who was made a Knight Companion of the New Zealand Order of Merit in the Queen's Birthday Honours, for services to business and the community.

A spokesman for the Super Fund said the investment was the first made under a new expansion capital strategy and there was potential for more money to be invested in that area.

The fund had a target of up to 10 per cent or $1.59 billion globally to invest in private equity and of that between 5 per cent and 10 per cent was allocated to New Zealand.

The Super Fund's head of private markets Matt Whineray said the fund only selected external managers to invest money when it believed the manager would generate returns better than could be achieved through passive investment. It had a strict process for selecting external managers.

Marshall would not say what its investment performance had been like over the last few years but said it targeted an internal rate of return in excess of 20 per cent per annum.

"I think it is quite a vindication of what we have done over the last few years," he said of the Super Fund's decision to select it to manage money.

"It has been very tough for the last 18 months. We sat out the period and it ended up being the right thing to do."