The Financial Markets Authority, in its latest report Private assets in managed funds: Investment landscape and valuation practices indicates that KiwiSaver providers are expected to increase their exposure to private assets in the years ahead.
Leading investors globally typically make larger allocations to private assets – and benefit from more diversified portfolios – than we currently see in KiwiSaver funds. KiwiSaver members should have access to similar investment options as those provided by international retirement investment schemes. Of the nearly $100 billion in KiwiSaver funds under management, less than 3% is invested into private assets. This is significantly lower than pensions funds in other jurisdictions. By comparison, 18% of Australian superfunds are invested across a wide range of private assets.
The FMA’s report foresees welcome developments in KiwiSaver investing. In 2023 CSF published recommendations to reduce impediments to investment in private assets, alongside a joint legal opinion by MinterEllisonRuddWatts and Chapman Tripp highlighting legislative impediments within the current framework.
Unlocking long-term value
KiwiSaver is inherently a long-term savings vehicle, well suited to investments in private markets. Asset classes such as infrastructure, private equity, and private debt can provide diversification benefits within global portfolios.
Barriers and system settings
The Financial Markets Authority has highlighted challenges around valuation, governance, and managing less liquid assets — issues also identified in CSF’s paper and legal opinion.
CSF’s work points to structural barriers, including liquidity requirements, daily pricing, transfer settings, and fee ambiguity, that are not well aligned with long-term private asset investment. Our legal opinion further finds elements of the legislative framework may unintentionally discourage allocation to private markets, with reform needed to enable scale.
As allocations grow, strong governance, robust valuation, and transparency will be essential to maintain trust and deliver fair outcomes for KiwiSaver members. The FMA’s focus on these areas is an important complement to enabling regulatory change.
A coordinated path forward
The growing interest in private assets presents an opportunity to better align KiwiSaver with New Zealand’s long-term economic and sustainability goals. With the right policy settings, KiwiSaver capital can play a meaningful role in funding infrastructure, supporting innovation, and accelerating the transition to a low-emissions economy. Read more in our proposed 2030 strategy for financing sustainable growth.
