Fund focus: Pioneer sees PE come of age in New Zealand

New Zealand is one of the smallest markets in Asia Pacific but it might be the most conducive to private equity. Pioneer Capital estimates the country has the most private economy and the lowest supply of professional capital investment in the developed world.

The Auckland-based GP sees this national profile – shaped by geographic isolation – as resulting in a sharply favorable supply-demand imbalance for investors of privately held companies. Its third fundraise seems to confirm the popularity of this view: a final close of NZ$260 million ($180 million) was achieved after only a four months in the market.

This beats the NZ$210 million target and the NZ$150 million and NZ$70 million raised for Pioneer’s first two vehicles. All of the LPs are domestic institutions and the re-up rate was 88%. Backers include New Zealand Superannuation Fund, which contributed NZ$120 million, and a growing contingent of corporations representing the country’s indigenous Maori people. Maori groups are significant land owners in New Zealand and have recently diversified into PE, accounting for some 17% of Fund III.

“Private equity has become more mainstream since we started about 10 years ago, so there’s a lot more appetite among institutional investors,” says Randal Barrett, Pioneer’s managing director. “The track record of returns has been good, and the stock exchange is so small, the only way to actually access large parts of our economy is private equity.”

The plan is to make deployments of NZ$10-50 million to medium-sized domestic companies that are in position to rapidly grow internationally. Investments will be flexible, including minority or control stakes in businesses that could be cash flow positive or negative.

International exporters will be the primary target, reflecting Pioneer’s current portfolio, where more than 95% of the combined sales are made overseas. A stronger focus will be put on premium grocery brands that can leverage the country’s growing reputation for food safety and environmental consciousness.

The first of these investments has already been made in a joint buyout of Havelock North Fruit alongside Oriens Capital. The two firms took a combined 55% of the company, which has been renamed Rockit after its core product – a line of specially bred miniature snack apples sold in tubes, tennis ball-style.      

The simultaneous novelty and familiarity of Rockit apples is at the heart of the New Zealand marketing opportunity. The country’s primary agricultural and mineral commodities still dominate the economy, but companies able to put a palatable twist on old trademarks are finding a place in a new fast lane.

“Last year, high-value exports out of New Zealand were NZ$9.1 billion and outstripped our forestry, wool and meat industries,” Barrett explains. “Value-added products were second only to our dairy sector, but they’re catching up – and LPs want exposure to that.”

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• Topics
• Australasia
• Buyout
• GPs
• LPs
• Fundraising
• New Zealand
• Pioneer Capital
• New Zealand Superannuation Fund