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Loosening KiwiSaver Rules and NZX Changes Gets Seal of Approval
Finance industry players welcome the government’s proposed changes to make it easier for KiwiSaver funds to invest in a broader range of private assets and to list on the NZ Stock Exchange.
According to Commerce Minister Andrew Bayly, the government wants to loosen the rules so that KiwiSaver funds can be invested in private assets, housing and infrastructure projects.
Bayly states that the initiative would provide much-needed capital for local companies as well as offer investment diversification. According to the minister, part of New Zealand’s low-productivity problem was that businesses often struggled to raise money to invest in labour-saving technology and equipment. This was due to relatively shallow pools of capital.
A two-part reform package
Bayly claims that the government has released a reform package made up of two initiatives that will take effect immediately, plus a commitment to undertake more work in the year ahead.
The first initiative included changes to make it easier for KiwiSaver funds to invest in unlisted assets, such as infrastructure projects and private New Zealand businesses. Meanwhile, the second initiative was a series of adjustments that will reduce the costs and barriers faced by companies listed or undergoing listing on the New Zealand Exchange (NZX).
According to Bayly, the KiwiSaver initiative is the first step in achieving a “win-win” for the financial markets, providing investors with risk diversification and potentially higher returns.
“Leveraging the money held in KiwiSaver to invest in unlisted assets, particularly domestic ones – such as transport projects, renewable energy generation or large-scale housing developments – would be a win-win,” Bayly said.
Currently, most of the KiwiSaver funds (around $120 billion) are invested offshore in foreign stock exchanges. Similarly, only 3% is invested in unlisted assets, compared to the 16% of Australian superannuation funds.
The Ministry of Business, Innovation and Employment (MBIE) is consulting on options that will allow KiwiSaver fund managers to use common-practice liquidity management tools. There will be two consultations led by MBIE, which will close on February 14, 2025.
Planned KiwiSaver changes supported by the Government
The proposed changes received strong industry support; however, experts remain cautious. Sam Stubbs, chief executive of KiwiSaver provider Simplicity, welcomed the announcement.
“We are broadly supportive, but with these things the devil is in the detail,” he said.
“We all want this to happen in principle, it’s just how we can make it happen that is fair to KiwiSaver members who are ultimately the ones fronting up with the cash for all of this.”
Meanwhile, the Securities Industry Association (SIA) said it was happy with the direction of the proposed changes.
"Progressing this package of reforms will assist companies in attracting much-needed investment capital for growth and innovation and give Kiwis an opportunity to be a part of that growth story," said SIA member Malcolm Jackson and chief executive of FirstCape.
"Our industry supports proportionate and risk-based regulation that creates a framework for New Zealand's capital markets to thrive and contribute positively to the New Zealand economy."
Improving listing in the NZX
The Government is also looking at recommending proposed changes to improve the competitiveness and attractiveness of the New Zealand Exchange (NZX).
Its proposal includes introducing greater flexibility about how companies provide prospective financial information. Additionally, the government is proposing changes to the climate disclosure regime to better align New Zealand with its international peers.
“The fact that only a handful of companies have chosen to list on the NZX in recent years speaks to the unattractiveness of our capital markets,” Bayly said.
“A particular concern is the cost associated with providing forward-looking financial information – known as prospective financial information – as part of an initial public offering and the burden of complying with the climate-related disclosures regime.”
According to Mark Peterson, NZX chief executive, the package of reforms would improve access to capital and boost New Zealand’s economic growth and market liquidity. The proposal was a positive step, particularly in the areas of removing regulations that add cost to companies looking to list and the intention to consult on changes to climate-related disclosures.
“New Zealand needs to remove regulatory roadblocks that are hindering investment and access to capital for New Zealand companies and projects,” Peterson said.
“The package of changes, which include making the requirement to provide prospective financial information for initial public offers optional, signalling consultations on climate-related disclosure settings, and general disclosure requirements – alongside the Law Commission review into director liability settings – will materially improve the viability for companies wanting to meet their growth aspirations via the listed market,” he said.
Peterson said changes were certainly needed to improve New Zealand’s climate-related disclosures (CRD), as they need to align with global standards, particularly with Australia.
“If New Zealand is serious about transition, disclosures would also apply equally to both listed and unlisted companies,” he said.
Key takeaway
The proposed change is set to be a great move forward for Kiwi businesses, welcoming more investment and access to capital. However, caution is still recommended as it is uncertain if the initiatives will materialise.
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