Will Goodwin, head of direct investments at NZ Super, is not shy about the ambitions behind the sovereign wealth fund’s Investment Hub initiative.
“Is there a way that we, a government superannuation fund, can unlock unique investment opportunities for our beneficiaries while also creating wider benefits for this young economy?” he told Agri Investor.
“We are uniquely placed to do that because of access to our international peers, our direct access to government and industry, and our very strong relationship with Maori, New Zealand’s indigenous people.”
NZ Super began building its Investment Hub, whose objective is to create direct investment opportunities in the New Zealand market, about a year ago. The idea took shape following the work of the New Zealand Productivity Commission, which found that many of the country’s sectors performed poorly when compared with global productivity measures.
“We really only had one industry that performed efficiently, landing a spot among the top quartile of firms globally, and that was our airline industry,” Goodwin said. “But across the rest of the economic sectors – be it dairy, tourism or financial services – we perform below our potential.”
“If you had a blank piece of paper and you said where in the world would I want to have a fisheries business based, you would likely come up with Iceland and New Zealand,” he said, since both countries fulfill certain criteria. These include having the largest exclusive economic zones, high quality of fishing rights and species, sustainable economic practices and close proximity to key target markets.
“We should be one of the leading fisheries countries in the world, but we’re not,” Goodwin added, given that New Zealand has the sixth-largest exclusive economic zone, cold water fish species of high value and close proximity to China.
“We are well below potential. We suffer from massive underinvestment and the industry as a whole is generating ROEs in the low single digits. But when you look at best in class, you then look at Iceland and you realize that it has an industry that generates high, double-digit ROEs.
“It’s the number one component of their GDP; the technology and innovation that surrounds that industry is bringing wider economic growth. It’s something that can be adapted to New Zealand.”
Infra bottlenecks
NZ Super’s role, as a government entity, is to influence the legislation needed to improve the industry along with industry participants. “If we do make an investment, it will likely be through infrastructure – processing, more efficient fleets and brand building. That, in and of itself, will then drive the higher ROEs and then you’ll become self-sustaining. And hopefully, to some degree, will look a little more like Iceland.”
New Zealand’s red meat industry is also a candidate for improvement, in Goodwin’s view. He reckons vast overcapacity in abattoirs, inefficient supply chains and weak downstream brands are hampering the sector. “It needs aggregating, consolidating and potentially rationalizing a lot of the capacity to try and create more efficient supply chains,” he said. “Again, we think we can potentially apply our hub model to improve the industry and drive unique investment opportunities.”
Next week, in the second article of this series, we take a closer look at the investment hub’s structure and strategy.
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