The Guardians of New Zealand Superannuation have confirmed a commitment of $30 million to become the cornerstone investor in Waterman Fund 2 LP (the Fund). The Fund has a target capitalisation of $75 million and is well on the way to achieving that total. As at 1 July it had already raised in excess of $65 million in capital and will now commence investment activity.  The capital will be invested to assist the growth and expansion of capital-constrained, private New Zealand companies.

Waterman Capital is the first manager appointed by the Guardians for its Expansion Capital Strategy, which is part of its global private equity strategy. The Fund is the second private equity fund to be raised by Auckland-based Waterman Capital since its establishment in 2005.

In addition to the commitment from the Guardians, Waterman Capital has received strong support from investors who participated in its first fund raised in 2005, many of whom have substantially increased their commitment.  Waterman Capital has also attracted a significant number of new investors and is close to finalising support from several parties that will take the Fund's capitalisation to above $75 million.

The Fund will make equity investments into private New Zealand companies with values ranging from $10 million to $50 million. Target companies will have proven business models and a profitable track record. They will require further capital to attain growth targets, to expand internationally, or to assist with ownership succession.

The Guardians' General Manager, Investments, Matt Whineray, said the Guardians had been actively seeking high-quality opportunities to invest in smaller, high-growth, privately owned New Zealand businesses constrained by a shortage of capital.

"This investment will assist with meeting the Fund's purpose of reducing the tax burden on future New Zealanders of the cost of New Zealand Superannuation," Mr Whineray said. "We are pleased that, in serving that purpose, we can assist New Zealand businesses to grow to their potential."

Executive director of Waterman Capital, Chris Marshall welcomed the Guardians as a cornerstone investor.

"Waterman targets a deep pool of private companies that represent the heart of the New Zealand economy. 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."

Mr Whineray said that the Guardians had followed a thorough process to select Waterman. "We use external managers only when we firmly believe that the manager is operating in an investment environment conducive to generating returns better than could be achieved investing passively; when the manager is utilising a sound investment strategy; and where the manager has satisfied our demanding due diligence hurdles."

"Waterman has established an experienced investment team with a proven track record of success in selecting private companies able to create value through growth and change", Mr Whineray said.

The Guardians already have significant investments in New Zealand, with some NZ$2.9 billion or 19% of their portfolio (about 31% including cash) invested in New Zealand equities, infrastructure, property, timber, other private equity and fixed income at 31 May 2010.

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About the New Zealand Superannuation Fund

The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to reduce the tax burden on future New Zealand taxpayers of the cost of New Zealand Superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the Government has made contributions to the Fund while the cost of superannuation is relatively low. The Fund will invest the money on a prudent but commercial basis and the Government will begin to make withdrawals from 2031, when the cost of superannuation has increased. As at 31 May 2010 the value of the Fund was NZ$15.9 billion.

For more information about the Expansion Capital Strategy, how the Guardians appoint investment managers and about the Fund generally visit www.nzsuperfund.co.nz 

About Waterman Capital

Waterman Capital is a New Zealand owned and based private equity firm established by Matt Riley and Chris Marshall and began investing in 2005. It is focused on investing in and adding value to small to mid-market businesses in New Zealand.  For more information visit www.waterman.co.nz.