The super fund is already an investor in larger companies, previously taking a stake in Z Energy and now having a share of Kiwibank.
The fund, which helps to pre-fund universal superannuation in New Zealand, would invest up to $90million in Direct Capital's V Fund, up to $120million into Pioneer Capital's III Fund and up to $50million into Movac's IV Fund.
Super fund chief investment officer Matt Whineray said the three funds targeted different parts of the private equity market in New Zealand. Direct Capital operated at the larger end of the growth spectrum, Pioneer targeted mid-market companies seeking international growth and Movac focused on earlier stage, high-growth technology companies. Each fund was expected to invest in between eight and 15 companies.
The fund had been investing in the sector since 2005 and previous fund investments had delivered net returns of about 15% a year, he said.
``New Zealand continues to provide attractive investment opportunities in small to medium-sized companies which are high growth, typically internationally focused and able to benefit from the expertise these managers can provide.
``External managers are a logical and efficient way for the fund to get access to the growth opportunities of this sector.''
Otago Chamber of Commerce chief executive Dougal McGowan welcomed the fund's plan and said it was obvious Mr Whineray saw the benefits of investing locally.
``These businesses can offer good rates of returns and a bright future. This is money which is hopefully going directly back into economic development and employment in our own country.''
The super fund would provide another level of second-tier lending, something which was in short supply in New Zealand, he said.
Emerging business funding was strong in the United States, Europe and Asia but there were not a lot of options in New Zealand for taking companies to the next level.
The fund would provide a new way for the chamber to work with local investors to add value and support high-tech companies in Dunedin and Otago, Mr McGowan said.
Mr Whineray said the super fund's in-house New Zealand investment team would continue to focus its efforts on listed equities and large-scale investments of $100million or more, along with the fund's rural and timber holdings.
As at November 30, the fund had $4.9billion invested locally, including more than $1billion in the New Zealand sharemarket and large investments in Kaingaroa Timberlands, Datacom and Kiwibank. The fund had returned 9.7% since its inception in 2003 by former finance minister Sir Michael Cullen. The National Government stopped contributions to the fund in 2008.
