New Zealand has a stable legal system, a transparent regulatory environment and a range of investable sectors, including agriculture, energy, infrastructure and technology. Even so, many global managers allocate little or nothing to the country.
Why allocations stay small
Three practical issues come up repeatedly. Transactions are often below the minimum size a large fund will consider. Managers without local presence find it hard to source opportunities before they are widely marketed. And unfamiliar regulation, tax and counterparties add time and cost to each investment.
Each of these is a structuring and execution problem rather than a reason to avoid the market.
Addressing ticket size
Platforms combine individual assets or loans into a vehicle large enough to justify an institutional allocation. A lending platform, a portfolio of infrastructure assets or a programme of co-investments can give a manager meaningful exposure through a single relationship.
Addressing access and execution
Local origination gives investors access to opportunities before a broad sale process begins. A local partner can also manage counterparties, advisers and stakeholders through to completion, which reduces the burden on a manager’s own team.
Structuring to investment parameters
Global funds work within defined mandates covering return targets, tenor, currency, security, reporting and governance. Opportunities designed around those parameters from the start move from first meeting to investment committee faster than opportunities that must be restructured later.
For New Zealand businesses seeking capital, the same principle applies in reverse: understanding how an international investor evaluates an opportunity is the first step to attracting one.
This article is for general information only and does not constitute financial advice.