Government reforms will allow $120 billion currently in KiwiSaver funds to be more easily invested in private assets, changes also on the way for NZX to make it less ‘unattractive’

New capital market rules will allow KiwiSaver providers to invest in private assets and “leverage” the $120 billion currently sitting in KiwiSaver funds.

Commerce and Consumer Affairs Minister Andrew Bayly says New Zealand’s “relatively shallow pools of capital” are hard on businesses trying to raise money for investment purposes.

In response, the Government will be rolling out a “package of reforms to unlock capital”.

This will include changes to KiwiSaver rules so KiwiSaver funds can be more easily invested in unlisted assets.

“Currently, most of these funds are parked offshore in foreign stock exchanges, generating little good for New Zealand’s economy. Similarly, only around 3% is invested in unlisted assets, compared to around 16% of Australian superannuation funds,” Bayly says.

“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.”

KiwiSaver funds are allowed to invest in unlisted assets but the rules around it lack clarity. 

Bayly says the current regulatory settings don’t “clearly enable” KiwiSaver fund managers to invest in private – unlisted – assets and it is difficult for KiwiSaver fund managers to use appropriate liquidity risk management tools. 

Currently, members can withdraw their investments within 10 days which makes investment in illiquid, private assets challenging. Illiquid assets are assets not easily converted into cash.

NZX is ‘unattractive’

The Government will also be rolling out a “series of adjustments” to reduce the costs and barriers faced by companies which are listed or wanting to list on the NZ stock exchange (NZX).

This will improve the “competitiveness and attractiveness” of the NZX, according to Bayly.

He says the “unattractiveness” of NZ’s capital markets is why only a handful of companies have chosen to list on the NZX in recent years.

The Government plans to introduce more flexibility around how companies provide prospective financial information.

“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 (IPO) and the burden of complying with the climate-related disclosures regime.

Bayly says NZX companies are required to publish forward-looking prospective financial information in order to list on the NZX.

The costs are “onerous” and range from 5% to 15% of total Initial Public Offering (IPO) costs, he says, reaching as high as several million dollars. 

Companies will be able to choose to not prepare prospective financial information, but will need to outline the reasons why or to prepare prospective financial information in a form of the company’s choosing.

Bayly says these changes would align with requirements in Australia, remove unnecessary costs for issuers, and make it easier to list on the NZX.

“We are moving at pace to implement these changes with the intention that they are in place in early 2025 prior to the IPO season,” he says.

Bayly says he also wants to propose changes to the climate disclosures regime “to better align” with international peers like Australia which he describes as NZ’s closest economic partner.

The first statements under NZ’s new climate-related disclosures regime were lodged this year and Bayly says the first year of reporting highlighted “significant problems” with the regime.

Public feedback will be sought on potential changes like raising the NZX-list company reporting threshold from the current $60 million in market capitalisation to $550 million in market capitalisation instead. This change would kick in from early 2026 if it gets approval.

Bayly has also suggested that alternatively, the NZX-list company reporting threshold could be raised to $550 million in market capitalisation from early 2026 – and then the threshold could be reduced down to $250 million in early 2028.

Public consultation will also look at raising the investment scheme manager reporting threshold from $1 billion in total assets under management to either $5 billion in total assets under management or $5 billion per scheme.