Cabinet paper

Cabinet Paper DEV-19-SUB-0063: Proposed Option to Deepen New Zealand's Early Stage Capital Markets

Accessible HTML version

Only the Proposal and Executive Summary sections of this Cabinet paper are extracted below in HTML.  If you require a full HTML version please contact [email protected] and cite DEV-19-SUB-0063 as a reference.

Extract from Cabinet Paper DEV-19-SUB-0063: Proposed Option to Deepen New Zealand's Early Stage Capital Markets#


1. This paper presents a proposal to deepen New Zealand’s early stage capital markets. It considers the strengths, weaknesses and risks of alternative implementation and funding options. It outlines an approach for implementing my preferred option, including how to mitigate any associated risks, secure funding, and effect legislative and operational change.

Executive Summary

2. At the last Cabinet Economic Development Committee (DEV) meeting in December 2018, you agreed that we need to deepen early stage capital markets and address the venture capital (VC) gap experienced by New Zealand firms. It was noted that we need $300 million of public money to be invested in a fund of funds model to achieve this purpose, $60 million of which already sits with New Zealand Venture Investment Fund Limited (NZVIF).

3. You agreed that I should present back to this committee a detailed proposal. This paper outlines the options I have considered.

4. The Business Advisory Council recently identified the gap in early stage capital markets and also recommended that New Zealand address this issue through our sovereign wealth fund.

5. After reflecting on the analysis, my preferred option remains to allocate $240 million of New Zealand Superannuation Fund (NZSF) contributions into a new fund administered by the Guardians of New Zealand Superannuation (the Guardians) who will then invest into NZVIF in a fund of funds model.

6. There are number of risks associated with the preferred option but I believe there are efficient ways we can mitigate those risks.

7. I proposed we legislate a new fund, with a new mandate, to service the early stage capital markets while leveraging off the expertise and reputation of the Guardians. In addition to receiving the $240 million for the new fund, the Guardians will receive the $60 million currently in NZVIF.

8. I propose we review the programme every 5 years and at the end of the proposed fund term of 15 years.

9. If Cabinet agrees with the preferred option, the next steps will include a detailed design of the funds and qualifying criteria. Minister Robertson and I will lead an engagement with the Guardians and the NZVIF, and other relevant stakeholders to develop this.

[Extract ends]