Don't force Kiwi wealth on to the NZX - guide locals to infrastructure instead

Sunday, 28 June 2026

There’s been talk about using Kiwi wealth to bolster our lacklustre local capital markets. But there’s a better solution - which would see us support the NZX but invest in things that have a direct benefit to New Zealanders, says Sam Stubbs.

Sam Stubbs is the managing director of KiwiSaver fund Simplicity and a regular commentator on financial and economic issues.

OPINION: Investing in New Zealand is a very mixed experience. We romanticise our highly successful start ups, but investor access to companies like Rocket Lab and Halter has been difficult for most retail investors, especially in their early and exciting phases.

In contrast, what’s available to investors in the New Zealand stock exchange has been pretty boring, and has performed poorly.

The numbers say it all. The top 500 US companies have given investors an average before tax return of 13.7% per annum over the last 5 years, versus New Zealand’s top 50 companies, which have delivered a paltry 2.6%.

And it’s not just the American markets - heavily weighted to technology - that have embarrassed us. The top 50 European companies made investors an average of 10.3% per annum, the top 200 Australian companies 6.8% and the biggest companies in emerging markets 8.7%.

The NZ Stock Exchange has also listed only six companies in total in the last five years, compared with the Australian Stock exchange listing up to 120 per year. They have over 2,200 companies now listed, while the NZX has seen the number of companies decline from 130 to 112 over the last five years.

So why is the New Zealand Stock Exchange such a woeful performer, with so few companies listed?

There are many reasons. Top of mind to me is the conflict of interest the exchange had in both being an exchange, a regulator, and a fund manager in it’s own right. This was largely addressed in a re-structuring in 2020, which separated the Stock Exchange’s regulatory functions from the operating business. But the damage had been done by then.

Another reason is that the management of the NZX have mis-placed their attention on existing listed companies, and largely ignored the rise of KiwiSaver. In my 14 years of managing a KiwiSaver fund - including two default providers - I have never been pro-actively approached by the Stock Exchange to discuss any issue relevant to growing our capital markets.

And this conflict of interest has been exacerbated by the dominance of a few investment banks in New Zealand, all of whom own wealth management businesses that are increasingly paying their bonuses and, once again, competing with their KiwiSaver clients and diverting attention away from growing the capital markets at home.

This woeful state has led to calls for asset managers, and large state owned investors like the ACC and NZ Super Fund, to be forced to invest more locally. But this is a very bad idea.

Why?

The obvious reason is there is so little to invest in. By 2070, total KiwiSaver savings could easily be $1 trillion dollars, as opposed to $140 billion now. So if fund managers were obliged to keep their current asset allocation to New Zealand investments - about 30% - they would have to invest another $250 billion in Aotearoa by 2070.

To put that into perspective, the largest two venture capital firms in New Zealand currently manage $1.3 billion between them, and the general feeling now is that there is now plenty of venture capital money here for a good idea.

But let’s assume that we become the Silicon Valley of the Southern Hemisphere and multiply our venture capital investments twenty times by 2070. That means a huge venture capital investment industry in New Zealand would still only absorb less than 10% of what KiwiSaver managers would have to invest here.

So, obliging the biggest New Zealand managers to invest a large percentage locally risks flooding the market with too much money, and driving up asset values to bubble like valuations. That might suit day traders, but it is not the right way to manage long term KiwiSaver investments.

Sam Stubbs has an idea for all the wealth the country will be generating in the next decade.

A second reason is we don’t want our capital markets as a political football. Allowing politicians to tell fund managers how much to invest in would risk putting our retirement dollars into politicians pet projects. This degree of influence happens in no mature economy I am are of, for good reason.

But, regardless of the woeful state our capital markets are in, demand usually begets supply, and this should be its saviour. Why? Because, just as we have many billions to invest, so we have a current infrastructure deficit. MBIE estimates it at $200-210 billion. They also estimate that upgrading our infrastructure over the next 30 years, to the OECD average, will cost over $1 trillion dollars.

A lot of that cost will inevitably be borne by tax and rate payers, as it is currently. But I have yet to hear an economist or politician say they can afford it all. And that’s where KiwiSaver managers, the ACC, NZ Super, Iwi and other pension funds have a critical role to play. If the Government and councils are prepared to accept that investment in their infrastructure should be allowed by large local investors - and those investments could be listed on the NZ Stock Exchange for local shareholders only - that is a match made in investment heaven.

To date, what little infrastructure investment there has been by local fund managers and listed companies has been chasing higher and shorter term returns. Infratil is perhaps the best, and most successful, example of this. But the days of getting high returns from buying monopolies, duopolies and oligopolies in New Zealand is probably over. Why? Because big local investors are now prepared to accept lower returns for the certainty of consumers paying their electricity, water and rent bills. As an investor, I am happy to accept a lower return if it's in the last bill you won’t pay.

This match - between the infrastructure needs of local and central Government and the billions of dollars of in KiwiSaver, the NZ Super Fund, the ACC and Iwi - is an almost perfect one. Just look at where it’s been successful, most notably Australia and Singapore.

So, in spite of our currently woeful share market, I am very optimistic that the next 5 -10 years in our capital markets will be in much better shape, and serving our needs as consumers and investors. And if the listed companies are 100% Kiwi owned, it’s effectively public ownership by another name.

But KiwiSaver and fund managers, the NZ Stock Exchange, and infrastructure owners, all need to start planning for the possibilities, and making them happen. That would be enlightened capitalism, and the future of our capital markets.

Watch Future Proofing NZ, the great retirement funding crunch, with NZ First leader Winston Peters, national's deputy leader Nicola Willis, ANZ NZ chief executive Antonia Watson, and ANZ Group chief economist Richard Yetsenga, hosted by ANZ, Infrastructure NZ, and The Post. The discussion will be moderated by the Post and Sunday Star-Times national affairs editor Andrea Vance and associate editor Luke Malpass. Watch online at thepost.co.nz from 7am tomorrow.