You may have seen the recent announcement of yet another New Zealand tech success story – the sale of Tradify to a large global software player. This is another excellent example of Kiwi ingenuity being recognised on the global stage.
Tradify is a leading job management software for trade businesses such as builders, plumbers and electricians. The company was founded in 2013 and raised capital to support growth along its journey. Movac, the New Zealand venture capital manager, invested in the company in 2021 through its Movac Fund 5, along with several other investors.
As part of broadening our KiwiSaver investments over time, our KiwiSaver* is invested in Movac Fund 5 and so benefits from this sale at an attractive return.
* Fisher Funds KiwiSaver Plan has invested in Movac Fund 5, Fisher Funds KiwiSaver Scheme and Fisher Funds TWO KiwiSaver Scheme have not.
KiwiSaver and ‘alternative’ assets
KiwiSaver portfolios have traditionally been invested in shares and bonds but there are a wide range of other available investment options, many of which are called alternative assets. Alternative assets can include venture capital, private equity and unlisted infrastructure and property, to name a few.
We are continuing to broaden our investment mix to enhance returns on our KiwiSaver portfolios, including investing in alternative assets. Alternative assets come with different returns and risks versus more traditional assets like shares and bonds, so require a thoughtful and careful approach when selecting these investment opportunities. We have added several alternatives investments already, including Movac Fund 5, and will look to grow these investments over time.
Tradify and Movac
Tradify was founded by an electrical engineer who was sick of all the paperwork and admin that came with being a business owner. The software makes it easy for tradies to manage essential tasks like quoting, invoicing, job tracking, and getting paid. What started as a small Kiwi business 10 years ago has now grown to 20,000 customers in New Zealand, Australia and the UK and is still growing strongly.
“What Curtis Bailey (Founder) and Michael Steckler (CEO) have achieved with Tradify is another great example of a homegrown New Zealand software businesses taking on the world – exactly the sort of people and businesses we’re backing at Movac. Weightless exports like software are the perfect export for a small country on the far side of the world and ‘exits’ like this mean both human and financial capital are recycled to grow the next generation of iconic Kiwi companies, as we’ve seen with the likes of TradeMe, Xero, Vend and others.”
– Jason Graham, Movac partner
As a business like Tradify starts to grow, it will typically need regular injections of cash (also known as capital) to help fund each stage of growth. The capital can be used for a range of reasons including developing more software features, hiring a sales team or launching a new marketing campaign. This capital typically comes from venture capital funds, such as Movac, which in turn get their capital from pension funds and other long-term investors. These investors require returns of 20% or so annually in return for the risk and length of time their capital is tied up. This is much higher than a typical return in the share market in any given year. While the return realised on Movac’s Tradify hasn’t been publicly disclosed, it is safe to say that Movac’s investors have done very well by backing this New Zealand success story.
This is a great example of Movac’s ability, as New Zealand’s longest established venture capital manager, to identify and invest in New Zealand technology companies with high growth potential.
Tradify CEO, Michael Steckler
Why venture capital and private equity offer opportunities for long term investing
Venture capital investing is different to share market investing. Venture capital funds will typically raise a fixed amount of money into a fund and then progressively invest the fund over five years into a concentrated portfolio of approximately 20 investments. Investments are then sold over the remaining life of the fund to realise a return.
Venture capital investing is a long-term game – most funds only return all money to investors after 10 or more years. This is an example of why venture capital, and other alternative assets, are well-suited to long-term KiwiSaver portfolios. Investors can expect higher returns than public share markets as compensation for the illiquid nature of private assets and time taken to receive their investment back.
Venture capital, together with private equity, are an important part of the portfolios of large pension funds globally. We see opportunities to invest with high-quality managers in New Zealand and overseas to gain exposure to these attractive alternative asset classes for our KiwiSaver portfolios.
The world of investing is always evolving, and we believe alternative investments such as venture capital and private equity provide high-quality opportunities to complement our existing KiwiSaver portfolios of shares and bonds.
Have questions?
If you would like to talk to someone about your investment, or to make sure your strategy is right for you, the team at Fisher Funds are here to help. Please contact us or get in touch with your adviser.
