Māori Direct Investment – Picking the Right Opportunities

Webinar held on 12/11/2020

Direct investment activity continues to increase driven by iwi armed with a $1bn investment capacity, progressive Māori Trusts & Incorporations growing and diversifying, and innovative Māori businesses.

Direct investment in unlisted NZ private companies and start-up ventures may provide attractive returns, growth potential, and quadruple bottom line outcomes making them appealing to Māori investors.

However, they can also carry additional risks like market volatility, management transition, and single asset or geographic concentration.

Identifying, assessing and managing these risks is critical to the preservation and generation of wealth so we talked to leaders of Māori commercial entities of varying size, age and stage to seek their experiences and perspectives on balancing reward with risk.

Special thanks to our speakers:

Mark Tume, Chair, Ngāi Tahu Holdings

June McCabe, Chair, Te Waka Pupuri Pūtea

Dr Riri Ellis, Executive Director, Tukairangi Investments

This webinar was hosted by David Harrison, Head of Māori Relationships at ANZ.

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SUMMARY

Mark Tume – Chair, Ngāi Tahu Holdings (NTH)

• NTH have a very defined governance structure with a suite of documents providing clarity of governance roles, shareholder expectations, the overall goal, primary and secondary objectives and set of investment preferences.

• Know your endowments and understand how you can turn these into competitive advantages to make direct investments successful.  We take a ‘fast fail’ approach with our endowments being the first filter we run over direct investment opportunities to assess their strategic fit.

• Diversification should maximise the risk/reward or efficiency of portfolio returns, assuming volatility of returns as a proxy for risk. However, an alternate approach is to consider risk from the bottom up i.e. operational; financial; people; customer, etc.  When the risks are well understood a more concentrated portfolio can also provide acceptable returns.

June McCabe – Chair, Te Waka Pupuri Pūtea

• Having a clear and deliberate strategy in place enabled an opportunistic investment like Bell’s Produce to accelerate the implementation of our plan.

• It’s important to ‘bring the people with you’ on the investment journey.  You have to keep highlighting why it’s important, linking it back to the big picture and showing what’s in it for whānau.

• Having the capability to run the business after acquisition is paramount along with stress testing the financial model and assumptions. Negotiations need to factor in these challenges e.g. an agreed transition plan.

• First and foremost you have to be able to stand hand on heart and have confidence in the numbers behind your due diligence but there are wonderful intangibles too like:

Pride: the tribe’s sense of pride that this is our business!

Confidence: internally – trust and confidence that the commercial board can deliver outcomes and that it’s not just about the money.  And externally – Te Rarawa are now seen in the community as a big player leading to more investment opportunities. 

Dr Riri Ellis – Executive Director, Tukairangi Investments

• Having survived PSA and covid-19 there is still a desire to diversify to mitigate risk with an intention to move from 90% to 70% exposure to kiwifruit.  However finding investments that deliver returns on par with our existing portfolio is not easy.  In fact the strategy to diversify was stalled by a recent significant kiwifruit investment.

• ‘Rangatiratanga’ provides an over-arching principle to guide decisions which has seen a focus on value-chain investment, and asking ourselves: “at the end of the investment - Will we own the land? The business? Will we manage it? Or can we eat it?”.

• We have a desire to accelerate the identification and development of talent and organisational capability to support our growth and diversification aspirations.