KiwiSaver has grown tremendously since it launched in 2007, but it is pretty vanilla. Most investments are lazily thrown into listed stocks and bonds – the scheme is designed that way.

We could be using some of this money to invest in such alternatives as startups, scaling successful businesses to go international, and infrastructure that we need, as is done routinely internationally.

KiwiSaver is big enough and old enough to ask how we can unleash the power of capital towards the unmet capital needs of New Zealand.

Overseas pensions do things differently. They invest considerably more in alternative assets, such as unlisted infrastructure, real estate, venture capital and private equity. US, Germany and Australia invest 15-30 per cent of their pension assets in alternatives.

New Zealand stands out for our conservative allocation. We allocate a measly 1 per cent. The difference in allocation is worth $11 billion to $22b. That’s a lot of capital that could be doing good.

Adding alternative assets makes sense for savers and recipients of capital.

Savers would be better off with more alternatives. Venture capital and growth equity returns averaged 18 per cent a year since 1970, much higher than 11 per cent for global listed equities. This comes with more risk, but that is usually less of an issue for long-term investors, such as young people investing for their retirement. UK research found that allocating 5 per cent of savings into alternatives from age 22 could increase the retirement pot by 7-12 per cent.

The money can be invested in the capital desert faced by our startups and internationalising firms, or to fill the massive infrastructure shortfall in our country (around $75b).

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