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Cabinet Paper DEV-19-SUB-0221: Venture Capital Fund Bill: Policy Approval and Approval for Introduction
1. This paper seeks the Cabinet Economic Development Committee’s agreement to the detailed policy decisions behind the Venture Capital Fund Bill and agreement to introduce this Bill. This Bill establishes a Venture Capital Fund and provides for the Guardians of New Zealand Superannuation (the Guardians) to manage and administer the Fund.
2. This Bill proposes amendments to the New Zealand Superannuation and Retirement Income Act 2001 (NZSRI Act) and the creation of a new Venture Capital Fund Act.
3. There is currently a venture capital gap experienced by New Zealand firms and this is leading to firms either being constrained in their growth or having to seek foreign investment.
4. The purpose of the Bill is to establish a Venture Capital Fund to fill this venture capital gap in New Zealand.
5. The Bill amends the NZSRI Act to enable the Guardians to take on the new role of managing and administering the Venture Capital Fund, in addition to their role in managing and administering the New Zealand Superannuation Fund (NZ Super Fund). The Bill makes no changes to the functioning of New Zealand Superannuation or the Guardian’s role in managing the NZ Super Fund.
6. The Bill will bring into force a new Venture Capital Fund Act. This Act will require the Guardians to invest the Venture Capital Fund in accordance with best practice investment management that is appropriate for institutional investment in those markets, subject to the requirement to comply with any directions in a policy statement issued by Ministers.
7. The policy statement allows the Minister of Finance to establish certain policy settings, and define key terms, where it is not appropriate for these to be fixed in legislation (such as the amount of private capital that has to be invested alongside the Crown’s investment).
8. The best outcome will be achieved by having the Guardians initially draw on the existing capability and experience of New Zealand Venture Investment Finance Limited (NZVIF). NZVIF will be the delivery agency, investing the Venture Capital Fund via a “fund of funds” model, while the Guardians will provide oversight, monitoring, and ultimately be accountable for the Venture Capital Fund. To ensure this, the Bill requires that the Guardians and NZVIF make reasonable efforts to reach an agreement for investing the Venture Capital Fund. If no agreement can be
reached, the Minister of Finance may specify a contract or other arrangement that will be binding on the Guardians and NZVIF.
9. The Minister of Finance can direct the Guardians to wind up the Venture Capital Fund if the Minister is satisfied that adequate venture capital is available to New Zealand entities to enable them to grow into successful and sustainable businesses.