Bigger than the stock exchange, and still growing
KiwiSaver now holds $123.1 billion in funds under management, roughly matching the entire market capitalisation of the New Zealand stock exchange. That scale is the problem. There simply are not enough listed assets in New Zealand to absorb the money flowing in every fortnight from employer contributions and member savings.
The logical destination is private markets: unlisted infrastructure, private equity, direct property, venture capital, private credit. Mercer New Zealand CIO Padraig Brown has said managers “have no choice but to look offshore or beyond public markets” as the scheme outgrows domestic listed opportunities. Australian super funds already allocate 15% or more to private assets. New Zealand sits at just 2.4%. The gap is the opportunity. It is also the risk.
The regulator is waving flags, not blocking traffic
The Financial Markets Authority is not trying to stop the shift. It is telling the industry, publicly, that governance is not keeping pace with ambition.
FMA Director of Markets, Investors and Reporting John Horner has acknowledged that private assets “can offer diversification and long-term value” but warned that private markets bring “unique risks around valuation, liquidity and opacity”. A snapshot survey of 30 providers found infrequent valuations leaving unit prices stale, limited visibility over external valuers’ assumptions, conflicts of interest in the valuation process, and patchy disclosure to members.
The FMA described the “rapid expansion” of private markets as “bringing about fundamental changes in New Zealand’s investment patterns, liquidity conditions and risk distribution”. That is not the language of a regulator comfortable with the pace of change. It is a warning dressed as commentary.
Cabinet already opened the gate
The policy train left the station before the FMA raised its concerns. In December 2024, MBIE launched a consultation on enabling greater private asset investment in KiwiSaver. By October 2025, Cabinet had agreed to amend the Financial Markets Conduct Regulations to require new asset disclosure categories. The government’s rationale is explicitly about directing capital toward “long-term productivity challenges and economic growth.”
The FMA’s governance warnings have come after the regulatory change, not before it.
The switching problem nobody has solved
Here is where the tension bites. KiwiSaver providers must currently release funds within ten days when members switch schemes. Private assets, by definition, cannot be sold in ten days. AUT Professor Aaron Gilbert has flagged this structural mismatch, noting that proposed changes would effectively lock members into fund managers for indeterminate periods while still paying fees.
The Retirement Commission’s submission was blunter. It argued that proposed liquidity tools like side-pockets and redemption gates “shift risk from providers to members”, warning that a member needing funds for hardship, a first home, or retirement “could find themselves in a position where they are restricted from accessing a portion of their funds.”
This is not theoretical. The FMA’s annual report shows 175,000 members switched schemes in the 12 months to March, with that number growing by more than 20,000 every year since 2023.
Wall Street is already stress-testing the thesis
The US private credit market is providing a live demonstration of the risks the FMA is flagging. In early 2026, Blue Owl Capital capped withdrawals after investors sought to pull 40.7% of shares in one fund. BlackRock restricted withdrawals from its HPS Corporate Lending Fund after $1.2 billion in redemption requests. Apollo Global capped redemptions at 5%. These are not fringe operators. These are the largest alternative asset managers on earth, and they could not meet redemption demand.
What business owners should actually be watching
Milford Funds, managing roughly $10 billion in KiwiSaver, has invested in private assets for over a decade but holds only $32 million in private assets, just 0.32% of scheme FUM. That caution is instructive. Milford’s submission warned against introducing side-pockets and redemption gates, arguing the complexity “would amount to an unintended and unwanted consequence from trying to foster greater investment in private assets.”
With 21 providers and nearly half managing less than $1 billion, many smaller schemes risk heavy concentration in a handful of illiquid investments. Growth-category funds now represent 47.5% of all KiwiSaver FUM, up from 28.3% in 2015. Members have been progressively pushed toward higher-risk profiles. Private assets are the next step in that trajectory.
The direction is probably right. A $123 billion savings pool needs more than the NZX can offer. But the governance infrastructure for valuing, disclosing, and managing illiquid assets in a retail savings scheme is not built yet. The FMA knows it. The question is whether the industry closes the gap before the next market stress event forces the issue for them.
Sources
- FMA: KiwiSaver Annual Report 2025 (2025)
- MPA Magazine: KiwiSaver funds eye private assets as FMA flags valuation risks (2025)
- 1News: KiwiSaver shakeup – Private asset investment risks could outweigh rewards (2025-02-05)
- Investment News NZ: FMA puts KiwiSaver commissions, default retiree engagement on watch (2025)
- Investment News NZ: FMA to quiz funds on private assets (2025)
- i3 Invest: KiwiSaver Grows Beyond Local Markets (2025-08)