Mercer New Zealand has appointed a local investment manager, New Ground Capital, to bring an institutional-grade residential property exposure in the New Zealand market to their Mercer Unlisted Property Fund.
Mercer manages more than $846bn (€735bn) globally. Its New Zealand clients include KiwiSaver (the nation’s retirement scheme), endowment funds, Māori iwi investment companies, charitable trusts, and a number of large workplace savings schemes.
Mercer has made an initial allocation with New Ground which will source and manage the assets, with New Ground also making an appropriate co-investment to align its interest with the fund.
New Ground was chosen to deploy the strategy for its decade-long experience in building rental and affordable housing in New Zealand, said Del Hart, Mercer New Zealand’s chief investment officer, who joined Mercer in March from NZ Super.
She said the fund was seeded from the firm’s existing Mercer Unlisted Property Portfolio, with capital to be drawn over time as attractive opportunities were identified.
If fully deployed today, she added the allocation to New Ground Capital would amount to around 26% of Mercer’s existing Unlisted Property Fund.
“Residential real estate is underrepresented in portfolios here and in Australia compared with global portfolios,” she told IPE Real Assets, adding exposure to the asset class improved diversification and resilience.
The strategy aims to pair inflation-resilient, long-term income with potential residential capital growth, she explained.
“New Zealand faces a persistent housing undersupply and growing public-sector demand for leased accommodation. We believe the best way to capture the structural benefits of residential property is by design: a targeted allocation managed by an experienced local specialist and integrated within our unlisted property portfolio.”
Hart said for most diversified investors the look-through exposure would be modest, but the fund meaningfully enhanced income stability and diversification within unlisted property allocations.
The fund would invest in residential properties across New Zealand to build out a geographically diversified New Zealand portfolio. The houses would be leased to government and community housing providers aiming to create a stable long-term rental income stream, with the prospect of capital appreciation over time. The fund is opportunity led and can invest in a wide spectrum of residential property types.
“We’re confident around the thesis from an investment commercial return perspective, but it has a social outcome associated with it. We think this is a win-win strategy.”
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