If like me, you are at that time of life when the time you started work is a distant memory and retirement is getting closer, the chances are you’re thinking about how you’re going to fund it. You're probably also hearing stories from people you know talking about their money not going as far as they’d hoped, or even deferring retirement a few years.
They'll explain that they are in this situation because their savings, sitting in fixed term deposits, are not going to provide them with enough income to retire comfortably thanks to the very low interest rate environment right now.
This is a real challenge for growing numbers of New Zealanders, so that's why we set up our Private Land and Property Fund (PLPF) in 2017. We felt there was a lack of good investment New Zealand-based opportunities out there.
Land, lots of land
We chose to set up a land and property fund because, as New Zealanders, this is an asset class we feel an emotional connection with and it makes good investment sense. Land is the backbone of the country but something which is becoming more out of reach to all but the wealthy as real estate prices rise.
PLPF has so far invested in land from Nelson to Kerikeri. This land is either rented out to a grower for a fixed rental or PLPF itself grows a crop and the net proceeds from that crop gives us our income which we return as a distribution. There is also potential for capital growth as the land appreciates in value and sometimes the fund will benefit from future development opportunities. Any income builds up inside the fund before it is distributed, and this gets added to the fund value every day.
The way we see it, PLPF is a great way to invest in property without all the risks and hassle of managing it yourself. What we have created with this fund is an opportunity to invest in multiple properties across New Zealand – something that most of us wouldn’t have the money or expertise to do otherwise.
PLPF has undertaken a lot of investing in the wine sector, but this is deliberately spread across three different regions. We’ve also added a kiwifruit orchard. We'll also be investing in other sectors so we don’t have all the investments concentrated around one opportunity. Industrial properties, like warehouses, are likely to be another area where we should find good income-producing assets.
The results so far
In its first two years, the fund is following through on our aim to give investors higher returns than fixed term deposits. In fact, both years we’ve actually beaten our long-run return target of 8% per year (before tax but after fees).
That said, we know it’s not all about returns. That’s why we made sure investors’ money isn’t locked in and there are features like automatic monthly withdrawals, which have been very popular.
Perhaps most importantly, people have been given the option to invest in something tangible. Investors can drive through New Zealand and actually see the productive assets they own, which is very reassuring.
More than one basket
On the subject of being sensible when it comes to your savings, everyone has heard the saying about not putting all your eggs in the one basket.
When we set up the Private Land and Property Fund we knew we weren’t creating the only investment fund our investors would ever need. But we knew it was going to be a very useful investment option to help investors make the most out of their nest eggs.
It’s not about investors putting all of their savings in PLPF, just like hopefully they wouldn’t put all of their nest egg in term deposits. But we do hope people will consider the difference it might make if they invested some of their savings in PLPF.
After all, we all worked hard to get where we are today and we all deserve to have our money working hard for us now.
