Channeling the Ivy League Helped a Maori Tribe Earn $1.3 Billion

(Bloomberg Businessweek) -- New Zealand’s indigenous Maori people were guaranteed equality when they signed the Treaty of Waitangi with the British Crown in 1840. But it took more than 150 years for the government to apologize and seriously address the injustices the Maori suffered during colonization, when vast tracts of land were bought from them for a pittance. That loss of an economic foundation still disadvantages them.

In 1998 the Ngai Tahu tribe of Christchurch got a NZ$170 million payout from the government, one of the first in a series of compensation payments that have given tribal groups, or iwi, the opportunity to invest. Today, Ngai Tahu owns a portfolio of tourism ventures, commercial and residential properties, farms, forests, and fisheries. Its assets are valued at NZ$2 billion ($1.3 billion), the largest of any iwi, while the broader Maori economy is estimated at NZ$50 billion. “As the peace and reconciliation process continues, as the assets have gone back to the tribes, as economic capability and capital has become available, it’s fantastic,” said Adrian Orr, New Zealand’s central bank governor, in a recent interview with Bloomberg News. “Ngai Tahu is a great story.”

Even though the iwi got a fraction of the amount it was estimated to have lost, its investment plan has become a blueprint for others to follow. Under a clause that ensures the first iwi to settle won’t be disadvantaged later on, Ngai Tahu also receives 16% of the value of all subsequent settlements, which has so far amounted to almost NZ$300 million. Ngai Tahu’s fund boasts an average annual return of more than 15% since it began, says Mike Sang, chief executive officer of Ngai Tahu Holdings Corp., the iwi’s investment arm.

The profits benefit Ngai Tahu’s 61,000 members through cultural, environmental, and economic development. By June 30, the end of this financial year, NZ$573 million will have been directed to iwi initiatives, including scholarships, grants, and a matched savings plan through which members save for education, homeownership, and retirement.

As the distribution policy was being developed, Ngai Tahu looked around the world and took guidance from endowment funds such as those run by Yale and Harvard in the U.S., says Sang, who prior to working for Ngai Tahu was chief financial officer at farm supply company PGG Wrightson. The iwi adopted parts of the Ivies’ model, making investments it could hold on to for years or decades to create intergenerational wealth. “The key reason we exist is for the iwi to be able to achieve its aspirations in terms of the well-being of people, cultural revitalization, and environmental restoration, so it’s important that we’re able to provide a consistent distribution,” Sang says. “The amount of capital per person has grown. We’ve performed better than what we would have hoped.”

The iwi made astute early investments. In the late 1990s it purchased a 25% stake in fledgling retirement village operator Ryman Healthcare Ltd. for NZ$7.5 million. It’s since sold down its stake to 2%, generating, along with dividends, returns of NZ$315 million; the remaining holding is now worth NZ$118 million.

An investment in Shotover Jet Ltd., which is based near the South Island resort of Queenstown and offers tourists speedboat rides, began in 1999 with an initial purchase of 38% of the company. Ngai Tahu completed a buyout five years later. The iwi now owns other tourism companies, which offer scenic helicopter flights, whitewater rafting, and trail hiking. It also has a stake in a whale-watching business.

Ngai Tahu accepted the government’s settlement offer 20 years ago because “eventually you’ve got to look at how you want to move forward rather than keep fighting the battles of the past,” Sang says. By contrast, the largest Maori iwi in terms of membership, Ngapuhi, is struggling to resolve a decade of internal divisions that have stalled settlement negotiations with the government. Last year its assets were valued at just NZ$59 million.

To contact the editor responsible for this story: Bret Begun at bbegun@bloomberg.net

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