Bayly AndrewANDREW BAYLY (National—Hunua): Thank you Madam Speaker. It is interesting to be talking on the Venture Capital Fund Bill first reading. I am slightly heartened that the bill is in the name of David Parker having had some experience with fund managers and fund management prior to coming into politics. But I've got to say that when I looked at the New Zealand Venture Investment Fund which is going to be a co-investor I was a little bit disconcerted when I saw that the presiding Minister was the Hon Phil Twyford which just slightly worried me in terms of the commerciality of that.My colleague the Hon Paul Goldsmith has noted that we're going to support this bill but we do have some concerns. Before I start talking about those I do want to acknowledge the Hon James Shaw for his persistence over a number of years in finally getting this through his coalition partners and actually being at a stage where we're talking about it today. The first question is: why a venture capital fund? That is a very important question Madam Speaker because I know you know these things. There are different types of funds the most risky of which is a venture capital fund. That is where you invest in start-up companies. The next stage in investment is expansion capital. That is where you have companies that have moved forward in their progression and are more stable. Then you get the third stage which is private equity. New Zealand has seen a huge investment largely from Australia of private equity funds coming into New Zealand. And then you get into a normal type of investment in a particular company that you see happening in every day of New Zealand corporate life. So the most striking thing is that the Government has chosen to invest in the most risky part of the investment portfolio namely in a venture capital fund. And I think that is an issue because that implies that these companies in formative stages who've typically not taken their market proposition to the market yet but have intellectual property that they've developed which they think has commercial application but has not been proven in the market place—whereas if you were further down the line with a private equity investment for instance that company would have already been operating and would have positive cash flows and would be a far less riskier investment. And so correspondingly the required rate of return on a venture capital fund is very very high. Normally it's more than 20 percent per annum because that reflects the amount of losses that will take place in the investee companies i.e. the companies that the venture capital fund chooses to invest in. On average probably one will be very successful one or maybe two will be OK and the remaining seven or eight will be hopeless and in many cases result in financial loss. And so for a Government entity namely the New Zealand Superannuation Fund to invest $240 million alongside a New Zealand venture investment fund for a total of $300 million—this is a diametrically opposed position in terms of the objects of the New Zealand Superannuation Fund which has traditionally invested in large-scale funds and very very secure companies with a position mainly of realising those assets over 30 to 40 years. The second thing is I struggle with involving the New Zealand Superannuation Fund. That's not to say I don't believe they do an excellent job; they do. They've returned over 10 percent per annum compared to the required 20 percent for a venture capital fund. They've achieved over 10 percent since it's been formed—an outstanding achievement. But there are different requirements to running a venture capital fund versus a $40 billion fund of funds - type of investment that primarily is the New Zealand Superannuation Fund's modus operandi. And so those different skill sets mean that the New Zealand Superannuation Fund will need to take on board different people to manage this $240 million investment. And it begs the question: if the Government wanted to go down the investment in venture capital route why didn't it just use the existing vehicle that the Government set up many many years ago which is the New Zealand Venture Investment Fund? That's already got $240 million invested in about 11 venture capital funds and nearly 300 companies I think from memory. And so that to me is the first question: why on earth did it not choose the venture capital fund that's been successful to date been in operation for many many years and could have been the prime vehicle because they are specialists in venture capital funds? The other thing I'm concerned about—and I did ask the Hon David Parker this when we had the recent debate at select committee—is that there is no target return. Now I spoke before about a 20 percent return for a venture capital fund and that is a very high expectation. The Minister's response broadly was to say that because it was a supply agreement between the Greens and the New Zealand Labour Party that sort of detail hadn't been specified—and I note is not specified in this legislation. I think that is an absolute essential element of all venture capital funds and without that clarity no fund will ever operate. It's an absurd proposition to be proposing a fund without clear parameters around its success. Also the modus operandi of investing a fund of funds is a very unusual approach for this particularly where you want to try and direct it towards green investments because that requires the combined entity to find lots of subsidiary funds to invest in and there ain't that many funds available. And so that is going to be an interesting issue and one no doubt we will explore in the select committee about just on earth who they are going to invest in. And I think the last thing—I don't want to take up too much time because I'm looking forward to debating this in the committee—is this issue around recycling. This is a wonderful concept—that the Government invests money in this wonderful concept and through wonderful management and governance out pops the original capital plus a profit. And of course that'll be recirculated back and reinvested and we'll get this ecosystem which I heard mentioned before. Well unfortunately I think we heard that with KiwiBuild. Weren't we going to recycle $2 billion? I seem to recall that. I don't think there's been much recycling other than Ministers—Rt Hon David Carter: No there's a reset.ANDREW BAYLY: It is a reset we have had recycling of Ministers but we certainly haven't had recycling of investment and certainly not the $2 billion. And so I am looking forward to learning more about this recycling as we go through the select committee stage because I just want to see just what the Government has in store for us about how we're going to get all this money back even though a lot of these companies will fail ultimately unfortunately. Thank you Madam Speaker.