New Zealand's government-managed investment pools have always been vulnerable to political interference, despite the official hands-off policies.
Some years back, for instance, Bill English issued a directive to the NZ Superannuation Fund (NZS) to invest more in local assets, which it has.
But the National government hasn't so far even mooted the prospect of completely draining the Crown investment pools to fill current liquidity demands (with the quite legitimate exception of the $6-7 billion Earthquake Commission fund).
In fiscally-restrained times, however, the government-invested funds are too tempting for some to resist. Most notably, NZ First leader Winston Peters has called for the NZS to fund the buy-back of state-owned assets (if and when a sale happens), while former ACT leader, Rodney Hide, (writing in some publication whose name escapes me) wants the government to liquidate the lot on some deranged principle.
Both proposals might prove difficult to implement: it's not that easy to conduct a $20 billion fire sale.
In any event, all the five Crown Financial Institutions (CFIs) have come under tighter government oversight in the last year after the creation of the Crown Ownership Monitoring Unit (COMU) in 2011.
A division of Treasury, COMU has a wide ambit over all government-owned businesses, approving board appointments and whatnot.
As well, COMU has been tasked with measuring the combined risk profile and return characteristics of all CFIs, publishing the results quarterly.
The relatively new relationship between COMU and NZS is highlighted in a recent exchange of letters between Finance Minister Bill English, and the chair of the Guardians of the NZS, David May.
English notes that COMU should "engage with [NZS] on its ongoing work around CFI risk frameworks and Crown's risk tolerance level".
In his letter English urges the NZS to contact "COMU shortly after receiving this letter to discuss my expectations in more detail".
"Investment specialists from [NZS] have recently met with COMU [to discuss risk tolerance]," May writes back. "We look forward to further engagement and knowledge-sharing with officials."
It's difficult to read much into the exchange of officialese but to me it seems a wee bit tense, which becomes slightly more apparent when costs are discussed.
"The levels of remuneration and investment management costs being incurred by [NZS] are high relative to other CFIs," English says. "... I expect the Guardians to ensure that the costs incurred in implementing the Fund's investment strategy are appropriate in the context of managing Crown assets and sufficiently compensated by the performance of the Fund on a net of costs basis."
May replies: "By international standards, [NZS] is lower cost and creates similar net-value-add to its peers..."
According to May, the overall cost of running NZS (before fund manager performance fees) should fall from the current 0.64 per cent of funds under management to 0.57 per cent or from 0.79 per cent to 0.75 per cent if expected performance fees are included.