The so-called Crown Financial Institutions (CFIs) have generally been a boon to government books over the last few years, adding cream to the asset mix.

Strong returns across the board coupled with some inflows, mainly to the ACC fund, have helped build total CFI financial assets to about $70 billion - mostly via the NZ Super Fund (NZS) and the ACC fund, which both currently manage around $30 billion each (with the ACC the largest by a couple of billion).

The balance of about $6 billion is supplied by the Government Superannuation Fund (approximately $4 billion) and the National Provident Fund - two largely-forgotten entities whose management is outsourced to Annuitas (For the time-being, the Earthquake Commission (EQC) fund, now almost cleaned out of its once $6 billion holdings, can be discounted).

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But while the $70 billion or so CFI assets lie sexily in the government accounts (a figure which doesn't include roughly $600 million in annual tax tipped in by the country's single biggest taxpayer - NZ Super), they also pose some risks.

As part of a wider investigation of state-owned financial risks, the government has set Treasury on a mission to trawl through the CFIs.

In a letter posted to the NZS in March, Finance Minister Bill English, set the scene for the Treasury investigation.

"The government needs to ensure that appropriate risk settings are in place across the Crown balance sheet," the letter says.

"I have tasked Treasury to work in this space and I ask that you engage with the Treasury when asked to support this work."

Treasury will probably expend most effort with the ACC and NZS, which are surprisingly different in their investment approaches: the latter has a large, passive exposure to global markets plus a significant dabbling in exotics; the former is a committed active investor, heavily-weighted to NZ assets.

I expect the Treasury financial risk review to make for interesting reading - or at least it might play well to the actuarial community.

There may be some surprises. For example, the NZS exposure to the slumping dairy market could make for minor excitement.


In its recently-published 'Statement of performance expectations - 2016/16', the NZS includes a reassuringly-Kiwi line in the projected income for the 12 months ending June 2016: "milk sales" are predicted to earn the NZS about $21.85 million over the period, the accounts show.

Unfortunately, "farm operating expenses" could come in at $22.8 million during the same timeframe.

But when viewed against the NZS projected investment profit after tax of almost $2 billion in the 12 months to June next year, a small loss on milk isn't worth crying over.