Economic Development Minister David Parker is expected to put forward a Cabinet paper which could direct the New Zealand Super Fund to invest in early stage companies. While the idea could have merit, having politicians influence the investment decisions of the $40 billion fund is dangerous territory.

OPINION: Since it was established, politicians of almost all parties have been offering views about what the Super Fund should, or should not, invest in.

Set up to help cover New Zealand's future pension needs, so far it has largely resisted political pressure, but this is something which needs to be guarded against carefully.

While he was still in Opposition, John Key issued statements that the fund should be used to increase investment in New Zealand infrastructure.

Former Labour leader David Cunliffe raised the idea of a dedicated pool of money being used to buy New Zealand assets such as farms.

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As well as giving continual instructions on which companies the Super Fund should or should not be investing in on ethical or environmental grounds, the Green Party at one time proposed a Kiwisaver fund to be run by the Super Fund.

ROBERT KITCHIN/STUFF Back in 2009 when he was Minister of Finance, Bill English directed the Super Fund to "identify and consider opportunities" to increase investment in New Zealand. However since it received the directive, the share of New Zealand assets in the fund has actually fallen.

Telling the fund what to do is easy while in Opposition, but rare in Government, although it has happened once.

The former National government gave the Super Fund a single directive, but the wording was so vague that it is impossible to track whether it was being followed.

In May 2009, Finance Minister Bill English wrote to the chair of the fund to say that the Government's "expectation" was that in the course of being run in a commercial and prudent way, the Super Fund should "identify and consider opportunities" to increase the share of the fund invested in New Zealand.

The fund will say it did what it was told and can point to a string of impressive investments in New Zealand, beyond $1.5 billion worth of shares.

From stakes in Kaingaroa forests, Kiwibank, horticulture company NZ Gourmet, insurance company Fidelity Life, retirement village company Metlifecare and farmland worth $350m. It is developing houses in Auckland with the South Island's Ngai Tahu.

A spokeswoman points out that the returns on the New Zealand assets have been good.

But against the overall fund, the share of New Zealand assets has actually plunged. When English sent his letter, around 21 per cent of the Super Fund's assets were in New Zealand, compared to National's hope that it would ultimately increase to 40 per cent.

TOM PULLAR-STRECKER/STUFF As well as stakes in a New Zealand insurance company, forestry and horticulture businesses, the Super Fund's investments in New Zealand include a 25 per cent stake in Kiwibank.

However, a sharp climb in the value of global sharemarkets since means that while the total value invested in New Zealand may have increased, the proportion invested locally has dropped to 15 per cent.

Should we be upset by this? Hardly. The fund was told by political masters that the popular thing to do would be to buy New Zealand assets, but instead of grabbing whatever became available, it stayed calm, buying a string of gems.

Now, Labour appears to be considering taking steps to require NZ Super to invest in a very specific way in a way no politician has tried to do before.

While no one from the Government is prepared to discuss the plans, it is understood that Economic Development Minister David Parker wants to carve off hundreds of millions of dollars of the Governments contributions to the Super Fund to be specifically invested into early stage companies.

This is often referred to as angel investment.

The amounts of money being discussed are small in the scheme of NZ Super's overall size (around $40 billion before the recent market turmoil) not to mention that after years of no contributions under National, Labour has committed to pumping in billions of dollars in the coming years.

Parker's idea is not, in itself. strange; a lack of capital for early stage companies often raised as a problem in New Zealand's financial markets.

In 2016, Spark chief executive Simon Moutter launched a plan for major New Zealand companies to join together to create a $100 million venture capital fund in response to low levels of investment in research and development.

This was later shelved because of a lack of interest from other companies and organisations, including the Super Fund.

Leaving aside whether there is a lack of money for early stage companies, a view which is not universally held in the industry, there are bigger issues at play. Having politicians direct the investments of NZ Super is dangerous territory.

Carving up the Government's contributions to the fund, and earmarking parts for specific areas appears to be a subtle way to direct the Super Fund's investments. It could easily become a political tool if politicians were able to use their influence to change investment decisions.

Once the door to political influence is opened, it will be difficult to close again, and each idea from Parliament is likely to be more questionable than the last.

There is also the question of what message the move will have for the investment market in New Zealand, when the Government already plays in this space through the New Zealand Venture Investment Fund.

Supporters of the idea of a major new early stage venture capital fund in New Zealand seem to be under the impression that having the Super Fund involved would encourage other possible investors to get involved, including possible overseas investors.

The Super Fund already has pockets which are plenty deep enough to find the money to invest in venture capital.

It has an existing directive from a former Finance Minister to "identify and consider opportunities" to increase investment in New Zealand.

So far, it has resisted doing so. What signal will it send to possible co-investors if the Super Fund is now dragged, against its will, into this area of investment?