Government has "revolutionised" the investment of public funds, Finance Minister Eugene Cox claimed in the House of Assembly yesterday.

Responding to Opposition concerns about protecting money held by Government, such as the Contributory Pension Fund, the Minister told the House of Assembly that the Public Funds Investment Committee, which advises on managing the money, had been given performance goals they never had before.

And he reassured his House colleagues that the more than $1 billion held by Government was in good hands under professional direction.

But Opposition Leader Pamela Gordon, while declaring herself supportive of the direction in which the administration of public funds is going, called for greater transparency and questioned whether some members of the Investment Committee had a conflict of interest.

Prior to the Progressive Labour Party taking power, the Committee was "an old boys club," the Minister said. "Some of the (fund) managers had funds which had accumulated from $25 million to $75 million and nothing was done to shift that money."

Mr. Cox's comments came during discussion of a law giving the Minister of Finance more flexibility in deciding how government held money is invested.

The intent of the law -The Public Funds Amendment Act - was to accommodate new forms of investments, such as hedge funds and forward exchange contracts, that did not exist when the law first came into effect in 1954. It was passed after it received broad based support in the House.

The Finance Minister explained that changes to the Public Funds Act were recommended by the Public Funds Investment Committee after a review of types of securities that pension funds in other countries were investing in.

The changes allow the minister to decide on what securities are to be invested in by making an order based on advice from the Committee.

"In selecting the different types of securities purchased or investments made, Government's goal is to maximise returns at a prudent level of risk," the Minister said in his initial briefing. "This requires balancing market volatility with long term goals."

He added there will be limits and controls on the amounts invested in each category of investment. "In conclusion, the proposed amendment will allow enable the various pension funds to be invested in a more modern and prudent manner in order to maximise the potential long term investment returns, for the ultimate benefit of pensioners."

Opposition suggestions that the bill be changed so as to rein in the Minister's discretion had already been accepted, explained Mr. Cox as he introduced the bill for the second time. Now the Minister's orders will have to be tabled in the House first.

Ms Gordon thanked Mr. Cox for taking their concerns into account but said Government should make public changes in investment strategies, performance of portfolios and fund managers in the form of an annual report.

"A billion dollars is a significant amount of money that belongs to this country," Ms Gordon said. And the people should have a right to see "where it's invested and how it's invested".

She added : "There is an accountability process and the way we honour that accountability is to make it public."

Ms Gordon expressed concern that one or two members on the Investment Committee may have a conflict of interest because they are also in the investment business. She said that ran counter to industry standards.

"You cannot sit on the committee and have a say in where the funds are going to be put and be a beneficiary of where the funds are invested."

She also wanted to know about the funds' performance benchmarks for the managers, "who would have set those benchmarks and who manages the managers?"

Allan Marshall (UBP) referred to a series of recent media stories to show that the issue of pension funds was a sensitive one. And he went into intricate detail about investment strategies, questioning what he considered might be too much investment of the public money in risky hedge funds. Mr. Marshall also cautioned that there might be too many fund managers on board.

"When you expand your management base there is always a risk. There is the issue of whether we're going to get the best bang for the buck," he said. Mr. Marshall also said the Minister's statement that getting the best financial return was the overriding objective gave the Opposition some comfort that the funds will not be used to fulfil "other political agendas or social agendas."

Government whip Ottiwell Simmons was to later dismiss Mr. Marshall's contribution to the debate as full of "extraneous matters to the real issue." And he denounced the suggestion that Government would abuse the people's trust by spending the money on social projects. "Nobody is so socially conscious that they are going to be giving away money.

"What the minister is trying to do is make sure the money is safe," concluded Mr. Simmons.

Mr. Marshall made another potentially explosive claim - that the minister had directed a percentage of the money be invested with local firms.

Mr. Cox began his response by saying that Mr. Marshall was aspiring to be the Alan Greenspan of the UBP side.

"I know people may want to come and ventilate their knowledge. That's okay," said the Finance Minister. But "I wished he had left it to the Honourable learned Leader." He then reviewed the direction the administration of funds had taken since the Progressive Labour Party got into power.

A consultant had been hired to review the portfolio, he said. Performance of managers had been reviewed and some had been fired for underperformance. "We've done everything with the intention of making it the best it's ever been."

Mr. Cox told the House that there had been no directive to send some trade to local firms.

"We have said to our committee and our managers to try to see if we can invest with Bermudian brokers. And if their rates match the norm to do business with them."

He agreed that hedged funds have caused a lot of concern "and should be watched carefully."

As to Ms Gordon's concern about conflict of interest on the Investment Committee, Mr. Cox said there was a limited talent pool on the island. And he conceded that there were "one or two members" who were brokers. But, he said, the members are asked to declare their interests and "that's watched on a daily basis". Any abuse will result in immediate termination, he said.

The system in place to administer public funds was superior to what had been in place before. And the amendment being proposed was a "simple" amendment to give the minister flexibility.

"We don't need Alan Greenspan."

"We will not apologise for holding Government to a higher standards," said Ms Gordon. "What we do expect is that the best arrangement is made for the taxpayer to be the biggest beneficiary... We do support the direction the Minister is going as long as there is accountability and public scrutiny."

The House also passed a bill setting fees for registration of professional surveyors. The Opposition side asked for clarification that persons practising different branches of the profession would not have to pay multiple fees. The Finance Minister confirmed that was the case.