he management of the government pension funds, as is all of her other duties, of grave importance for the Minister of Finance. However, since the fund is currently under scrutiny by the Opposition, the public needs to know what is in question.

What Is Being Questioned?

The leader of the Opposition, Dr. Grant Gibbons, has alleged repeatedly that The Honourable Dr. Ewart Brown held a $2,500 a plate fund raising dinner in Washington DC at which current and prospective “fund managers” were in attendance. Later Dr. Gibbons expressed similarly that Calvin White, Chairman of the Public Fund Investment Committee (PFIC), had attempted to organise a golf tournament to raise money for one of the PLP Hamilton Parish Branches.

Mr. White is said to have invited several American money managers to participate in this event. Unfortunately, the golf tournament never took place due to a misunderstanding in scheduling at a local golf course.

Whether or not we agree with the manner of action taken by Dr. Gibbons, there is always a need for an examination of the handling of pension funds or trust funds as there is always a possibility of fraud in the handling of such funds. The impact in such cases is harmful to whomever is the beneficiary of these funds; in this case it would be our retirees and also a blot on the reputation of Bermuda as a ‘clean' financial jurisdiction. Hence, there is a great responsibility that the management of pension funds must be subject to controls that are verifiable by independent authorities and easily understood by the stakeholders of the fund. I believe that the Public Fund Investment Committee is structured to meet these criteria.

Given the size and importance of the Government pension fund, it often attracts the attention of politicians as there is a very real concern among the elderly that there will be money in the fund when they retire. There are such questions as whether the funds are being invested with due regard for risk, for growth and for income therefrom. There is a need to know whether the fund meets the policy objectives of the Minister of Finance.

What is the reality with respect to the management of the Bermuda Government pension funds? In the first instance, we need to ask whether the fund is at risk. Broadly, risk is of two types. There is the risk of fraud - someone might simply steal the funds. Then there is the risk that the fund will not be invested wisely.

How Is the Government fund managed?

The Government fund is managed by the Minister of Finance supported by the Financial Secretary and his staff acting on the recommendations of the Public Fund Investment Committee. The investment committee in turn is advised by an American investment consultant who provides the committee with information on the performance of the fund managers under contract to the Ministry. The performance of these money managers is compared with the movement of benchmarks representing the class of assets under consideration and also with the performance of the peer groups of the managers under review.

These management reviews take place once a quarter based on information provided by the consultant. Those managers, who do not meet the agreed criteria for performance, are designated as “under performers”. If their performances do not improve after an additional quarter, the Minister is advised that the money manager in question be released and replaced by another money manager. The new money manager will be taken from a list, prepared by the consultant and agreed by the committee that shows the performance of the proposed manager over a period of five years. This system works. This is evidenced by the fact that the Government of Bermuda has been given an “A” rating for financial management over the past two years.

Is There Substance to the Charges of Corruption?

No doubt some people may be wondering whether there is any substance to the allegations and innuendoes made by Dr. Gibbons with respect to Minister Dr. E. Browne and Chairman Mr. Calvin White. I am strongly of the opinion that there is no substance to the charges made against Dr. Brown. Dr. Brown is not, and has never been, the Minister of Finance who has the sole responsibility for the investment of public funds. At the time the fundraising dinner was held, Dr. Brown was not in a position to determine “the play” or anything else connected with the Finance Minister's decisions and this is well known by Dr. Gibbons, the Opposition Leader, if not by his members.

The charge against Mr. White is a little different in the sense that he has been respected as a fellow economist and was the chairman of the Public Funds Investment Committee. Hence, the Minister of Finance, the Honourable and Learned Paula Cox has promised to investigate the allegation. While the investigation is being conducted, the chairman, Mr. Calvin White, has taken a leave of absence, a course of action that was quite noble of him.

Personally, I have some serious questions as to why the UBP continues to make such dangerous allegations whenever an issue arises that is economic. Clearly, the facts would suffice, why embellish the facts with such phrases as “the Premier is a political eunuch”? Or is the Opposition Leader trying to continue to make the timeworn myth that “black organisations cannot manage money”. To those who may claim this to be unfair to Dr. Gibbons, consider the following. The Minister of Finance is black. The Financial Secretary is black. The Public Funds Investment Committee is almost totally black. The chairman of the PFIC is black. The American consultant is black. Further, it has only been since the PLP took office that there has been such a heavy black presence in the management of this large Government fund.

Given the above considerations, the Finance Minister Paula Cox was justified in making such a strong response to the charges and allegations of the Opposition Leader against her Leader and fellow Cabinet Minister. I hope that the Minister will set the mandate for the investigating committee to examine not only the current aspects of the management of the Government pension fund but also the past years.

The investigating committee needs to ask: Are the pension funds being managed adequately by the Progressive Labour Party government? Does the fund have controls that are in line with those in use by managers of similar pension funds? What controls were in existence when the fund was managed by the former Minister of Finance, the Honourable Dr. Grant Gibbons? Were there examples of “pay for play” under the UBP government? Have management controls of the fund deteriorated since when it was under the authority of the UBP Leader of the Opposition or have the rules and conditions become more stringent?

calvin@northrock.bm