Bermuda Fund.

Mrs. Carolyn Hall of Gulfstream Securities yesterday dramatically challenged Bank of Butterfield president Mr. Michael Collier over the launch of the fund -- which is authorised to issue $25 million shares at $10 per share.

Mrs. Hall -- who confronted Mr. Collier during question time after his speech to Hamilton Lions at the Princess Hotel -- asked what effect the Bermuda dollar mutual fund would have on the comparatively small local exchange.

Later yesterday she told The Royal Gazette that investment managers had spent the last two years getting more Bermudians into the buying and selling of stocks on the Bermuda Stock Exchange, introducing more liquidity, doubling the value of some stocks and benefiting a wide range of people.

"The benefits have been great,'' she said. "It's been good for everyone. But now along comes this fund from this large institution and since people have looked to them for advice over a lot of years, they will end up with a large share of investment money, instead of encouraging people, as we have been doing up to now, to learn about and buy individual stocks.

"Mutual funds are usually designed to help investors gain more diversification.

"But with the purchase of shares in this fund, you are not achieving diversification in such a small arena.'' But Mr. Collier said: "If you have shares in a company, and that stock goes down, you are worse off. But if you have shares in our mutual fund, which may have stock in that same company, you can smooth out the declines by the improvements in other stocks.'' Ms Hall said the Buttress fund has the potential to attracting $250 million.

"That would put downward pressure on stocks when you sell and put upward pressure on stocks when you buy. We've seen pension funds put their money locally, but it will be harder for them to do that now. Everyone will suffer.

"It will put this new fund in a very powerful position to dictate the terms of any new issues. Any new issuer will have to look to the fund managers as a major buyer. They could own 25 percent of almost any company.'' But Mr. Collier answered: "The fund will not take off all in a hurry. It won't happen overnight. This is our way of showing confidence in Bermuda's future.

"It is unlikely that we would sell all our stock in any one company at one time. It will be more market-driven. The last thing that we want to do is to create uncertainty in a currently stable market. We will be prudent managers.

It may not be in our best interests to be dominant in any one company.''