Last Friday the House of Assembly eased restrictions on how Government could invest public funds, including pensions.

This liberalisation is wise, but requires close monitoring and reporting. The debate also shone light on an area which rarely comes up in public discourse and for that reason alone was useful.

More than $1 billion in public funds are managed by the Government. Some are pension funds, and are therefore being held in trust by the Government on behalf of the public. The rest is public money too, in the sense that it has been paid by the taxpayer.

For those reasons, great care needs to be taken on how the money is invested and the debate on Friday means that they can now be invested in Bermuda securities and in investment devices called hedge funds.

"Investing in Bermuda" makes sense on the face of it, but should be done carefully and within very defined limits. The risk comes when the local economy does poorly. Government has a responsibility to ensure that pensioners do not lose their funds at the same time that the rest of the community is also struggling. Those pension funds may be the cushion between financial survival and disaster. Nonetheless, investing a fixed percentage of the funds under management might be acceptable.

The same caution should be taken with regard to hedge funds. Originally established to "hedge" risk and preserve capital for wealthy clients, many are now anything but safe, although they are often very successful at times when other securities are doing poorly, that is the case right now and is the reason they are in vogue. But it should be recalled that only a couple of years ago, many were losing spectacular amounts of money, or going out of business altogether. So caution needs to be taken here as well.