Yvonne Ba­boolal

Fees amount­ing to US$18.5 mil­lion were paid to man­agers of the non-US Core In­ter­na­tion­al Eq­ui­ty Fund of the Her­itage and Sta­bil­i­sa­tion Fund (HSF) in 2011 while on­ly US$10 mil­lion in prof­its was re­alised. This was the is­sue that ap­peared to cause con­cern among both Gov­ern­ment and Op­po­si­tion mem­bers of a par­lia­men­tary Pub­lic Ac­counts Com­mit­tee (PAC) meet­ing yes­ter­day as they met with rep­re­sen­ta­tives of the Cen­tral Bank and the Min­istry of Fi­nance.

The in­for­ma­tion was con­tained in the an­nu­al fi­nan­cial state­ment of the HSF for the year end­ing Sep­tem­ber 2011, which is to be laid in Par­lia­ment soon by the Min­is­ter of Fi­nance. "Be­fore ri­ot breaks out among the mem­bers here, we are not in­ter­est­ed in the pre­vi­ous year. "The com­mit­tee is on­ly deal­ing with 2011, not 2010 or 2012," PAC chair­man, Op­po­si­tion MP Colm Im­bert, told Cen­tral Bank Gov­er­nor Ewart Williams.

PAC mem­ber, Anand Ram­lo­gan, summed up his col­leagues con­cern this way: "Es­sen­tial­ly, peo­ple were be­ing paid to beat the bench­mark and were not beat­ing it." Im­bert added: "Is it good busi­ness that in ex­cess of TT$100 mil­lion is paid in fees? "As lay peo­ple, we are try­ing to find out. Are you hap­py you paid them US$18-plus mil­lion to earn US$10 mil­lion?"

Im­bert want­ed to know if man­agers man­ag­ing sov­er­eign funds in oth­er parts of the world were dealt with in the same way. Williams, in try­ing to ex­plain how eight man­agers and one glob­al cus­to­di­an of the non-US fund were paid US$18.5 mil­lion, re­ferred to 2010 and 2012 fig­ures.

He sought to show that the non-US ac­count of the HSF showed in­creas­es from as far back as 2007 right down to 2010 and again in 2012. "As far as we are con­cerned, we are still ahead of the game," he in­sist­ed. He said it was mis­lead­ing to look at the fund over any one par­tic­u­lar year and say it was bad.

The debt cri­sis in Eu­rope af­fect­ed the fund in 2011, he said, not­ing the Greece bailout. He added: "In the last quar­ter of the fis­cal year, the Eu­ro­pean in­vest­ment cli­mate turned very bad. In­vestors were pulling their mon­ey out of Eu­ro­pean en­ti­ties. "You can't iden­ti­fy one part of the year and let it be seen as a ba­sis of poor man­age­ment and pun­ish man­agers."

He said the man­agers were paid fees for every ser­vice they per­formed, based on the mar­ket val­ue of the fund, not on its gains or loss­es. These man­agers were hired, ba­si­cal­ly, to out­per­form the mar­ket-based bench­mark they were giv­en and would have out­per­formed the bench­mark up un­til the end of June 2011, Al­is­ter Noel, Cen­tral Bank's se­nior man­ag­er in op­er­a­tions, added.

In­sist­ing the loss was not that large, Williams said there was US$4 bil­lion in the HSF, with US$621 mil­lion held in the Non-US ac­count. But Im­bert was not in­ter­est­ed in that kind of in­for­ma­tion. He want­ed Williams to state specif­i­cal­ly what checks and bal­ances were in place in 2011 to min­imise any loss.

The PAC meet­ing, which start­ed late, did not last long. Williams was giv­en a num­ber of ques­tions to an­swer at an­oth­er ses­sion. "We need to clean this up," Im­bert said.