By Clint Chan Tack Tuesday, May 13 2008

THE POPULATION will soon have the opportunity to monitor the performance of the Heritage and Stabilisation Fund (HSF), into which deposits from the energy sector are placed annually, on the Internet.

This was revealed in the HSF’s 2007 Annual Report which was laid in the House of Representatives last Friday.

The report said this was all in keeping with Government’s commitment to ensure “the highest standards of transparency and accountability” in the management of the Fund which currently stands at US$1,766,093,509.48. The report said the Central Bank will soon begin the process of selecting external managers and other service providers “who will be involved in the operational management of the Fund.”

This process is expected to take six to nine months to complete. In the interim, a transitional investment strategy will be presented to the HSF board of directors. The report said because the board was committed to ensuring the transparency of the fund’s operations, the board plans “to establish a website where periodic reports on the Fund activities and performance will be made available to the public.”

The report added that the website would support existing measures in the HSF legislation to ensure transparency and accountability in its management.

Expected to be published on the website are quarterly reporting on the Fund by the Central Bank to the board, quarterly and annual reporting by the board to the Minister of Finance, annual reporting by the Finance Minister to Parliament and annual auditing by the Auditor-General.

HSF board chairman Sam Martin said the HSF Act, which was approved by Parliament on March 15, 2007, “contains a well-defined governance structure, specifies clear rules for transfers to and withdrawals from the Fund and incorporates provisions to ensure the highest standards of transparency and accountability.”

He said the board will soon work out a public education programme to educate citizens about the Fund’s operations “so as to counter mis-information and mis-perceptions and to manage expectations in line with market realities.” The HSF started with a balance of US$1.4 billion on March 15, 2007 and Government made further quarterly contributions amounting to US$321.6 million during the last fiscal year.

Over this period, the fund returned 2.93 percent versus a benchmark of 2.91 percent. Stating that the intention is to focus on the savings aspect, Martin said: “The fund is to be invested in a diversified portfolio of financial assets which will be managed so as to yield high-weighted returns. These returns will be able to support budgetary expenditures when energy resources have dwindled.”

Minister in the Ministry of Finance Mariano Browne recently said while the HSF was invested in US dollar denominated assets, the strategic asset allocation provided for the fund to be invested in non-US dollar equities. “This diversification would take place over the next few months when the external managers have been contracted,” he said.