This Is Guernsey

By Tom Edwards

MORE than £2m. of public money might be lost by the States through an ill-timed investment in troubled Northern Rock. Treasury and Resources employed asset managers Schroder’s to manage a portion of its superannuation fund, which contains all Guernsey public sector workers’ pensions, by investing in UK equities.

The company bought more than 250,000 shares in Northern Rock at £10 each, but after the global credit crunch they are now worth just £1, resulting in a paper loss of £2.25m.

But yesterday Treasury minister Lyndon Trott was quick to point out the fund had still made an overall profit of £40m.

He said the fund was worth between £850m. and £900m. and the Northern Rock shares represented just a small fraction.

‘During this government’s term of office there have been 783 occasions when the value of the fund has risen or fallen by £2m.,’ he said.

‘The portfolio contains many examples where the gain on investment has exceeded the loss on the Northern Rock shares.

‘The superannuation fund is performing well and we are justifiably proud of that.’

Treasury put a portion of the fund, totalling £174m., in the hands of Schroder’s, although it set investment parameters such as what type of industries to put the money into.

The asset management company met the department in London in September to tell it about the mounting losses from Northern Rock.

At that point the bank had already crashed and shares were valued at just £2.50 each.

The asset managers told the department that keeping the shares was the best course of action in anticipation that the share value would recover slightly when a future owner takes over.

Deputy Trott said that investment decisions rested exclusively with Schroder’s and not the States or his department.

‘I cannot stress enough that while the bigger decisions may come down to us, the day to day management is entirely Schroder’s responsibility,’ he said.

‘They have complete autonomy to decide what stocks are picked, when to buy them and when to sell.

‘That’s what they are paid for.

‘There is no political input in the process whatsoever and we do not believe it is our function in any way, shape or form to get involved.

‘For us to do anything would be tantamount to interference.’

Deputy Trott has sent a letter today to all States members explaining the situation as the superannuation fund also contains all their pension money.

When asked if he would continue to use Schroder’s to manage millions of pounds-worth of public money, he said he would.

‘They are one of the longest established investment houses in London, with a great track record going back hundreds of years,’ he said.

‘With regard to the superannuation fund, we are only interested in long-term overall performance and are content we will continue to have success.’