Jennifer Strachan proposed to structure States finances in a better way to provide a central opportunity for growth.
She said that such a fund would offer greater clarity on the States financial position, with better transparency and reporting; would improve the risk-adjusted return of assets, with better focus and more nimbleness.
She said that the clear identification of such a fund would considerably increase the island’s ‘international financial credibility’.
Most importantly, she said, it would support the local economy, as such funds from other international finance centres had proved. If local businesses have good ideas to raise funding, a Guernsey Sovereign Wealth fund could decide to follow other investors or support loan guarantees when others are committed to invest.
‘Currently, we send 95% of our investments off-island and do not seem to appreciate nor measure the impact it would have to invest more here,’ said Deputy Strachan.
She said that local fund managers were being frozen out by a different approach from the States. At one point about £400m. of States assets were invested through local fund managers, with a small portion invested directly locally, and the performance had been strong, and had produced annual fee income of some £2m.
A restructuring in 2022 saw a US-based investment consultant appointed and the policy towards local fund managers was changed from a maximum of 20% to a minimum of 10% of non-pension assets, and she believed that had led to annual fee income paid locally being cut by more than half to some £850,000.
Deputy Strachan, who said she had no direct conflict of interest despite her role in the industry, said that this had a ‘significant impact’ on the local sector.
She said that managers were now repeatedly missing market and real return benchmarks with investments, costing the States some £200m. in potential asset gains.
‘It is essential for Guernsey to improve this situation, as we have lost much more money in recent investment underperformance than we have in the MyGov IT debacle,’ she said.
‘I have a passionate interest in our financial assets being managed well and made to work for the people of Guernsey.
‘These assets are a key part of the economic engine of the island and this topic, on how the assets are to be structured and managed is at least as important as the debate over the tax structure.’
Deputy Charles Parkinson said he was interested in the concept of a sovereign wealth fund.
He supported the concept of the States Investment Board, which he had recently joined, and said he was taking a strong interest in its work.