Premier David Burt announced the establishment of the Bermuda Infrastructure Fund (BIF), supported by a $100 million investment by Bermuda’s insurance industry.
Speaking as the Minister of Finance, he said the new fund will create jobs and boost the local economy through major construction projects.
Mr Burt told MPs on Friday, that the concept was not supported by the former One Bermuda Alliance administration due to a disagreement over proposed fees.
Since the change of Government, he said the Progressive Labour Party administration had negotiated a new deal.
When approached by key senior executives, he said: “The former Minister of Finance did not support this fund as there was disagreement on the management fee that was to be paid to the fund managers.
“This disagreement prevented the fund from becoming a reality. Upon taking office the concept was presented to this Government, and following a period of negotiation we were able to arrive at a suitable agreement to proceed which granted the Government a seat on the board in exchange for a guarantee of the minimum management fee.
“The Government believes that is in the best interest of Bermuda and Bermudians who are looking for jobs to have international business invest their funds locally to help stimulate Bermuda’s economy.
“Given the confidence we have in the future of Bermuda and our desire to support infrastructure development, the Government has agreed to support the establishment of the Bermuda Infrastructure Fund,” he added.
Investment opportunities listed as examples the BIF would consider include:
- Upgrades to Bermuda’s energy infrastructure;
- Sewage treatment;
- New port facilities at Marginal Wharf;
- Redevelopment of the Hamilton Waterfront;
- Construction of mixed use residential and commercial buildings in Hamilton.
Premier Burt also noted that “insurance and reinsurance companies have significant assets”.
“These assets are put aside to pay claims when they arise. The vast majority of these assets are invested outside Bermuda. If only a small portion of these funds were invested domestically in the Bermuda economy that would result in significant investments,” he said.
“This would be a very significant inward flow of capital into our economy leading to investments that will create jobs and stimulate economic growth.”
He noted that these companies “have consistently been committed to Bermuda”, and “wanted to help ensure that Bermuda was able to return to a path of economic growth, creating prosperity for Bermudians”.
“The recent statistics shows that 2016 was the seventh year of economic contraction in the last eight years, which shows the urgency that must be placed on economic growth as our future depends on being able to grow our economy and create jobs for Bermudians.
“The originators of the fund idea, realising that they do not have the in-house expertise in infrastructure investment necessary to manage the fund professionally, approached Fortress Investment Group who agreed to act as manager,” he added.
Fortress Investment Group LLC is a leading global investment management firm, specializing in “a range of investment strategies – private equity, credit, liquid markets and traditional asset management – on behalf of over 1,600 institutional investors and private clients worldwide”.
The Fund is seeking a minimum of $100 million in commitments from Bermuda-based insurance companies and management fees will be payable semi-annually in advance, in an amount equal to 0.75 percent of the capital invested. The minimum fee is $1 million per year.
It was also noted that whenever the management fee is less than $500,000 in a semi-annual period, the Government must pay the difference. The amount paid by Government will also represent an interest in the Fund, and Government will be liable to pay the initial management fee of $500,000 and pay other fees as long as the amount invested by the fund is below $66.7 million.
An advisory board comprised of representatives of certain limited partners and a Government representative will be established by Fortress Bermuda.
The BIF will be able to borrow funds to facilitate investments or in connection with the Fund’s business.
Unless savings can be found from “current allocations”, Premier Burt warned that supplementary estimates will be required for the management fees.
As Finance Minister, he advised MPs that “there is no budget allocation for the Management Fees that have to be funded by Government for this proposal”.
“Therefore unless savings can be found from current allocations, a supplementary estimate will be required. It is important to remember that Government will receive an equity stake in the fund for any payments made which will rank equally with other investors.
“This fund is a vote of confidence in Bermuda and a vote of confidence in the co-operative approach to governance that this new Government has taken.”
Moving forward, he said: “Given the confidence we have in the future of Bermuda and our desire to support infrastructure development, the Government has agreed to support the establishment of the Bermuda Infrastructure Fund.”
Key features of the Fund:
- The Fund is being formed primarily to make investments in Bermuda-based infrastructure assets and opportunities
- The General Partner will be Fortress Bermuda Infrastructure Fund GP LLC & The Manager will be Fortress Bermuda Infrastructure Fund Advisors LLC
- The Fund is seeking a minimum of $100 million in commitments from Bermuda-based insurance companies
- Management Fees are payable semi-annually in advance, in an amount equal to .75% (1.5% annually) of capital invested. The minimum fee is $1 million per year
- In the event that the Management Fee is less than $500,000 in a semi-annual period the Government must pay the difference. The amount paid by Government will represent an interest in the Fund
- Government will be liable to pay the initial management fee of $500,000 and will be liable to pay some fees as long as the amount invested by the fund is below $66.7 million
- The General Partner will establish an Advisory Board composed of representatives of certain limited partners and a Government representative
- The Fund may borrow funds to facilitate investments or otherwise in connection with the Fund’s business
The Premier concluded with a quote by former Premier Alex Scott, who said: “Bermuda works best when we work together”. And he reaffirmed Government’s commitment “to working together with all partners that are interested in genuine collaboration to grow Bermuda’s economy and create jobs in Bermuda that Bermudians can and will fill”.