A leading academic has endorsed the NSW Coalition’s call for council investments to be managed centrally by experts, stating the State Government’s current guidelines are partly to blame for millions in losses in the sub-prime fall-out.

Martin Gold, an academic at Sydney Business School and former fund manager, has told the Australian Financial Review that councils are suffering due to “outdated investment governance”.

Mr Gold echoed a recommendation made by Mike Baird, Shadow Minister for Finance, in August last year for the Iemma Government to appoint experts to centrally manage investments on behalf of all councils.

“When the fall-out of the sub-prime market began to hit NSW councils I reviewed the Iemma Government’s investment guidelines and frankly could not believe how inadequate they were,” Mr Baird said.

“The guidelines make no restrictions in terms of diversifying investments, which is the key to mitigating risk. They also fail to specify a limit to the tenure of the investment and as a result councils have made risky investments that they are locked into for 30 years.

“While councils are struggling with the enormous responsibility of managing millions in ratepayer funds, the Iemma Government is sitting on its hands.

“The Minister for Local Government announced a review last September and gave councils less than three weeks to provide details of their investments, however he’s missed his own November deadline.

“We reiterate our call for the Iemma Government to immediately fix its investment guidelines for councils and look to appoint a central panel of experts to manage the risk on behalf of all councils. Ratepayers need it and academics endorse it,” Mr Baird said.

Manly, Wingecarribee, Burwood, Tenterfield and Woollahra councils are some of the NSW councils currently struggling with investment losses linked to the decline of the US sub-prime mortgage market.

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