Thursday, June 25, 2015

AFICS "not convinced" on need to convene meeting on Pension Fund matters (23.6.15)

Room DC1-580, United Nations, New York, NY 10017
Tel. (212) 963-2943 Fax. (212) 963-5702 e-mail.


Honorary Members
Martti Ahtisaari
Kofi A. Annan
Ban Ki-moon
Aung San Suu Kyi
Boutros Boutros-Ghali           LS/vw
Javier Perez de Cuellar

23 June 2015

Dear Loraine, Lowell and Curling,

We reported today to the AFICS/NY Governing Board on last week’s meeting of 17 June
between yourselves and Fernando Astete, Federico Riesco, Warren Sach and myself. As you
will recall, we had been asked by our Governing Board to ascertain what further information
you were seeking and what assurances you still needed regarding the Pension Fund. You said
that the specific purpose of your request was “perceived gaps in information concerning the
proposed MoU and media reports of the Fund’s intention to expand alternative investments”.
These came down to two matters: questions about the potential for further investments in
hedge funds and other risky alternatives which you felt were substantiated by articles that had
appeared in CNBC and Opalesque, and secondly, your belief that the exceptions to be granted
through the MoU would change the structure of the Fund and give the CEO the authority to
take over the investment function. We pointed out that answers on both points had been
provided repeatedly from the highest levels of the UN Administration—from the Secretary-
General’s Chef de Cabinet, the Under-Secretary-General for Management, the Assistant
Secretary-General for Human Resources Management, the CEO of the Fund and the
Representative of the Secretary-General for the investments of the Pension Fund. The
AFICS/NY Governing Board could not add anything to that record.

The Governing Board has requested that you review and take into account the following
information: On the CNBC article, we would refer you to the RSG’s statements of 4 June
2015 which are available in full on the AFICS/NY website via the webcast of the Annual
Assembly and as a separate posting. The RSG gave a detailed explanation of where the Fund’s
money is invested and in what amounts. She spoke about a single hedge fund, the Bridgewater
All Weather Fund which has a management fee of about one quarter of one percent and in
which approximately one percentage point of the entire Fund is invested. She described it (as
had the Chef de Cabinet on 16 April 2015) as not typical of hedge funds. She herself then
referred to the CNBC article, stating that it was “not correct” that the Fund planned to increase
its exposure to hedge funds, further clarifying that “despite the CNBC article, there were no
plans to do so and that “sometimes, the press gets it wrong”. The other article that appeared to
alarm you was a report of an Expression of Interest (EOI) notice which appeared in a London
publication, Opalesque, and had led to a mistaken interpretation by some that it was an
indication of intent to increase Pension Fund investments in hedge funds.Warren Sach, former
RSG, explained to you that, on the contrary, EOIs are routine instruments for procuring
services both for custodial services and master record keeping. Such contractual arrangements
have been in use in the Fund for decades and have nothing to do with how funds are
invested. In fact, they represent a safeguard and extra level of control as they register and
report on where the funds are invested.

With respect to the exceptions to be provided under the MoU, we would again refer you to the
AFICS/NY website and ASG/OHRM Carole Wainaina who clearly stated that the MoU grants
no authority whatsoever for the investments side of the Fund to the CEO. She said she felt
“morally responsible” to the Secretary-General on the matter of the delegated authority under
the MoU and stated categorically that the MoU will not affect or change the structure of the
Fund in any way, but concerned four human resources flexibilities which were already
applicable in many other parts of the United Nations. In the case of the Pension Fund, because
these flexibilities were meant to apply to a group of staff with highly specialized functions, it
was more efficient to cover them by a MoU, rather than necessitate recourse to waivers on a
case-by-case basis. She stressed that it was essential to update the current MoU, as requested
by the Pension Board and endorsed by the General Assembly, which had been in effect for
some 15 years because many of the rules, ST/SGBs, etc. to which it referred had been revoked
or superseded, thus rendering the present MoU ineffective as a HR tool. Moreover, each of the
four flexibilities would be managed and continue to be overseen by OHRM. Additionally, the
Pension Board was expecting a report on implementation of the MoU at the forthcoming
session in July. As you know, the Governing Board is of the view, based on what it has
heard from all officials, that the exceptions to be granted under the MoU do not affect the
structure of the Fund or signal a trend in that direction, that it concerns serving staff, not
retirees, and is a matter for OHRM to decide with the CEO and RSG with guidance from
the Legal Office.

The Governing Board then discussed the substantive need for an extraordinary meeting of the
AFICS/NY membership in light of these further explanations. It further noted that the
extraordinary meeting had been requested within 24 hours of the close of the Annual
Assembly, a meeting which had taken some three months to prepare. Many members of the
Governing Board saw it as an attempt to discredit an Assembly which had been highly
informative. The Governing Board felt that if some retirees continue to lack trust in the
information/assurances that have been provided, further meetings would not dispel this
mistrust. No matter how many explanations/ assurances are provided, extraordinary meetings
would likely yield little benefit.

In light of the above, the Governing Board believes that answers to the “perceived gaps in
information” have been provided and is not fully convinced of the need for an extraordinary
meeting, much less on an urgent basis. It is also a practical reality that AFICS/NY would not
be able to hold a meeting before the Pension Board meets in July. We would first have to
establish the formal agenda and secure the participation of the key officials concerned
(ASG/OHRM, CEO of the Fund and RSG for investments) before applying the minimum 14
day lead time to inform the entire membership of AFICS/NY, as per the By-Laws. However,
as mentioned at our meeting last week, to assure the legitimacy of the proposed meeting and
assure a truly representative participation we would have to provide much more than the
required minimum 14-day notification. Moreover, in considering the need for such a meeting,
it was understood that the procedures for the request must be in strict compliance with the
AFICS/NY By-Laws and Rules of Procedure, and in particular, the provisions of Article IV,
para. 3 of the By-Laws.

The Governing Board has not set a prospective date for the requested extraordinary meeting.
Once all of the practical and legal constraints have been satisfied, it will be in a position to
determine a specific date and formal agenda. As it appears that many of those requesting the
meeting may be unaware of the latest information provided by the Administration at the
Assembly, we would urge them to review the webcast of 4 June and other information related
to the webcast that are posted on the AFICS/NY website,

[signed] Linda Saputelli
President, on behalf of the

AFICS/NYGoverning Board

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