Mr. Yukio Takasu
United Nations Under-Secretary-General for
Management
19
April 2016
Dear Mr. Takasu,
We, the undersigned,
former and current staff, are deeply disturbed by recent issues surrounding the
management of Pension Fund investments. We are grateful for the action you took
to stop the proposed merger of the administrative and investment sides of the
Fund. We also appreciate your recent actions to adopt progress benchmarks to
eliminate the serious payments backlog, although questions persist about how
quickly this backlog can be cleared and the effectiveness of management in the
Fund Secretariat.
The faltering management
of the Investment Management Division however, increasingly preoccupies us, and
the tendency of its leaders to take on increased risk with our savings without
appropriate risk assessment and without the required competent and independent
staff to conduct such assessment. We refer, in particular, to two letters to
the Secretary-General from the Acting Chair and Chair of the Pension Board Assets
and Liabilities Monitoring Committee, dated 11 February and 7 March 2016,
respectively. More alarmingly, the RSG for Investments has ignored advice and
made it uncomfortable for officials that make frank and honest assessments of proposed,
but inadvisable investments, particularly in risky hedge funds.
We have become aware that
no one is now writing up the investment policy, maintaining the risk management
manual, following up on compliance or doing business continuity and disaster
recovery tests. All of this has been stopped because of inadequate staffing, in
terms of both capacity and expertise. As one example, the resources and
capabilities do not exist to do the dashboard for the bluebook and risk
budgets.
How investment decisions
are being made seems a complete mystery since there is no senior D-2 or D1
Deputy Director for Risk Management and Compliance who
can take a view independent of the RSG as required by sound fiduciary
responsibility. There is ample evidence from many sources that investment in
hedge funds is ill advised and counter productive, since hedge fund managers
are known to make great profits for themselves, but serve their investors
poorly. We note that the risk and performance dashboard has disappeared both
from the blue book and website. Instead, the site provides a raw data dump,
which does not tell the real story about the risk of investing more money in
hedge funds.
Our concern is that
without due diligence and oversight the RSG will fill the vacant D-1 and D-2
posts with candidates who do not have the required independence to truthfully
say when an investment is not advisable.
Under the existing MOU,
the recruitment of the D-2 requires that the CEO be 'consulted,’ but as far as
we know the CEO and other Fund administration staff are completely in the dark
about this secretive interview process, which was concluded with almost no
oversight or participation. There are supposed to be checks and balances in the
system; that is why we, among others, argued that the two sides of the Fund
should not be integrated. That does not mean, however, that there should be no
oversight or participation in the decision-making of the RSG.
When the RSG appeared in public on the issue of
hedge fund investments she claimed that the existing Fund investment in
Bridgewater (BW) All Weather (AW) Risk Parity Strategy was working well for the
UN Pension Fund. This was at a time when
other independent sources were saying that investments in AW were not advisable
owing to the nature of its strategy and the significant tail risk involved.
BW’s Risk Parity strategy does not provide any diversification benefit
according to many sources.
We share the alarm expressed by the Acting
Chair and Chair of the Pension Board Assets and Liabilities Monitoring
Committee that the RSG is operating in an administrative vacuum without
reference to proper recruitment and investment procedures, participation by
other members of the administration, and proper oversight. The decisions on
Fund investments should not reside in any one person or be based solely on
his/her personal preferences or views, without highly qualified risk
assessment, which has as its fundamental value, the protection and conservative
investment of fund assets.
We request you to intervene personally to
ensure that these matters are handled in an entirely transparent manner to
protect our savings.
Yours
sincerely,
(List of
signatories attached)
N.B. 227 total signatures
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