The
online pension briefing organized by the UN Participant Representatives to the Pension Board on Wednesday, 29 April 2020 was extremely informative and
useful. I wish to thank them for organizing the event, and commend them for
their dedication, commitment and persistence in working for the interests of
Fund participants (active staff, whom they represent) and advocating for
retirees in the matter of the continued health of our fund.
I wish also to raise issues concerning the briefing, and a recent Passblue article, for which it is imperative that independent facts be established in order to ensure we're solving the right problems.
Informal
summary (below)
I
have prepared an informal summary below this note, structured
according to the presentations on i) developments at the Fund; ii) benefits; iii) investments; and iv) questions and answers; v) cost savings; vi) and closing remarks).
I wish to stress that this summary is
unofficial and offered solely for information of interested fund members, who
may also wish to visit the following link to replay the recorded live event.
Footnotes
My
summary notes include four footnotes. The first two concern allegations brought by the
UN Participant Representatives in letters to the Secretary-General, some of which were raised at the briefing, and responses from the RSG, for which there is
currently no independent information. The OIOS governance audit on the Office
of Investment Management, due on 31 May 2020, may hopefully shed light on these topics.
Unless we have independent and established facts, we can't be sure we're solving the right problems.
Two
other footnotes concern the issues of a) the quality of investment information
contained on the Fund website; and b) questions regarding benefit processing
rates reported by the Fund Secretariat and how they relate to improvements in
following up on missing documentation.
Passblue
article
Similarly,
there is currently no available independent verification for the
following paragraphs contained in the informative recent Passblue article, authored by
George Irving and Sugiyama Iutaka, two former UN staff members, whom I know and
respect:
“A major issue
emerged when the two top officials in the Pension Investment Office, Rajkumar
and the director, Herman Bril, imposed
changes in investments that for the first time since the fund’s inception
departed from the principles adopted by the General Assembly that investments
would be guided according to safety-profitability-liquidity-convertibility and
instead would be tied to profitability-safety-(nonliquidity)-convertibility.
That change exposed the fund to more risk and
reduced liquidity, making it more difficult to rebalance investments during
marked downturns. The exposure to high risk and the discussions that ensued
internally, including alleged retaliation against those who disagreed with
Rajkumar, led staff representatives to voice their concerns with Guterres last
year. …
The authors also note: “Although the pension board was informed of the new policies, it endorsed them with little to no oversight, as did the fund’s investment committee and assets-and-liabilities monitoring committee.”
The authors conclude that:
"It would be wiser if the relevant parties to
the fund act as soon as possible to avoid dire problems, sticking to running
the fund as it was designed originally by the pension review group in the early
1950s.”
These
paragraphs concern essentially the same allegations by the UN Participant Representatives,
contained in their letter of 21 October 2020 addressed to the Secretary-General
and related responses by the former RSG, dated 4 November 2020, the subject of the first two footnotes in my summary of the pension briefing.
Returning
to the 1950s?
Where
is the independent information that points to the wisdom of “running
the fund as it was designed originally by the pension review group in the early
1950s”?
What
is the exact relationship to systems set in place more than 70 years ago and
changes alleged to have jeopardized our investments, which allegations were seemingly not borne out by the presentation on investments by the Acting RSG?
What would it mean to run the fund exactly as it was set up 70 years ago? Does this apply to all staff-management practices, not just investment procedures? What needs to be changed to accomplish that desired unwavering adherence to 70 year old practices?
How
can anyone be expected to be brought in to lead an institution where the
prevailing culture is that systems established 70 years ago are carved in stone and not subject to
change? Are we not setting ourselves up for a system of rinse and repeat unless we identify exactly what needs to be fixed?
We
need independent facts in order to identify solutions
This
is in no way to suggest prejudice toward whatever facts on these issues that may hopefully be
contained in the OIOS governance audit that the Acting RSG said is due for presentation to the Pension Board on 31 May 2020, and subsequently, the Assembly.
It
is rather to say that until and unless we establish independent facts of what
needs to change in OIM, or regarding any Fund practices, we’re unable to definitively attribute responsibility or
accountability, or identify the source of problems that may need to be
resolved, in particular, what role alleged changed policies may or may not have
been played in losses incurred in the Covid-19 crisis, and equally important, the roles played by the various
oversight bodies.
________________________________________
Online Pension Fund information session on the situation regarding investments
Wednesday,
29 April 2020
Informal notes by Loraine Rickard-Martin (1 May 2020)
Disclaimer: This is not a transcript of the briefing. The
briefing is available at this link: https://bit.ly/PFInfoSession0420
Participants
Moderator:
Ian Richards, UN Participant Representative to the Pension Board
Speakers:
Michelle
Rockcliffe, UN Participant Representative to the Pension Board
Rosemarie
McClean, Chief Executive of Pension Administration
Pedro
Guazo, Acting Representative of the Secretary-General on Investments
Mary Abu Rakabeh, UN Participant Representative
to the Pension Board
Table of contents
I. Developments at the Fund – Michelle
Rockcliffe Paras. 1-15
II.
Benefits – Rosemarie McClean Paras 16-22
i.
Background
ii.
Impact of Covid-19 on benefit processing
iii.
Strategic direction
III. Investments – Pedro Guazo Paras. 23-37
i.
Long-term return objective
ii.
Strategic Asset allocation
iii,
Market value of assets
iv.
Weekly fund performance
v.
Liquidity
vi.
OIM website
vii.
OIM staff are telecommuting
IV.
Questions and answers:
A. Investments Paras.
38-55
i.
Sustainable investing
ii.
Cryptocurrency
iii.
OIOS audit
iv.
Strategy to deal with Covid-19
v.
Transparency
vi.
Administrative costs
vii.
Management and decision-making
viii.
Outsourcing of investment management
B. Benefits Paras. 56-63
i.
Impact of Covid-19
ii.
Timeliness of processing
iii. Reconstituting the
Executive Office
iv. Advance on monthly pension
v. Staffing
vi. Acceptance of scanned
documents
V. Cost savings – Michelle Rockcliffe Para. 64
VI.
Closing remarks – Ian Richards Paras.
65-66
I. Developments
at the Fund – Michelle Rockcliffe
1. UN Participant Representatives are hopeful
about the direction of our Fund, because of a change in the attitude of
leadership on various sides over the last few months, the willingness to listen
to the skilled professionals who have kept our fund healthy, and a desire to
safeguard the Fund for us, the beneficiaries.
2. UN Family Participants’ Representatives
have continued to be watchdogs over our Defined Benefit Fund.
3. At the July 2019 Board session, UN
Participant Representatives were made aware, of the additional risks, new asset
classes and even the possibility of investments in junk bonds contained in the
new Investment Policy Statement. The new IPS [Investment Policy Statement] contained
a large reduction in US and developed markets and a reallocation to riskier
Emerging markets.[1]
4. Last October, Participants’
Representatives communicated their concerns about the quick paced implementation
of the new Strategic Asset Allocation, which was taking place in 4 months
versus the 4 years endorsed by the Board. (Market indexes year to date show
that developed markets especially US out-performed the Emerging markets
resulting in opportunity costs to us.)[2]
[1] There is currently no available independent information regarding this allegation. The OIOS audit due on 31 May 2020 may provide such information. The allegation was contained in a letter to the Secretary-General from the UN Participant Representatives dated 21 October 2019. The former Representative of the Secretary-General responded on 4 November 2019 as follows: Quote: “The new Strategic Asset Allocation (SAA 2019) reduces risk to the Fund when compared with the previous SAA (SAA 2015) and is fully in line with the Risk Appetite Statement of the Fund approved by the Pension Board. SAA 2019 was finalized after extensive consultations over a period of seven months with the Investments Committee, the Committee of Actuaries, and other Pension Board committees. SAA 2019 was discussed exhaustively for the better part of a day at the Pension Board session in July 2019 and was also discussed during two half-day briefings for Pension Board members the week before the Board session formally began. As you know, all these Committees unanimously and strongly supported the move to SAA 2019 at the Pension Board session. Our global peers shifted to a similar SAA 10-15 years ago. The statement about a 'shift from a conservative to a more aggressive investment approach with a higher risk tolerance that could deliver more volatile returns' appears therefore to be based on a misperception of the objectives and the results of SAA 2019.. 2). The Acting RSG stated in his presentation at the briefing that the Fund does not invest in junk bonds. Link to the 2019 Investment Policy Statement:
https://oim.unjspf.org/wp-content/uploads/2019/08/IPS-2019.pdf
[2] There is currently no available independent information regarding this allegation. The OIOS audit due on 31 May 2020 may provide such information. The allegation was contained in the 21 October 2019 letter from the UN Participant Representatives to the Secretary-General. On 4 November 2020, the former RSG responded to as follows. Quote: “The actual proportion of invested equities being shifted as a result of these activities is 15% over 5-6 months. For comparison, about 40% of our invested equities are shifted (i.e. bought and sold) in a typical 12-month period as part of routine investment activity….. From a long-term investment perspective, emerging market equities have delivered 2.3 times the cumulative return of developed market equities over the returns on average as compared to developed market equities. 80% of our total exposure to global equities will remain in developed market equities after this change.”
_______________________________
5. Even before the pandemic the UN
Participant Representatives brought these concerns to fund members, forecasts
of slowing in the markets and the new asset allocation which also prompted the
UN Staff Union in NY to pass a resolution on the safeguarding our investments,
including a demand for divestment from fossil fuels.
6. UN Participant Representatives continued
to keep on top of things, and in the UN Staff Pension Committee meeting at
beginning of February they questioned how COVID-19 would affect the Fund. The
former RSG did not provide satisfactory answers to their questions.
7. Where the markets will possibly land us in
the not too distant future, the fund has seen before…during the Great Financial
Crisis of 2008 and before that in the 1980s.
8. It is time for the Pension Board to get to
work, and prepare, review the fund’s history, see what principles worked – and
repeat the actions that brought us to this place of balance. There should be no
need to reinvent the wheel in case the Fund loses value due to a recession.
9. The fund’s investments have been well run
for decades, as proven after the 2008/09 crash, when it rebounded well, while
other Pension Funds went under.
10. The investment approach must remain
conservative and adhere to principles of safety, profitability, liquidity and
convertibility. The fund must maintain the appropriate separation of Duties,
fiduciary, from investment execution, from compliance, from risk.
11.
Many staff are now wondering if their
jobs will be a casualty of the liquidity crisis exacerbated by the COVID-19. And
there are concerns about how fast the Fund will pay. Participant’s
Representatives have for three years made proposals that would negate
re-tooling systems to accommodate crises and ensure timely payments. These
proposals have not yet been accepted by the Fund but they will try again this
year.
12. Going forward we hope that the Fund will
reconstitute the Executive Office which plays an integral part in ensuring the
Fund’s resources and which would no doubt reduce current conflicts of interest
and provide guidance to ensure the reductions of cost per participants as
mandated by the General
Assembly.
13. On Thursday 30th April there will be a
meeting of the UNSPC
to
finalize our review of disability benefits and discuss items Participants’
Representatives have requested placed on the Agenda; such as arrangements for
of next Board meeting in a time of COVID, updates on outstanding benefits; and
on the procurement of services of the independent entity which the GA has
requested, to assist the Board with arriving at equitable Board representation
and other governance matters.
14. UN Participant Representatives thank the
staff of the Pension Administration and Secretariat and Office of Investments
for persevering over the last several years and the last 6 weeks, all of which
have not been easy.
15. But again, as said at the beginning, Participant
Representatives are hopeful that with good leadership, things will change for
the better internally, so that the Fund can weather the uncertainty and
external storms which are surely approaching.
II. Benefits -- Rosemarie
McClean
16. Rosemarie McClean noted that she is from the
Ontario Teachers Pension Plan. She has 30 years of experience, and has a lot to
learn about the uniqueness of the UNJSPF and the learning curve has just begun.
i). Background
17. There are 131,583 participants and 79,975
beneficiaries in the fund. The fund pays out $2.7 billion in periodic benefits and
takes in $2.679 billion in contributions from employers and staff. Benefits are
paid in 190 countries in various currencies. The Fund is a defined benefit
plan, meaning a benefit can be calculated at any time and is not based on
market performance. The Fund is in a good financial position. The actuarial position
will be reviewed by the Board in 2020.
ii) Impact
of Covid-19 on benefit processing
18. The fund continues to process cases up to
date. Payments are made on time. Two separate payrolls were run in March and
April remotely, thanks to staff at the fund who have stepped up and done a
remarkable job to ensure that payments have not suffered. The fund is taking a
look at changing some of its processes to make them more digital-abled because
of postal disruption.
19. The fund staff continue to be available via
phone or email for questions, although walk-in service was affected by
Covid-19. Toll free numbers are available around the world.
20. She encouraged members to stay in touch with
the fund by registering with member self-service. Members can do their own
pension estimate, take a look at their annual statement and get a look at
what’s happening with the Fund.
iii) Strategic
direction
21. There are three pillars of strategic
direction: client experience; modernize pension services; develop a strong,
global partnership network.
22. The fund is incredibly complex; the job is to
ensure that plans, rules and regulations are easily understandable; modernize
pension processes to make them as efficient as possible; and leverage technology
where possible.
III. Investments
– Pedro Guazo
23. The Acting RSG made a slide presentation on
the situation of the Fund, which can be found as follows on the UNJSPF OIM
website: (Click on the up and down
arrows on the bottom left on the screen to see the presentation).
24. He noted that when he joined the UN system
some ten years ago, working in Rome for WFP, he came to realize the importance
of pension and health insurance as the social security for international civil
servants. He would often visit the web page of the OIM and was glad to see the
evolution of market assets on a weekly basis. Recently, the website has not had
the quality of information as in the past.[3]
One of the priorities of the investment team is to bring back that information
that’s useful for participants and beneficiaries and all stakeholders in the easiest
way to comprehend.
i) Slide
1 -- Long-term return objective:
25. The best way to measure the health of the
Fund is by reviewing the graph called the ‘long-term real return’. The
accumulated average annual real rate of return for 15 years as of December 2019
is 4.32 per cent. Portfolio performance in 2019 was close to 18 per cent. If one were to calculate the same annual rate
of return as at closure on 31 March, the day of the biggest drop, the return is
3.57 per cent. The fund always has to be above that flat line (3.5 per cent)
called the annual rate of return.
26. In the last several years, the fund has
always been above that line except during 2014 to 2016. It is now a tight
situation, because 3.57 per cent is close to 3.5 per cent; but the fund is
analyzing the markets to see where it can invest to bring that line above 3.5
per cent.
--------------------------------------------------
[3] The OIM website has consistently displayed
the investment reports presented by the Acting RSG in his presentation, which were updated as of information available on 21 April) with
the exception of the weekly report which was discontinued under the leadership
of the former RSG, when reports were posted on a quarterly basis, as established by the IPS (Investment Policy Statement). Paragraph 51 of the
IPS, approved by the fund’s oversight bodies,
states: “OIM maintains and updates a public website which discloses, on a
quarterly basis, a broad range of information on Fund investments by asset
class, geographical diversification, countries and regions in which the Fund
invests, the Fund’s market value of assets, and historical Fund performance
versus both the Long-Term Investment Objective and the Short-Term Investment
Objective. Some quarterly performance information is available with a one
quarter lag due to delays in obtaining valuations for private market
investments. Year-end information is up-to-date in all respects and is usually
available by the end of April of the following year.”
--------------------------------------------------------
ii) Slide
2 – Strategic asset allocation
27. The rows indicate the different types of
securities the fund invests in, namely, private equity; real estate; real
assets; fixed income; investment cash; and treasury and operational cash.
28. These categories have always been there. The
strategic asset allocation (SAA), the percentage that can be invested in each
of these categories, was updated in August 2019. In the long term, in order to
produce the return of 3.5 per cent, the fund should target these percentages in
each category. This is not inflexible. There is a range for movement. (Compare the targets in column 3 with the
actual portfolio weight in column 6).
29. Investments are overweighted in global
equities; in terms of private equity the weight is 5.7 per cent against 9 per
cent. One has to be very careful in moving from the actual weight of the assets
to the target. There are not a lot of options in the market. One cannot buy
billions of assets. Fund guidelines for investing in these equities are very
tight. The fund does not buy junk or low quality assets. It follows a very
tight process and selects high-quality assets so as not to put members’ money
at risk.
30. The fund is receiving news about the
evolution of the crisis. It has to be careful – defensive -- in trying to hold
as much cash and equivalents at hand to be ready for when the economic recovery
starts so that the money can be put into high quality investments.
iii) Slide
3 - Market value of assets
31. This slide shows the market value of assets
through time. It is very important to focus on what has been happening in this
quarter. There is a lot of anxiety and volatility in this quarter. The
Secretary-General shared in his letter that the market value of the portfolio
as of 31 December 2019 was $72 billion. That was a great performance,
influenced by amazing returns on the market – close to 19 per cent returns in
2019. When Covid-19 started to hit, it impacted all the markets – developed,
emerging, equity, and some other markets. So the only market that had positive
feedback was the bonds market, with a decrease of interest rates. From$72
billion the market value of assets dropped to $63.4 billion on 31 March 2020.
You will see on the weekly report posted on our website, that it already
increased to $66.1 billion by 21 April. We are still at the highest level seen
in history besides the $72 billion of 31 December 2019.
32. How does this crisis compare to the 2007-2008
crisis in terms of the comparable impact on our portfolio?
In
2008, the portfolio dropped by 25 per cent. It took two years to get back to
the level of $41 billion. It is premature to draw any conclusions about how
that compares to the movements we are seeing. The reasons for the crises are
completely different. The 2007-2008 crisis was caused by a lack of confidence
in financial systems and it took many years to rebuild the financial structure. This is a health crisis, and we still have
uncertainty about the length of recovery, whether it will be weeks, months or
years. If one compares the drop of 25 per cent in 2007-2008, there was a decline
of 11.9 per cent; if one compares $72 billion and the $66 billion achieved last
Friday, or $66.5 billion last Monday, the drop is 8.2 per cent or 7.2 per cent,
respectively.
33. There is a lot of volatility in the markets
in the value of our portfolio. Every day we are seeing drops of 1 to 2 per cent.
We should not be scared of 1 o 2 per cent down in the portfolio until we have
clarity or resolution to the crisis and how economic recovery will be achieved
worldwide.
iv) Slide 4 – Weekly fund performance
34. Weekly reports used to be available on our
website. We have returned to this good practice of sharing the weekly report.
This information comes directly from Northern Trust, our bookkeeper and
custodian. We have hired them on an independent basis to have an independent
valuation of our portfolio. The report goes to you on a weekly basis every Monday,
reporting figures at closure of the previous Friday. It shows the latest market value and return
on each portfolio on a weekly basis, during the quarter from January to March
2020. Decreases are aligned with those in the market – a bit better than
benchmarks.
v) Liquidity
35. We are in a sound position. We should be fully funded at these levels. We’re close to the 3.5 per cent real rate of return. We are very cautious in how we invest. We have created liquidity in order to be able to buy when it is time to buy securities. We are very cautious in all the securities in which we are investing and you can be sure that the resources of the Fund will only e devoted to the maintenance of the Fund. There is a question about whether resources will be used for any other liquidity purpose of the Secretariat. The answer is ‘no’. This is kept separate and will only be used for investments in the Fund.
vi) OIM
website
36. The Acting RSG gave a brief demonstration of
how members can go to the UNJSPF.OIM website to the investment charts on a
weekly and monthly basis, and to see information in real time.
vii) OIM
staff are telecommuting
37. All OIM staff are working from home, buying
and selling securities and producing reports, using the tools put in place. The
Acting RSG expressed appreciated to them for their commitment to the Fund and
the support they have given him.
IV. Questions
and answers
A. Investments
– Questions to the Acting RSG
i) Sustainable
investing
38. There were some questions about how sustainably
the fund is investing. The 2018 report on sustainable investing is on the website.
We are in the process of issuing the
2020 report. We follow all criteria for responsible investment. Members are
encouraged to read the report if you are interesting in seeing more about
sustainability. We cannot invest in defense.
2018
Report on Sustainable Investing is available here: https://oim.unjspf.org/wp-content/uploads/2019/07/unjspf-sustainability-report-web.pdf
39. Question: What’s the fund’s approach to
investments not compatible with ESG (environmental, social, and governance),
i.e., fossil fuels. What about other
investments, such as small weapons and aerospace, and crypto currency? What are
returns on those areas?
40. We divested from coal in 2018, and we are
going to make other commitments to stay away from unsustainable and not socially
accepted investments. We can have another session in the coming months to
explain our sustainability strategy and show you the details of our investments
and returns. That area is moving very quickly. Most investors are becoming
sustainable. On the Principles of Responsible Investing (PRI), we have 100
signatories and we are sharing knowledge and committing to action.
ii) Cryptocurrency
41. The fund follows four criteria: safety,
profitability, liquidity and convertibility. Cryptocurrency is not a mature
market. We don’t have visibility on these items. We will stay away from them
until and if they become a mature market in the long term. We do not do any
opportunistic trading. We invest for the long term.
iii) OIOS
audit
42. The OIOS (Office of Internal Oversight
Services) audit is taking place now. It is called a governance audit on
investments. This is an audit that OIOS conducts on a regular basis. It does
not happen every year. It is looking into governance and decision-making
processes not only for investments, but also for other decisions in investment
management.
43. We are working with the auditors and
providing information. We will know the first findings on 31 May 2020. The
General Assembly requested OIOS to bring the report to the Pension Board. It will
go first to the Pension Board and come to the Assembly in the fall. We are working
closely with the auditors to see what we can improve in our decision-making, operations
and governance.
iv) Strategy
to deal with Covid-19
44. Question: What’s the Fund’s strategy to deal
with the market impact of Covid-19 —more conservative or more aggressive? Is
the Fund investing in junk bonds or high-risk investments? What is your idea on
strategic allocation? There has been talk of the Fund buying a shopping center
in Canada?
45. Answer: We are very conservative in our
approach. At the end of March, we started building liquidity to be defensive
and very conservative. Whenever we see that there is less volatility in the
markets and have more clarity on long-term investments, we will start to invest
again in only high quality securities. We have been making most of these
investments for 25 to 30 years. They are long-term investments, for 15 to 20 to
30 years.
46. Throughout this period, we have faced
economic cycles -- good years, bad years. We are now facing the reality that
some Member States’ sovereign bonds that we bought at triple-A or double-A, are
now downgraded. We don’t invest in junk bonds. We have a small proportion of
sovereign debt that has been downgraded. We’ve been very careful with this.
47. We’re building liquidity to re-invest in
better terms in the coming weeks and months. The liquidity of the fund is not
at risk at all. The amount of money we receive from contributions is almost
equal to the level of payments we need to pay to retirees and beneficiaries.
There is no need on the side of the operation to have cash. We will not have to
touch the principal of the fund for 10 or 15 years. Liquidity is important, in
terms of a crisis. We have enough cash to start buying smartly when the markets
recover. That happened in the 2008 crisis and that’s what we are trying to do
now.
v) Transparency
48. Question: Various pension funds publicize
their investments in detail, Norway as an example. We’ve ben asking the fund to
do so. You’ve talked about improving the website. Will the website go down to the
details of investments?
49. Answer: On disclosure of individual
securities, I have not taken part in that discussion in the Pension Board. It
has been the decision not to disclose every security for compliance and
confidentiality reasons. That discussion can be held if the Board wishes to
have it. We want to go to the maximum level of transparency on the web page but
also to provide information that is useful. We are trying to find a balance to
benefit participants, retirees, the Board and the committees, for them to have
all the information to make decisions.
vi) Administrative
costs
50. Question: A Passblue article said that the
Fund’s administrative costs are getting higher even though UN liquidity is
tightening. Will the Fund consider cost-saving measures?
51. Answer: On cost-saving measures, all
entities are facing a difficult economic situation. We’re in the 2021 budget,
and working on being very cost-conscious and effective to get the best use of
the resources.
vii) Management
and decision-making
52. Question: How are you managing investments
related to criticisms brought by the UN Participant Representatives and staff
as well, for example, where the person proposing investments was also approving
them, according to how delegation of authority was interpreted. We felt that
there should be separation between the proposing and approving processes. Will
you bring that separation to the investment processes? We understand that prior to Rajkumar’s
departure, OIOS had reviewed how things were being managed. Is there a sneak
peek at how things can be improved in how OIM is run?
53. Answer: On management and decision-making,
this has been an issue for quite a while.
We’re working with OIOS on the normal audit process in terms of governance
and decision-making. We will only receive feedback and recommendations around
the end of May. In the meantime, we are hearing from and working with senior
investment officers/portfolio managers. We will start a review of appropriate
delegation of authority, the role of analysts and traders and the committees,
giving authority and responsibility to people to make the decisions; empowering
staff, with clear guidelines and responsibility on decision-making. Based on
our own analysis with recommendations from OIOS, we will make changes to have
good empowerment and internal controls at every level, and segregation of
duties.
viii) Outsourcing
of investment management
54. Question: There is ongoing concern about
plans to outsource the management of
investments to Wall Street. Could you clarify how our Fund has performed compared
to our standard benchmarks?
55. Answer: On the reference to Wall Street,
does the question refer to external fund managers? On our website, we share the proportion of
assets managed internally and those that are managed by external managers.
They
are not on Wall Street, but around the world, and they normally identify
investment opportunities in emerging markets and other frontier markets. The
proportion of external investment is very small and there are no plans to
expand it. We have qualified, smart analysts and senior investment officers on
whose knowledge we have relied for many years. This won’t change. The
construction of the portfolio we have now was done by these analysts and portfolio
managers in the past 15 years. You don’t change it in one or two years. We are
thinking in terms of securities that we believe in for the long term.
B. Benefits
– questions to the Chief Executive of Pension Administration
i) Impact
of Covid-19
56. Question:
Due to the impact of Covid -9 on the global economy, is there a real threat
that members will not get pension benefits? Does the pension fund have a
business continuity plan to guarantee payments?
57. Answer: For retirees concerned about our
ability to manage the payroll remotely, the fund has done it successfully for
two months. This relates to the business continuity plan that has been in
place. All this panning was done before the crisis. Once Covid-19 hit, a plan
was in place that was able to be executed It’s a plan that has evolved as the
crisis evolved. It ensure that staff have the equipment to work remotely and
process benefits and pay payroll. It may evolve to whether more documents are
needed electronically because of the postal crisis. The business continuity
plan has evolved. Staff meet weekly and are on top of it. People are committed;
they understand that the fund exists to serve its retirees. Staff have gone way
beyond what’s expected to ensure service is not disrupted.
ii) Timeliness
of processing
58. When staff members check out, how long it
can take to process the pension payment, months or years? If some supervisors are threatening to
dismiss staff because of Covid-19, how long does it take to get paid in case of
separation? What is the length of time that surviving beneficiaries have to
wait for benefits to be paid?
59. In recognition of the commitment to our
staff, the fund has been able to keep our processing commitment, once we
receive all documents, to deal with them within 15 business days, despite the
Covid-19 crisis, in over 90 per cent of cases.[4]
____________________________________
[4] Paragraph 39 of OIOS governance audit
A/73/341 noted that the Fund Secretariat receives $20 million per biennium to provide
secretariat services. Quote: “The Fund’s stated position that the
responsibility for missing documents
rested with the member organizations was contrary to its quality management
policy, which required the Fund to be more proactive in following up on such
missing documents. An OIOS recommendation that the Fund secretariat address
those deficiencies is still being implemented.”. Question: has the fund
Secretariat improved its performance on following up on missing documentation
and what is the percentage of pending cases that are missing documentation?
_______________________________________
iii) Reconstituting
the Executive Office
60. Question: when will the Executive Office be
reconstituted?
Answer:
There will be a staff management meeting this week. The Executive Office is
under review. The fund recognizes that we have a good relationship underway
with HQ CSS to support us with human resources matters. The Acting RSG and the
CEPA will continue to discuss to come up with a combined Executive Office. The
attitude of the Acting RSG and the CEPA is that this is a joined-at-the-hip
partnership. They will act in that way and have one voice. They have
communications jointly and will continue to do so.
iv) Advance
on monthly pension
61. Question: Can the fund pay advances on
monthly pensions to beneficiaries during Covid-19?
Fund
regulations are clear that there has to be separation of service for payment to
be made. The fund is not in a position to pay advances for any reasons.
v) Staffing
62. Question: Will the fund be hiring additional
staff in the current crisis?
Answer:
Covid-19 has not caused us to do any additional hiring in the crisis. We’ve
managed with our existing staff complement.
vi) Acceptance
of scanned documents
63. Question: Will the Fund accept scanned
copies to process requests of new pensioners since offices are closed?
Answer:
The short answer is yes. It is part of the flexibility we’ve developed through
this process, and part of our crisis management plan. Postal services are disrupted
around the world. We’ve had training on our team. We would encourage
participants to register through our secure site as a way of giving us
information we need to complete a transaction.
V. Cost
savings – Michelle Rockcliffe
64. In 2019, UN participant representatives were
asking for numerous reports by companies hired to do studies on various parts
of the fund. The McKinsey report cost close to $1 million. We also saw an ALM
study. There were at least two or three other studies on the pension
administration side, and even as Board members we never saw these reports. If
they are necessary, we should have some purview over them; but not having them
would go a long way to saving costs. Perhaps the experts we have in the Fund
could provide the correct answers.
VI. Closing
remarks – Ian Richards
65. This was very useful. We seem to have come
quite a ways from where the fund was two to three years ago when people were
waiting for 9 months to get paid, the system wasn’t working and telephone calls
weren’t being answered. Thanks for letting people know how they can interact
with the Fund and get paid on time. We’re looking forward to progress
especially for people who don’t have great connectivity.
66. On investments, we were able to get answers
on a lot of questions. We’ve had tons of emails and this provides essential
information. We have an important development of having much more information
published on the website. We encourage colleagues to go to the website. We look
forward to transparency and a session on ESG and sustainability. The big priority
was stabilization, but we want to organize that fairly soon. Thanks to everyone
for their time.
Dear Lorraine, the link below will take you to some answers to the notes you made in the summary of the Pension Info Session
ReplyDelete(copy and paste to your browser)
https://documentcloud.adobe.com/link/track?uri=urn%3Aaaid%3Ascds%3AUS%3A6fb3b702-f790-4f88-857f-8c79d11777d8
Michelle Rockcliffe