Dear Mr. Guazo,
A recent analysis of the Fund’s performance and transparency in reporting compared with its peers, using publicly available information, has raised several issues of concern to Fund members. There are also questions of concern regarding reported investigations and related morale and stability among Fund staff.
The main finding regarding the Fund’s performance in comparison to peers, according to TUCS (Trust Universe Comparison Service), is that “the fund is solidly in the bottom 25% compared to its peers and for 2022 came dangerously close to being in the bottom 5%” (see table).
https://www.wilshire.com/solutions/analytics/peer-analysis
Ajit Singh, former Chief Risk Officer, United Nations Joint Staff Pension Fund (UNJSPF), described the methodology used for his analysis as follows: Since the Fund does not provide annualized returns calculated for 3, 5 or 7 years, he “downloaded each year’s returns from 2013 to 2022 and [using the] GIPS approved geometric means approach, calculated 3, 5, 7 & 10 year returns and compared them to the TUCS universe of public pension plans over $5 billion, multi asset class and global footprint”. TUCS, he notes, “provides comprehensive information on the effects of risk, allocation and style and is widely used as a performance benchmark for US institutional assets."
He observes that for the ten-year period 2013 to 2022, starting with $44.6 billion and assuming no cash flow, a TUCS average peer performance of 8.15% annualized would have produced a market value of $97 billion instead of $80 billion produced by a below-average performance of 6.12%. Thus, the Fund's low performance "left about $17 billion in the market” that “could have meant substantially reduced contribution from employees", even arguing that with 117% overfunding the Fund does not need to take risks.
He raises the following specific questions:
Why does the Fund's 2022 annual report (page 6) provide information on 10 to 50 year returns and no information on 1,3,5,7 and 10 year annualized nominal returns, which he says is the industry standard and “minimum for any pension fund report”?
https://www.unjspf.org/wp-content/uploads/2023/08/Annual-Report-2022-final-version8.pdf
Why are the returns listed in a footnote as “real returns, not “nominal”, which he notes is “the industry standard for comparison”?
Why, where there is an asset management table (page 20), there is "no report of performance, long or short term, in comparison to peers, risk, tracking error, beta or omega"?
On page 24, why is “diversification” presented in terms of geographical diversification instead of by correlation, tail correlations, marginal risk and other statistics?
On page 33, a chart shows that from 2011 to 2021 the Fund's funding ratio evolved from 86% to 117%. He notes that this is a 31% improvement that is surprising for a Fund which has been in the bottom 25% in terms of comparison with other public plans' investment performance for 10 years.
He asks what could be the possible causes for this “spectacular improvement” and whether a comparison of the 2011 and 2021 ALM (Assets and Liabilities Monitoring Committee) studies might point to such causes as:
Contributions from the UN increased a lot more than 23%
Early deaths (mortality rates used)
Quadrupling of salaries
Changes in accounting rules
Changes in methodology for smoothing amortization
Further, regarding transparency, he notes that it “took him some time to find yearly returns on the Fund's website” and compares investment reporting unfavorably with that of the Texas Teachers Fund, where the annual report, page 118, includes a detailed and informative table. He suggests that the UNJSPF consult the website of peer public funds and use their reports as a guide for providing informative and transparent reports to its members.
He asks, given that the Fund “has access to the best experts globally and the IC [Investment Committee] is full of esteemed investment experts, [whether] the logical conclusion …is that the Fund is somehow not able to translate that wisdom into actionable implementation".
Finally, a question that's not directly related to the above analysis. Reportedly, several Fund staff, including senior investment officers, are under investigation by the UN's Office of Internal Oversight Services (OIOS).
Paragraph 109 of UN report A/78/301, Activities of the OIOS, dated 9 August 2023, states:
“During the reporting period, OIOS investigated multiple allegations implicating 15 staff members and 1 consultant related to the United Nations Joint Staff Pension Fund, in possible prohibited conduct, unauthorized disclosure of confidential information, failure to cooperate with authorized investigations, negligence and insubordination.”
What are the causes of these investigations? Are they related to the OIOS investment audit A/75/215 (21 July 2020) that found shortcomings and made recommendations to strengthen the independence, transparency and accountability of various investment governance arrangements, including the short and long term performance of the Representative of the Secretary-General (RSG), investment reporting, and the management of conflicts of interest?
Are the investigations related to events last year, when the Secretary-General, the Fund’s fiduciary, in response to pushback by members, suspended the planned external management of an additional portion of the Fund's investments?
The investment audit also found (page 93) “divisiveness among staff and a culture that many staff described as “toxic”.” Has this “toxic” staff/management culture changed under your tenure as RSG, and if so, how?
The reported OIOS investigations raise questions about retaliation against whistleblowers as a possible factor. Large-scale investigations of Fund staff, including senior investment officers, whatever the cause(s), have surely contributed to low staff morale and instability.
As a long-time Fund member deeply concerned about issues of transparency and sustainability, I would appreciate your responses to these observations and questions, including any factors the performance analysis may have failed to take into account, and how instability and staff morale owing to reported investigations of senior investment staff of the Fund might already have impacted, and may further impact, investment performance and the Fund's sustainability.
In view of the imminent meeting of the Administrative and Budgetary(ACABQ)/Fifth Committee of the United Nations General Assembly and its discussion of pension matters (9 November 2023), I would appreciate receiving your response as soon as possible.
Thank you for your attention.
Yours sincerely,
Loraine Rickard-Martin, Beneficiary, UNJSPF
Admin, UN Pension Blog
c.c. Catherine Pollard, Under-Secretary-General for Management Strategy, Policy and Compliance
Courtenay Rattray, Chef de Cabinet, Office of the Secretary-General
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