$38b UN fund to review ALM

The investments committee and committee of actuaries of the $38 billion UN Joint Staff Pension Board will recommend the introduction of new asset classes, including emerging markets equity and debt, real return assets and private equity in a presentation to the board in July.

It is the first time the fund will revisit an ALM study which recommends that the inclusion of the new asset classes provided marginal long-term benefits to the plan, regardless of the level of risk tolerance, and so should be considered.

Regardless of the three optional risk tolerance philosophies – of prudent funding, or return-oriented or defensive – the study recommended a 3 per cent allocation to private equity among other asset allocation adjustments. Until this time the fund has not included the new asset classes in its asset allocation.

At the most recent meeting, the investment committee recommends that the Secretary-General study this possibility and report back in due course.

The study, to be formally presented to the Board in July, also included a comprehensive risk tolerance framework which considered eight risk factors to more precisely quantify total plan risks.

At the end of March 2009, the fund was 8 per cent under its long-term equities benchmark of 60 per cent, and overweight bonds (6 per cent) and real estate.

It introduced a new benchmark in 2006 which consists of 60 per cent MSCI All Country World Index, 31 per cent Barclays Capital Global Aggregate Bond Index, 6 per cent National Council of Real Estate Investment Fiduciaries Open End Diversified Core Index, and 3 per cent 91-day US Treasury Bill.

At a meeting of the two committees last week, which concluded with lunch with the UN Secretary-General, it was reported the fund was earning good returns and enjoyed a positive actuarial balance with a funding ratio close to 100 per cent.