UN fund increases indirect exposure

The $38 billion United Nations Joint Staff Pension Fund (UNJSPF) has begun to implement the recommendations of the Hewitt Ennis Knupp asset-liability study which, among other things, recommended higher allocations to indirect assets, emerging markets and private equity.

When the study was completed in May this year the fund’s strategic asset allocation stood at 60 per cent global equity, 31 per cent global fixed income, 6 per cent real assets and 3 per cent cash.

The Hewitt Ennis Knupp recommendation, which focuses on improving the UNJSPF’s 91 per cent funding status, recommended a shift to 60 per cent global equity, 25 per cent global fixed income, and 15 per cent indirect assets.

It is believed that the changes will increase the expected rate of return from the current 7.7 per cent a year to 8.1 per cent a year.

In addition, the consultant recommended the fund include higher exposures to emerging market equity and private equity in its global equity allocation.

In September the quarterly report on investments reported that “investment in the four private equity funds and commodities broadened the geographic diversification of the fund’s investments, further increasing the allocation to emerging markets”.

Sponsored Content

From June to September this year the UNJSPF reduced equities by more than 6.5 percentage points, increasing bonds and short-term assets.

As part of the asset liability modelling (ALM) Hewitt Ennis Knupp recommended the fund significantly increase and expand its exposure to indirect assets.

Previously it had a 6 per cent exposure to real estate, but the recommendation is a 10 per cent allocation to global real estate and 5 per cent allocation to commodities.

In addition, the recommendation was that fixed income includes a significant allocation to inflation-linked bonds.

While currency hedging was explored by the review, it was decided hedging would add little value but increase implementation costs.

The entire fund is managed internally, except for about 5 per cent in research-intensive in real estate, small-cap equities and emerging markets.

There are 17 investment professionals, out of a total of 53 people employed by the fund, who manage the entire portfolio internally. It’s a lean operation, with investment managers allocated according to asset class, then geography, with a particular emphasis on active management.

The ALM study is the first for the fund since 2006 when it was conducted by Pension Consulting Alliance and EFI Actuaries.

The UNJSPF has members located all over the world, and has 23 member organisations including the United Nations, the World Health Organisation, and the International Criminal Court.

Leave a Comment

Sort content by

Quality factor explained by profitability: Robert Novy-Marx

Among academic classifications, and the subsequent implementation of factor investing, “quality” is one of the newer areas of investigation. Robert Novy-Marx, the Lori and Alan S. Zekelman Professor of Finance at the University of Rochester, is leading the charge on the academic justification of quality as a factor, although he has a “jaded scepticism” about

How to allocate assets to combat climate risk

  Mercer’s extensive climate change report, launched today, gives investors a practical framework for monitoring and managing climate risk, shifting the discussion from philosophical agreement to practical investment implementation.   In Investing in a time of climate change Mercer outlines extensive dynamic investment modelling that analyses changes in the return expectations of assets between 2015

Behind Norway’s coal divestment

The Norwegian Parliament’s finance committee recommendations to direct the Government Pension Fund Global to divest from companies that generate more than 30 per cent of their output or revenue from coal-related activities, is the evolution of a climate-related investment strategy that dates back to 2010. Amanda White explores the raft of tools the fund uses

CalPERS gives its managers ESG ultimatum

In what promises to be a transformational moment for ESG integration and investment manager accountability, CalPERS will require all of its managers to identify and articulate ESG in their investment processes. CalPERS staff led by Anne Simpson, senior portfolio manager and director of global governance, presented the ESG manager expectations, and draft sustainable investment guidelines,

Sourcing liquidity in fragmented markets

As equity trading becomes more fragmented, and more trading is done outside exchanges, it is prudent to assess whether alternative liquidity pools contribute to well-functioning markets. Norges Bank Investment Management has done the work for you, analysing the contributions, structures and functions of trading venues with limited pre-trade transparency. One of the benefits of liquidity

Factors the same in credit and equities

Robeco will launch the world’s first multi-factor credit fund, after academic research by its quantitative research team reveals that size, low-risk, value and momentum factors have economically meaningful and statistically significant risk-adjusted returns in the corporate bond market. David Blitz, co-head of quantitative strategies at Robeco in Rotterdam, tells Amanda White why an active approach makes

Previous