The United Nations Joint Staff Pension Fund plans to explore impact investment for part of the $90 billion portfolio including in developing and emerging markets like Africa. Alongside exploring investing for impact in consultation with its investment committee and board, the asset owner plans to boost diversification of its investments across developed, developing and emerging markets, according to the UN General Assembly’s recent Resolution on 2021 Pension Matters, published in January.
“The General Assembly noted the fund’s consistent outperformance of the 3.5 per cent annual real rate of return benchmark for the 10-year and 15-year periods and requested continued diversification of the fund’s investment portfolio among developing and emerging markets, including impact criteria for a part of the portfolio,” states a report on the Resolution. UNJSPF has had a 15-year rolling annualised return of 4.6 per cent.
The value of UNJSPF’s assets grew by more than 10 per cent in 2021 after an increase of 13 per cent in 2020, to reach an estimated $90 billion as of the end of December 2021. As it stands, the UNJSPF is fully funded, and in a position to assume pension liabilities for decades to come, said the statement. Around 82 per cent of the fund is managed internally and growth assets account for about 71 per cent of the allocation.
Streamlined governance
Regarding governance, the General Assembly endorsed an earlier vision expressed by the board regarding a more efficient and effective decision-making process. Governance reform includes updated and strengthened terms of reference for board members, chair, bureau and committees. Elsewhere, the board will meet more frequently during the year, making use of virtual meetings. The annual in-person meeting will be shortened from seven to five working days or less but the composition of the board’s 33 members, representing the 25 member organizations on a tripartite basis, remains unchanged.
“These important changes initiated at the request of the General Assembly should assist the United Nations Joint Staff Pension Board in effectively administering the fund in the coming years,” said the statement.
Sustainable investment
UNJSPF’s approach to sustainable investment incorporates forward looking methodologies in evaluating the impact of climate change on the investment portfolio. The fund has created partnerships with climate specialists and alternative data providers to supplement its internal resources and build ESG technology. For example, the office of investment management, in charge of the UNJSPF assets, has signed a strategic partnership exploring predictive climate analytics.
According to UNJSP website, OIM is also conducting research on developing quantifiable SDG scores using artificial intelligence (AI) to leverage big data and systematically measure companies’ impact on the SDGs. This research will aim to provide empirical evidence that will address the widespread perception that there is a trade-off between incorporating ESG or SDG considerations into investment decisions and generating strong financial returns.
“It will strengthen our understanding of the interdependencies between a firm’s long-term economic value and its societal impact,” states the website.
Asset allocation
UNJSPF’s global public equity portfolio (57.5 per cent) is managed internally by four teams: North America, Europe, Asia Pacific, and Global Emerging Markets (GEM). The global fixed income portfolio (25 per cent) seeks to achieve an above benchmark return by investing globally in local currency, investment grade securities. The portfolio is traded actively.
Real assets
The 7 per cent allocation to real assets comprises real estate, infrastructure, timber and commodities through around 100 externally managed funds. The real estate allocation (6.7 per cent) comprises 50 per cent core “open ended” funds and 50 percent non-core “closed end” funds. The fund’s core funds are diversified by geography and property type, and its non-core funds are diversified by vintage year, geography, property type and risk profile.
The real assets team also invests in externally managed infrastructure funds. Selection is based on moderate leverage, strong cash flow and a demonstrated record of realizations. Modest allocations to timber and commodities funds, invested on a global basis, are also part of the portfolio.
The alternative investments team is responsible for investments primarily in private equity (6.7 per cent) through externally managed funds in a program begun in 2010 diversified by vintage year, private equity sub-sectors and geography.
