Appendix 3: Terms of Reference of the Investments Committee

Appendix 3

TERMS OF REFERENCE OF THE INVESTMENTS COMMITTEE

I. Introduction

1. The Regulations of the United Nations Joint Staff Pension Fund which govern the investment of the assets of the Fund are:

Article 18: Property in the assets

The assets shall be the property of the fund and shall be acquired, deposited and held in the name of the United Nations, separately from the assets of the United Nations, on behalf of the participants and beneficiaries of the Fund.

Article 19: Investment of the assets

(a) The investment of the assets of the Fund shall be decided upon by the Secretary-General after consultation with an Investments Committee and in light of observations and suggestions made from time to time by the Board on the investments policy.

(b) The Secretary-General shall arrange for the maintenance of detailed accounts of all investments and other transactions relating to the Fund, which shall be open to examination by the Board.

Article 20: Investments Committee

The Investments Committee shall consist of nine members appointed by the Secretary-General after consultation with the Board and the Advisory Committee on Administrative and Budgetary Questions, subject to confirmation by the General Assembly.

II. Goals and Objectives of the Fund

2. The purpose of the investments of the UNJSPF is to secure the pension entitlements of the international civil servants who participate in the Fund. The fiduciary responsibility is to all parties concerned and it is the responsibility of the Secretary-General to ensure that those investments are managed to preserve the capital of the Fund and to obtain a long-term real rate of investment return that is in line with the actuarial assumptions, without jeopardizing the capital of the Fund by taking excessive risks.

III. The General Assembly

3. The General Assembly has adopted resolutions requesting the Secretary-General to take into account particular policy considerations. There have been resolutions, for example, requesting the Secretary-General to increase the Fund’s investments in developing countries to the greatest extent practicable. These resolutions have also made it clear that the Secretary-General should make all investments in conformity with the Regulations of the Fund and in careful observance of the requirements of safety, profitability, liquidity and convertibility, as first stated in the Report of the Secretary-General to the thirty-second session of the General Assembly. All the General Assembly resolutions have made it clear that the Secretary-General has the fiduciary responsibility under the Fund’s regulations, which requires that any investment decision taken must be in the best interests of the Fund.

IV. The Secretary-General

4. The Secretary –General has appointed the Under-Secretary-General for Management as his representative for the Fund’s investments. The Special Representative has responsibility for the investment of the Fund. On behalf of the Secretary-General, the Representative is responsible for evaluating investment advice, receiving observations and suggestions from the United Nations joint Staff Pension Board and the General Assembly, making the final decisions on investments and providing reports to the Board and the General Assembly. The Investment Management Division assists the Representative of the Secretary-General in evaluating investment advice received and in making the final decision as to the purchase or sale of specific investments.

5. In addition to receiving observations and suggestions on investment policy from the Board and the General Assembly, the Representative of Secretary-General has the benefit of additional supportive advice from a diversity of sources. These include the Investments Committee and institutional investment firms retained on a contractual basis.

V. Office of Investment Management

6. The Office of Investment Management (OIM):

(a) Formulates investment strategies and thought and executes them with the approval of the Representative of the Secretary-General;

(b) Formulates recommendation as to selection and managing investment advisors to the Representative of the Secretary-General so that the Fund can achieve the investment objectives;

(c) Evaluates the investment results achieved;

(d) Monitors and controls the various investment transactions, accounting and custodial work;

(e) Acts as liaison between the institutional investments advisers and the Investments Committee;

(f) Assists the Representative of the Secretary-General in her dealings with the Pension Board, the Board of Auditors and internal auditors, the Advisory Committee on Administrative and Budgetary Questions and the General Assembly;

(g) Maintains contact with the investment markets throughout the world;

(h) Receives and reviews a wide range of surveys, analyses and reports from investment houses, banks and other sources and uses them as the base for recommending investment strategies;

(i) Visits companies and investment institutions;

(j) Participates in investment and investment-related seminars;

(k) Adheres to the code of ethics and standards of professional conduct of the Association for Investment Management and Research (AIMR) in the performance of their work.

VI. Institutional investment advisers

7. Four institutional investment firms are currently retained to conduct research, provide analyses and make recommendations to the Secretary-General concerning strategy and individual investments. Small capitalization accounts are externally managed.

VII. The Investments Committee

8. In addition to the nine members appointed by the Secretary-General after consultation with the Board and the Advisory Committee on Administrative and Budgetary Questions and subject to confirmation by the General Assembly, the Secretary-General may appoint ad hoc members to serve with the Committee.

A. Purpose

9. The Investments Committee advises the Secretary-General on:

(a) investment policy
(b) risk control
(c) diversification of the Fund in terms of investment vehicles and markets
(d) best practice

10. The Committee meets formally four times a year, together with the Representative of the Secretary-General for investments and the investment advisory firms. It also meets from time to time with the Committee of Actuaries.

11. One Committee meeting is held in conjunction with the biennial session of the Pension Board, in order to give the Board an opportunity for discussion with the members of the Investments Committee on investment matters and policies.

12. The Representative of the Secretary-General for the Investments of the UNJSPF is responsible for the investments of the Fund, and considers the advice of the Committee in their discussions.

B. Working methods

13. The duration of the meetings is normally one day unless the Committee decides to extend the meeting for a second day. The Committee is provided in advance with (i) a report by the Investment Management Division which includes a review and analysis of the portfolio as at the end of the previous quarter; proposals for adding of companies in which IMS is authorized to purchase equity and recommendations on investment strategies (ii) reports by the institutional advisors which include reviews of the markets and economic conditions, their outlook and recommendations provided to IMS prior to the Committee meeting.

14. At the meeting, the institutional advisers make presentations on global investment environment in the past quarter and their outlook for the next three to six months.

15. After the institutional advisers finish their presentations, Investment Management Division presents its report providing the Fund status with regard to investment activities taken during the past quarter together with risk exposures of the portfolios.

16. Members of the Committee give their assessments as to the appropriateness of investment activities, including risk exposures and the subsequent performance of the Fund to provide the Representative of the Secretary-General with a good base for judgment.

17. Investment Management Division then makes a presentation on the market assessment and on the investment strategies as of the date when the Committee meets.

18. Members of the Committee make comments and observations and provide advice and recommendations to the Representative of the Secretary-General.

19. Investment policy is to be reviewed by the Committee as to its appropriateness based on the assessment on structural changes of the economy and markets, as a reflection of the underlining economy and of the Fund’s regulations, rules and liabilities.

C. Membership

20. Committee members are internationally respected for their knowledge on and experience in investments and the pension industry, and are in the position to give up-to-date advice to the Representative of the Secretary-General on investments and related matters.

21. The Secretary-General therefore intends to apply the following criteria in determining the membership of the Committee:

(a) There would be a limit of 5 terms, one term being 3 years;

(b) Members must have been actively involved in investments within the preceding 10 years;

(c) There must be adequate representation in terms of expertise, regional balance and gender;

(d) Service with the Committee would not create a conflict of interest.

(e) In addition to the regular members, the Secretary-General has the authority to appoint ad hoc members.

(f) The Chairman of the Committee will be appointed by the Secretary-General.

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