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Q&A on the Fund’s fixed income portfolio

24 March 2022

The following Q&A responds to the main questions raised about the operational plan to temporarily manage 65% of the fixed income portfolio using external advisors.

Why was the plan proposed?
Although the Fund has performed positively overall, the fixed income portfolio has underperformed for 15 years. The fixed income portfolio will have a new benchmark on 1 July 2022. The fixed income Director resigned effective 28 February 2022, and the recruitment of that post, together with the four new posts approved by the 2021 United Nations General Assembly's resolution on pension matters, will take some months. As a result, the fixed income team proposed to temporarily use external advisors to manage part of the fixed income portfolio to improve its performance.

What does the plan entail?
Up to 65% of the fixed income portfolio (equivalent to 18% of the Fund's total portfolio) will be managed passively (just following the benchmark without taking risks) by external advisors under the instructions, supervision, and control of the fixed income team. The allocation will be reviewed periodically with the objective to internalize the management of the fixed income portfolio once the recruitment of missing team members is completed and the performance of the part of the portfolio managed internally (35%) is positive.

How will the external advisors be selected?
Following proper competitive processes and due diligence, in full adherence to the UN Rules and Regulations, a group of at least three advisors will be selected.

What will the additional cost be?
The additional annual cost is expected to be less than 3 million US dollars.

What will the financial benefit be?
The expected annual profit is expected to be 60 million US dollars.

What is the regulatory framework on which the plan is based?
The plan is compliant with the Investment Policy Statement endorsed by the United Nations Joint Staff Pension Board and the United Nations General Assembly in 2019.

Which governing mechanisms oversaw this plan?
The Internal Investment Committee (composed of multi-disciplinary experts of the Office Of Investment Management, chaired by the Chief Investment Officer), the United Nations Joint Staff Pension Board and the Investments Committee (external advisory group of experts appointed by the General Assembly) endorsed the plan between 18 February 2022 and 10 March 2022.


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