The $43 billion United Nations Joint Staff Pension Fund has joined the ranks of institutional investors adding low-volatility equity strategies to their portfolios, with an allocation that has grown to more than $500 million.
Unlike some that have made strategic allocations to low-vol strategies in recent years, executives overseeing the New York-based United Nations pension fund called their move a tactical one, against the backdrop of longer-term efforts to boost an internally managed alternatives program.
In a recent interview with a trio of executives overseeing the pension fund's investments, Ajit Singh, chief risk officer with the investment management division, said the move into low-volatility strategies followed a year of study by investment staff on ways to reduce volatility and improve the fund's risk-adjusted returns.
Over the past year, volatility has remained a concern. According to its latest annual report, the pension fund's portfolio, with more than a 60% allocation to public equities, experienced “wide fluctuations” amid the turbulent market conditions of 2011.
After ending 2010 at $41.4 billion, the value of the system's pension assets jumped to a record $44.4 billion by the end of April 2011, only to drop to $39.7 billion by the close of the year, for a -3.9% return.
As of Aug. 10, the UNJSPF website reported allocations of 61.5% to equities, 29.1% to bonds, 5.1% to real estate, 3.5% to cash and 0.8% to alternatives.
In the same interview, Suzanne Bishopric, the director of the investment management division, said while the UNJSPF has been late in building its alternatives capabilities, it is moving now to come up to speed — with plans to raise its allocation to alternatives strategies by one percentage point a year over the coming years. She declined to specify a target allocation for alternatives.
The UNJSPF hired Tereza Trivell, a veteran of private equity firm Siguler Guff & Co., in June 2010 as a senior investment officer tasked with building an alternatives investment team, Ms. Bishopric noted.
The fund's most recent quarterly report, for the period ended March 31, lists $125.3 million in allocations to seven private equity investments and $201.1 million invested in three commodities funds — for a combined $326.4 million in alternatives strategies.
The pension fund's alternatives plans don't include immediate allocations to hedge funds, although those might come “at some point,” Ms. Bishopric said.
In the interview, Toru Shindo, deputy director for investments, said the UN investment team would like to increase allocations to real estate and private equity, but noted that doing so will take time.