UN Pension Fund Loses More Than $13B in 2022

The United Nations Joint Staff Pension Fund reported a preliminary decrease in market value of 14.7% in 2022, as it lost more than $13 billion during the year, according to its annual report. The fund ended 2022 worth $77.9 billion, down from $91.5 billion at the end of 2021.

However, the value of the pension fund has risen to $85.5 billion as of July 20, according to Pedro Guazo, who oversees investment of the fund’s assets and reported the figure at the pension fund’s 75th session late last month.

As of the end of 2022, the UNJSPF’s asset allocation was 50.63% in public equities, 28.73% in fixed income, 9.19% in real estate, 8.33% in private equity, 2.65% in cash and cash equivalents and 0.47% in real assets.

Every four years, the pension fund hires an outside consultant to conduct an asset liability management to forecast the likelihood that the current contribution rate will remain sufficient in the future and that future solvency metrics will remain within an acceptable range. The study also evaluates current and alternative asset allocations and assesses whether the assumed rate of investment return is expected to be met over the longer term.

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The UNJSPF’s office of investment management uses the results to set the pension fund’s investment strategy, while the board uses the study to understand the effects of potential plan design changes and future demographic trends.

The most recent study was announced at the pension board session, which concluded July 31 in London. The 2023 Asset-Liability Management study considered various scenarios for the future, including ones that incorporate climate risk. According to the pension fund, under a baseline scenario with moderate growth and a suitable asset allocation, it expects the required contribution rate to remain within a targeted range of 21.7% to 25.7% of pensionable remuneration, which currently would not trigger a change in the contribution rate.

The study also considered the impact of a financial crisis arising from the world’s failure to transition to net zero carbon emissions. Based on the study’s analysis, the scenario would be more challenging for the fund, which therefore intends to monitor the long-term impact of climate risk.

The pension’s board said it will submit its report on its 75th session to the U.N. General Assembly in the coming weeks, and the report will be published some time next month.