GLOBAL - The United Nations Joint Staff Pension Scheme has come under fire from a UN-related organisation for "under-investing" in developing countries while over-relying on external fund management.
The criticism comes from the Group of 77 (G-77), an organisation representing the interests of developing nations within the UN. Its key claim is the pension fund has failed to include appropriate emerging markets investments within its investment strategy.
Addressing a UN pension fund committee, Magid Yousif, minister plenipotentiary from the Republic of Sudan, said: "Despite some investments in a few developing countries, it still remains much under-represented in the fund's portfolio. Investments in the developing world could provide balance in the market and avoid negative impacts and setbacks, as was the case during the financial and economic crisis."
Yousif urged the UN pension fund to diversify its investments by increasing allocations in developing regions and called on the investment committee to bring more fund management in-house.
G-77's concerns relate to the UN pension fund's deterioration in performance following the downturn in markets, which saw the portfolio decrease by 28.3% at 31 March 2009. The group believes the scheme's heavy bias towards US stocks - which account for $14.4bn (€10.18bn) of a total $29bn allocation to equities - are to blame.
G-77's views are in part supported by advocates of emerging markets investments, who claim these regions have proved particularly lucrative over the past two years.
Michel Danechi, fund manager at emerging markets specialist Armajaro Asset Management, said: "2009 saw $80bn of inflows into emerging markets funds, representing a record year. The simple reason is that growth rates in the emerging markets are 3-4% better than Western Europe, and the structural problems experienced by the US and UK with high debt levels simple don't exist here."
He added: "People have been allocating substantial amounts to emerging markets but they are still underweight in most portfolios, so investors are trying to play catch up."
In spite of the domination of US stocks in the UN portfolio, the rest of its equity allocation is split among 40 countries and covers 27 currencies.
Furthermore, since the markets have recovered in the second half of 2009, the pension fund reported a significant upturn in performance. The market value of the fund's assets stood at $36.56bn by 30 September 2009, which represents an increase of $4bn (12.3%) from 30 June 2009 when assets were worth $32.56bn.
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