GLOBAL - The $35bn (€27bn) United Nations Joint Staff Pension Fund has axed Lombard Odier Darier Hentsch & Cie from a European small-cap mandate due to "persistent underperformance" over the last five years.

LODH confirmed that the mandate ended this summer but declined to comment further.

A report on the scheme's performance by the secretary general's office states that a second small-cap manager is to be terminated "for underperforming for the past three years".

There are six small-cap managers: ‘CS Asset Management', DFA Investment, Jennison, Baillie Gifford, LODH and SG Yamaichi. Only CS Asset Management has underperformed consistently over the last three years, according to the tables provided in the report.

A spokeswoman for Credit Suisse Asset Management said it was company policy not to comment on clients. Both the LODH mandate, of undisclosed size, as well as the other ($300m) small-cap brief will be tendered, the report states.

The total investment return of the fund was 13.3% for the year ended 31 March 2006 - compared to 10.4% last year.

According to the latest actuarial evaluation at year-end 2005 the 93,000-member fund had its fifth consecutive surplus amounting to 1.29% of pensionable remuneration, up from 1.14% in 2003.

The return on the bond portfolio (28.3% of total assets) was -2.8% against +7.8% last year.

The bond exposure "was kept at the low end of the 31% long-term strategic target guideline as the Federal Reserve's unrelenting rate hikes throughout the biennium affected fixed-income returns in the largest and deepest market, the USA".

The 4.1% real estate portfolio (below the 6% long-term strategic allocation) returned 30.5% compared to 15.8% last year.

Equities (currently 60% of the portfolio) contributed the most to the overall performance with a 21.3% return (2005: 11.8%).

The secretary general, who has the fiduciary responsibility over the UNJSPF, stressed that "the fund's most immediate concern is that it continues to manage $33bn as if it were a few million dollars" citing the fact that mandates in excess of $10bn are managed by just one person.

The UNJSPF is currently looking for five investment officers. However, the secretary general's report state that even with these new appointments "this will never add up to the proper umber of Professional investment staff to adequately manage the portfolio". It then goes on to give an estimate of around 30 professional investment managers needed.

Other changes to the fund this year included the setting up of an internal audit body and the appointment of Northern Trust as global custodian.