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Mr. Ban Ki-moon, Secretary-General of the United Nations: Maintain financial and structural integrity of UN Pension Fund
Lowell F.
started this petition to
Mr. Ban Ki-moon, Secretary-General of the United Nations
Dear Mr. Secretary-General,
We, the undersigned Pension Fund participants, beneficiaries, and current and former staff urge you to:
(1) Maintain the structure and functions of the UNJSPF and reject the organizational changes proposed by the CEO in a new Memo of Understanding (MOU);
(2) Maintain the applicability of the UN Staff Rules and
Regulations, including financial rules, to the staff, CEO and operations of the UNJSPF to ensure proper oversight and accountability;
(3) Protect the stability and soundness of Pension Fund
investments through continued conservative and careful management, building on the investment approach that has worked successfully up until now. Reject plans to invest in hedge funds and/or other risky alternative investments.
We are appealing to you as participants, beneficiaries, retirees and current staff of the United Nations who are seriously concerned about recent developments regarding the future configuration and operations of our UN Joint Staff Pension Fund.
We are deeply grateful for the effective and efficient operations of the UNJSPF up until now. Our Fund has weathered many storms in the outside financial and commercial markets that have brought other pension funds to ruin. It survived the 2008 international financial meltdown with limited losses and disruptions. This was due, we believe, to the conservative and careful management of our investments as well as to a management structure that ensures multiple levels of review before decisions are taken that could compromise the soundness of the Fund.
We are also aware that the health, and even the existence, of many public pension funds in the US and Europe has been undermined in recent years; sometimes for ideological reasons, sometimes because of mismanagement, and sometimes because of altered market conditions. This has resulted in many retirees losing their pension benefits just on the point of their retirement, or after they are no longer able to work.
Our immediate concern -and the cause for this petition - is a Memorandum of Understanding (hereinafter referred to as the MOU) prepared by the current Chief Executive Officer (CEO), which would fundamentally alter the relationship between the Pension Fund and the Secretariat of the United Nations. This MOU would, in our view, result in an unwarranted concentration of power and authority in the hands of the CEO.
In the past, the Investment Division operated under the authority and fiduciary responsibility of the Secretary-General, while the CEO reported to the Pension Fund Board, made up of representatives of governments, staff and the various UN organizations that participate in the Fund. These arrangements provided a system of checks and balances so that no one party could act alone. Under this set-up, the Pension Fund secretariat operated under the same administrative and staff rules and regulations as the rest of the UN.
Currently, the staff of the Pension Fund has UN contracts and is subject to the administrative Rules and regulations of the UN Secretariat. With the new MOU, the CEO would be at full liberty to ignore the UN’s well-established rules on a number of key issues.
This would include areas such as: (1) The code of ethics; (2) Receipt of gifts; (3) Length of contracts; (4) Use of temporary appointees for ongoing functions; (5) Financial responsibility of staff for gross negligence; (6) Approval of outside activities; (7) Extension beyond retirement age; (8) Promotions; and (8) Classification of posts
The new rules proposed by the CEO would allow him to bypass the UN’s procurement procedures and fraud reporting guidelines that require fund staff to report any suspected fraud to the UN’s Office of Internal Oversight Services.
The UN’s internal administrative and financial controls and procedures, to which the pension fund is currently subject, provide a stricter operating environment and a stronger framework of checks and balances, than is being proposed in the new MOU.
The trend that is signaled by this MOU is the full incorporation of the Investment Division under the authority of the CEO. Although the RSG has been delegated authority by you for the investments of the Fund, under the new MOU, the CEO would exercise administrative control of the staff of the Investment Management Division “in consultation” with the RSG. This will breach the strict separation between the administrative side of the Fund and the investment side, a separation that has served the Fund well over the years.
Taken together, we believe these changes will:
(1) damage the environment in which our staff colleagues at the fund are required to work; and, (2) undermine the integrity of our fund, including its investments.
On the issue of Pension Fund investments, we noted recently published reports on the television network CNBC that the Fund is planning to substantially increase its exposure to hedge funds and to increase its risk profile. The Chef de Cabinet did not deny these reports during her recent briefing to staff and retirees. The history and record of pension funds, which invest in hedge funds and other risky financial products is troubling.
Recently, Scott Stringer, the New York City Comptroller, in auditing NY City Pension Funds, found that over the last 10 years, hedge fund managers fell 2.6 billion dollars short of their target benchmarks after fees were accounted for. He said, “those managers gobbled up 95% of the value added – over 2 billion dollars – leaving almost no extra return for the funds.”
Various state governments in the US have recorded unfunded liabilities in the billions of dollars in their state pension funds because of increased exposure to alternative investments like hedge funds.
At the same time, the largest pension fund in the United States, CalPers, the California Public Employees Retirement System, has decided to divest entirely from hedge funds.
A former JP Morgan executive, asks an essential question: “why do … institutional investors like public pension funds, abetted by irresponsible consultants, continue squandering the middle class retirement assets that they oversee to make hedge fund managers phenomenally rich?”
Any plans to undertake more risky investments would be
facilitated by the proposed exemptions to the Staff Rules and Regulations that the CEO seeks for the Pension Fund. These include exceptions to the code of ethics, receipt of gifts, conflicts of interest, and approval of outside activities. To exempt the Pension Fund staff and the CEO from these safeguards can only lead to abuse that may result in substantial costs to the Fund. Given how large the rewards potentially are, the dangers to the safety and security of the UN Pension Fund are plain to see. Such exemptions may well incentivize the type of mismanagement and financial loss that have beleaguered other public pension funds both in the North America and Europe.
We, the undersigned Pension Fund participants, beneficiaries, and current and former staff urge you to:
(1) Maintain the structure and functions of the UNJSPF and reject the organizational changes proposed by the CEO in a new Memo of Understanding (MOU);
(2) Maintain the applicability of the UN Staff Rules and
Regulations, including financial rules, to the staff, CEO and operations of the UNJSPF to ensure proper oversight and accountability;
(3) Protect the stability and soundness of Pension Fund
investments through continued conservative and careful management, building on the investment approach that has worked successfully up until now. Reject plans to invest in hedge funds and/or other risky alternative investments.
We are appealing to you as participants, beneficiaries, retirees and current staff of the United Nations who are seriously concerned about recent developments regarding the future configuration and operations of our UN Joint Staff Pension Fund.
We are deeply grateful for the effective and efficient operations of the UNJSPF up until now. Our Fund has weathered many storms in the outside financial and commercial markets that have brought other pension funds to ruin. It survived the 2008 international financial meltdown with limited losses and disruptions. This was due, we believe, to the conservative and careful management of our investments as well as to a management structure that ensures multiple levels of review before decisions are taken that could compromise the soundness of the Fund.
We are also aware that the health, and even the existence, of many public pension funds in the US and Europe has been undermined in recent years; sometimes for ideological reasons, sometimes because of mismanagement, and sometimes because of altered market conditions. This has resulted in many retirees losing their pension benefits just on the point of their retirement, or after they are no longer able to work.
Our immediate concern -and the cause for this petition - is a Memorandum of Understanding (hereinafter referred to as the MOU) prepared by the current Chief Executive Officer (CEO), which would fundamentally alter the relationship between the Pension Fund and the Secretariat of the United Nations. This MOU would, in our view, result in an unwarranted concentration of power and authority in the hands of the CEO.
In the past, the Investment Division operated under the authority and fiduciary responsibility of the Secretary-General, while the CEO reported to the Pension Fund Board, made up of representatives of governments, staff and the various UN organizations that participate in the Fund. These arrangements provided a system of checks and balances so that no one party could act alone. Under this set-up, the Pension Fund secretariat operated under the same administrative and staff rules and regulations as the rest of the UN.
Currently, the staff of the Pension Fund has UN contracts and is subject to the administrative Rules and regulations of the UN Secretariat. With the new MOU, the CEO would be at full liberty to ignore the UN’s well-established rules on a number of key issues.
This would include areas such as: (1) The code of ethics; (2) Receipt of gifts; (3) Length of contracts; (4) Use of temporary appointees for ongoing functions; (5) Financial responsibility of staff for gross negligence; (6) Approval of outside activities; (7) Extension beyond retirement age; (8) Promotions; and (8) Classification of posts
The new rules proposed by the CEO would allow him to bypass the UN’s procurement procedures and fraud reporting guidelines that require fund staff to report any suspected fraud to the UN’s Office of Internal Oversight Services.
The UN’s internal administrative and financial controls and procedures, to which the pension fund is currently subject, provide a stricter operating environment and a stronger framework of checks and balances, than is being proposed in the new MOU.
The trend that is signaled by this MOU is the full incorporation of the Investment Division under the authority of the CEO. Although the RSG has been delegated authority by you for the investments of the Fund, under the new MOU, the CEO would exercise administrative control of the staff of the Investment Management Division “in consultation” with the RSG. This will breach the strict separation between the administrative side of the Fund and the investment side, a separation that has served the Fund well over the years.
Taken together, we believe these changes will:
(1) damage the environment in which our staff colleagues at the fund are required to work; and, (2) undermine the integrity of our fund, including its investments.
On the issue of Pension Fund investments, we noted recently published reports on the television network CNBC that the Fund is planning to substantially increase its exposure to hedge funds and to increase its risk profile. The Chef de Cabinet did not deny these reports during her recent briefing to staff and retirees. The history and record of pension funds, which invest in hedge funds and other risky financial products is troubling.
Recently, Scott Stringer, the New York City Comptroller, in auditing NY City Pension Funds, found that over the last 10 years, hedge fund managers fell 2.6 billion dollars short of their target benchmarks after fees were accounted for. He said, “those managers gobbled up 95% of the value added – over 2 billion dollars – leaving almost no extra return for the funds.”
Various state governments in the US have recorded unfunded liabilities in the billions of dollars in their state pension funds because of increased exposure to alternative investments like hedge funds.
At the same time, the largest pension fund in the United States, CalPers, the California Public Employees Retirement System, has decided to divest entirely from hedge funds.
A former JP Morgan executive, asks an essential question: “why do … institutional investors like public pension funds, abetted by irresponsible consultants, continue squandering the middle class retirement assets that they oversee to make hedge fund managers phenomenally rich?”
Any plans to undertake more risky investments would be
facilitated by the proposed exemptions to the Staff Rules and Regulations that the CEO seeks for the Pension Fund. These include exceptions to the code of ethics, receipt of gifts, conflicts of interest, and approval of outside activities. To exempt the Pension Fund staff and the CEO from these safeguards can only lead to abuse that may result in substantial costs to the Fund. Given how large the rewards potentially are, the dangers to the safety and security of the UN Pension Fund are plain to see. Such exemptions may well incentivize the type of mismanagement and financial loss that have beleaguered other public pension funds both in the North America and Europe.
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