UNJSPF News: Message from the RSG – Overview of Investment Results in 2018

UNJSPF News: Message from the RSG – Overview of Investment Results in 2018

4 February 2019

Dear Friends and Colleagues,

In the spirit of proactive communication with all stakeholders to which I am committed, I am providing below an initial overview of our investment results for 2018 – in advance of the final audited numbers which will not be available for several months as our third-party independent Master Record Keeper meticulously collects all relevant information and calculates various performance metrics in accordance with industry standards; similar to what happens with the preparation of our audited financial statements.

2018 turned out to be a challenging year in global financial markets. Investment returns for global equities were around minus 8.7%; the worst performance in any year since the Global Financial Crisis of 2008. Investment returns during December 2018 were the worst for that month in any year since 1931.

Despite these challenges, coupled with increasing market volatility, the market value of the assets of the Fund remained above the ‘Actuarial Assets Value’ of US$60.4 billion. This “Actuarial Assets Value’ was used by our Consulting Actuary in their most recent report to determine that the Fund’s financial condition is sound.

It is important for the Fund’s stakeholders, including our 205,000 current and future beneficiaries, to note that estimations of the Fund’s financial well-being are made by external experts using very conservative assumptions, including smoothing the market value of the Fund’s assets over 5 years, which adjusts for the expected volatility of global financial markets.

Underlining the fact that volatility is an enduring feature of global financial markets, the market value of the Fund’s assets has already bounced back to US$63.6 billion at the end of January 2019.

Preliminary, unaudited numbers indicate that the Office of Investment Management achieved its stated goal of meeting or exceeding the returns of the Policy Benchmark during 2018.

We also continue to exceed by a healthy margin our Long-Term Objective of 3.5% real (net of inflation) return in US dollar terms over 10 and 15-year periods. As I have previously stated at various stakeholder forums — including the Pension Board and the General Assembly – our goal is to fully discharge all our obligations to current and future beneficiaries. Pension payments are made over decades, and short-term fluctuations in investment returns do not have a material impact on these pension payments so long as the Long-Term Objective is being met.

Financial markets are likely to be volatile over the near-term as they adjust to a reversal of quantitative easing which has been going on for the past ten years, with no precedents to help us gauge how that adjustment may come about. At the same time, our fully funded status gives us a certain amount of financial cushion to withstand a period of low investment returns. I am confident that the Office of Investment Management will be able to deal with whatever challenges the markets may present, with the support and encouragement of all our stakeholders.

Best,

Sudhir Rajkumar
Representative of the Secretary-General (RSG) for the investment of the assets of the United Nations Joint Staff Pension Fund (UNJSPF)