How the UN’s Pension Orchestrated a Turnaround — and Grew By $30B

CEO Pedro Guazo doubled his team, grew investments, and hit responsible investing targets over the past four years.

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Chief executive officer Pedro Guazo took the helm at the United Nations Joint Staff Pension Fund at an inopportune time.

Joining in March 2020 amid a pandemic, a global shutdown, and a massive market downturn, Guazo wasn’t just contending with the sudden onslaught of macroeconomic headwinds. He also had to deal with a slow-moving crisis inside the then-$63 billion pension behemoth: Investments were underperforming, and an internal audit had revealed “toxic” workplace claims.

Four years in, things at the UNJSPF are radically different. The fund is now worth nearly $91 billion, owing to better returns and ongoing contributions from the UN. The staff has nearly doubled in size, which Guazo says has improved morale. And the UNJSPF hit its responsible investing targets early under his oversight.

“We were in a vicious cycle,” Guazo said. “We broke that, and we entered into a virtuous circle. When that happens, you start seeing a lot of creativity and transformative ideas coming from people.”

Guazo spoke with Institutional Investor in 2021 about prioritizing transparency at the fund, his first step toward improving its overall operations.

Since then, he hired nearly 80 people, about half of whom are investment staffers, bringing the staff size up to 165. “Of course, when you double in size, now you can do many things,” Guazo said. “When you start having people that are not burnt out because they’re under-resourced, the culture starts improving. Good results make happier people, happier people make better decisions and then you have better results.”

The UNJSPF looks more like a Canadian pension plan than its stateside peers. The staff is large, but it isn’t just investing capital: The team is handling middle- and back-office operations as well.

And much of the UNJSPF’s investing work is done directly. The fund has a 16.3 percent allocation to private markets, which it runs through external managers, many of whom it co-invests with. The remainder of the portfolio is in public equities and fixed income, the bulk of which is managed in-house by UNJSPF staffers. As the Canadians have, the UNJSPF has managed to reduce fees using this approach. According to Guazo, in some areas, fees are 30 percent lower than peer funds.

Public equities make up 44.4 percent of the fund’s assets. For the one-year period ending March 31, the public equity portfolio has returned 24.1 percent, outperforming the benchmark by 0.4 percent. Over the long term, the public equity portfolio performs in lockstep with the benchmark, which Guazo noted was higher than the benchmarks used by its peers.

These returns have also been achieved with a responsible investment policy that required the fund to divest from any fossil fuel companies that don’t have net zero transition plans by 2025.

“People get scared. If we do this, how much return will we sacrifice?” Guazo said. “The good news is that our benchmark, our customized benchmark is above the normal benchmark... We’re not only not leaving money on the table for being responsible, but we are having an additional return.”

He noted that the responsible investing policy is as much about improving environmental outcomes as it is managing risk. The UNJSPF tapped its consultant Ortec to run an asset liability study in 2023, which included scenario analysis on climate change.

According to Guazo, this analysis revealed that if things don’t go toward net zero, there could be a financial crisis. “That could impact portfolios massively,” he said. “We don’t have exposure to fossil fuel companies, [but] that would be impactful.”

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