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The Inside Story of How the United Nations Investment Office Made a Plan to Rebuild

“I call it opening the doors and the windows to let the air come in,” said fund chief Pedro Guazo.

The United Nations investment office is a complex behemoth. But Pedro Guazo, who is now leading the $81 billion fund, has a plan to tame it.  

In 2020, the fund’s former leadership resigned, an internal audit revealed a “toxic” culture, and pandemic-induced volatility dogged the portfolio.  

As the fund embarked on its search for a new chief investment officer, Guazo spoke with Institutional Investor about the UN investment office’s plans to improve, which include cultural changes, hiring staff, and introducing derivatives into its trading strategy. 

The pension fund’s cracks began to show publicly in 2019, when, at its annual meeting, Sudhir Rajkumar, the former Representative of the Secretary-General for the investment of the pension fund’s assets, called the pension fund “malnourished” and asked for the resources necessary to staff up.  

Less than a year later, on March 29, he resigned, citing personal reasons. By that day, the pension fund had lost roughly $10 billion in assets under management to pandemic-induced market volatility, falling to $63 billion.   

Rajkumar’s resignation came amid an internal audit of the investment management office — which, according to the July results, revealed “divisiveness” among staff, a “toxic” culture, and “micromanagement” from senior leadership. Rajkumar did not respond to multiple LinkedIn messages seeking comment.  

Enter Guazo, who had been the finance director at the United Nations for eight years. He was tapped to takeover Rajkumar’s role on an interim basis but has since permanently joined the fund.  

His first order of business? Transparency.

“I call it opening the doors and the windows to let the air come in,” Guazo said via video call.  

He set up a 120-day plan that addressed the pension fund’s major issues at the time: its investment portfolio, its culture, its organizational structure, and its decision-making process. 

“We basically planned to have three big pillars,” Guazo said. “The first one was to tackle the problems that we were facing in the portfolio.” 

The fund had already started to bounce back alongside the markets, but its investment leaders chose to keep a little more of the portfolio in cash while maintaining its asset allocation strategy, Guazo said. It worked. The portfolio went from a low of $63 billion in March to finishing the year with nearly $82 billion under management. The pension is roughly 130 percent funded, Guazo said.  

He credited the outgoing CIO, Herman Bril, with the fund’s strong performance, noting that he both diversified assets under management, and increased them by roughly 15 percent during his five-year tenure. Bril is leaving the fund in March to move with his family to Europe.  

Since Guazo joined, the fund has also divested from thermal coal and has received approval from the UN’s General Assembly to trade using derivatives on a two-year trial basis, he said.  

The changes that address the fund’s culture are, at first glance, small. The pension began publishing its weekly and monthly results online, for instance.  

But that was a point of contention under Rajkumar, who had stopped publishing weekly and monthly results because they “only created noise and resulted in apprehension among pensioners,” according to an August 2019 meeting summary.  

[II Deep Dive: ‘Toxic’ Workplace Accusations Trail UN Pension as It Searches for New CIO]

Guazo also shared an organizational chart with staffers, who he was “shocked” to learn had never seen the full picture of the pension fund’s internal organization.  

Before Guazo joined, all areas of the fund — from operations to risk management — were reporting to the chief investment officer, who then reported to the Representative of the Secretary-General. The representative also had the final say on decisions made by the internal investment committees.  

“In an organization like ours, when all our staff feels not only proud, but they also feel ownership of what they do, the worst thing you can do is to have a micromanagement style with all the decisions coming from top-down,” Guazo said.  

He changed the fund’s structure so that the chief investment officer, the operations chief, and the chief risk officer all report to him, rather than just the CIO. 

“The empowerment, that's palpable,” said Bill Wilkinson, who has been the chief operating officer at the fund since 2017. “People don't want to be micromanaged.”  

With a new leadership system in place along with increased transparency, the two are looking forward to continuing the implement the new culture plan, which includes surveying staffers to determine what other changes they will make.  

“We are seeing a change in the attitude of the people and that toxic environment; I think that it has decreased tremendously,” Guazo said.  

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