GLOBAL - The United Nations' internal watchdog has criticised the body's $33bn pension fund for having a high risk exposure in its real estate portfolio.
The remarks come in the latest annual report from the UN's Office of Internal Oversight Services. At the time of the audit the portfolio had a market value of $1.6bn. Currently 4.1% of scheme assets are invested in real estate, against a long-term target of 6%.
The OIOS acknowledged the fund "maintained a broadly ddiversified portfolio by property type, geographical location and investment vehicle, and that additional diversification was provided by funds that invest in hybrid real estate-related investment vehicles".
But it found that "those funds generally carried higher risks than conventional real estate funds and required more versatile risk-to-reward tolerance".
It also criticised the fact that the funds "required more specialized investment skills than traditional real estate investment vehicles".
The report states that the "fund is taking corrective action on the recommendations made". It adds the fund welcomes the report.
The watchdog also critcised fund advisers, stating that "there was a need for a more clearly defined methodology for measuring risk and for greater analysis by the advisers in managing the risks to the fund".
According to the report this issue is also being addressed.
According to the last actuarial evaluation at year-end 2005 the fund was 1.29% overfunded. The number of active participants stood at 93,683.
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