In good hands
2007 and 2008 were critical years for the CERN Pension Fund. The dramatic market downturn increased the deficit to scary levels. A newly appointed management and a redefined governance launched an updated investment strategy and totally new performance standards. In December 2011, the Fund was shortlisted as a finalist for a prestigious award. We invite you to (re)discover the CERN Pension Fund.
The challenge is still there: the funding deficit is currently estimated at about 2 billion CHF. But don’t stop reading. Today the Fund has a clear strategy and tangible plans to fix the problem. In its current structure, the Pension Fund management and administration is an independent unit in the Organization chart. Its Chief Executive Officer, Théodore Economou, was appointed by the Council three years ago and reappointed to the post at the last Council meeting in March.
The CERN Pension Fund has over 6,700 members, including members from ESO, as the Fund was already in place when the two institutions were on the same site. In order to achieve full funding over a 30-year projection period, in June 2011 the Council decided on a whole package of measures, which included a special contribution from CERN Member States of 60 MCHF per annum and from ESO Member States of 1.3 MCHF per annum. Although the cash contribution is clearly vital to help the Fund change route towards breaking even, it is not the only key factor in the overall recovery plan. “The Fund is executing a clear strategy whose overriding goal is to reduce risks,” confirms Théodore Economou. “We are the stewards of the Fund’s assets. Over the last three years we have implemented a capital preservation approach. We seek to have the highest possible efficiency, which includes opting for investments that present the lowest possible level of risk consistent with the Fund’s objectives.”
The Fund’s investments are diversified: among other things, 15% is invested in real estate and the Fund is seeking to increase this part; 10% is in cash, mostly with the Swiss treasury; 30% is in safe bonds. The current goals include reducing investment in equities to less than 30%. “Last year, for the first time, all assets were gathered under a single roof, that is a bank that acts as a master custodian of the Fund but does not manage it,” explains Théodore. “This operation was carried out in the framework of a large upgrade of the Fund’s operational infrastructure to implement industry best practices.”
In the new operation scheme, the CERN Pension Fund has developed a completely new governance structure and control systems. The Chief Executive Officer reports to the Pension Fund Governing Board, which is a body of the Council. In addition, a committee which includes external experts supervises the Fund’s investment policy and another committee covers actuarial and technical issues. “We produce regular reports to the Board and the committees and for the three annual audits. We count on reports by independent bodies that evaluate the performance of the Fund and its risk level,” says Théodore.
On the slides Théodore has prepared for his talks to CERN departments I can count up to seven different official reports that he is requested to make over the year, plus the audits, the independent evaluators… this sums up to a lot of supervision, checks and controls. Before coming to work for the CERN Pension Fund Théodore Economou was running two other funds, one of which was larger than CERN’s and won specialised awards. In December 2011, the CERN Pension Fund was named as a finalist in the aiCIO Industry Innovation Awards, a very prestigious prize for the category. The Fund didn’t win but stay tuned: the investment return target for the past three-year period has been exceeded. Hopefully, this is just the beginning of a successful new course.
As of this issue, the Bulletin is starting a new collaboration with the CERN Pension Fund, which will have a dedicated “corner” in our publication. The Chairman of the Pension Fund Governing Board will report regularly about the activities of the Fund.
This month, the aiCIO Publication features Gregoire Haenni, CIO of the CERN Pension Fund.
by Antonella Del Rosso