Report from the Pension Fund

In this column, the Chairman of the Pension Fund Governing Board (PFGB) presents the Board's latest main decisions, initiatives and accomplishments to the Fund's members and beneficiaries.

Since my last report in July, the Fund has continued the implementation of its capital preservation approach with encouraging results. There have also been several communication events focusing, in particular, on the Fund’s governance and its investment processes.

At the September sessions of the Finance Committee and Council, the Chairman of the Pension Fund Investment Committee, Dr Sigurd Lettow, gave comprehensive presentations on the governance and operations of the Fund’s Investment Committee. The Investment Committee is the subsidiary and expert body of the PFGB on investments. Its mandate is to define the process according to which the Fund’s assets - which amount to approximately 3.7 billion Swiss Francs - are invested, and to supervise the implementation of this process.

Dr Lettow’s presentation addressed the advantages and disadvantages of the many different investment possibilities available to the Fund. He explained the principles and the processes which determine the selection of the Fund’s investment mix. The principles underlying various approaches to the Fund’s actuarial valuation were also discussed. Dr Lettow reported that the Fund’s investment performance stood at 5.1% year-to-date, which is in line with the annual return objective determined by the Council, which targets an annual return of 3% above inflation.

Also in September, the Fund held its Annual Information Meetings at ESO and CERN. These meetings, which were advertised in the Bulletin, are open to all employees of CERN and ESO, as well as to the Fund’s beneficiaries. The Fund’s Chief Executive Officer reported on the Financial Statements of the Fund for 2011 and presented the Fund’s progress with the implementation of the capital preservation approach. The presentation included a detailed description of the Fund’s investment decision-making framework and of the reporting and control mechanisms that have been put in place in the past two years to ensure that the portfolio is optimally designed to meet the Fund’s objectives with the lowest possible estimated risk.

I am happy to report that the Fund successfully completed its second real-estate acquisition this year: a 2,310 m² office building in London, United Kingdom. The property, which is 100% let, is situated in the Victoria district, close to Buckingham Palace. The building was selected on the basis of its risk-to-return profile, fully in line with the Fund’s capital preservation approach. In the near future, a catalogue of all of the Fund’s real-estate assets will be made available for consultation to the Fund's members and beneficiaries.

The Fund is also progressing towards completion of its Regulations. The drafting of the Rules of Procedure is now being finalised. The document is scheduled to be ready for submission to the Council at its December 2012 session.

The CERN Pension Fund has increased its contacts with its peers in other international organisations. In September, I met the Financial Controller of the World Trade Organisation (WTO), at the request of the WTO. The purpose of this meeting was to share the CERN Pension Fund’s experience in updating its governance to modern best-practice levels. In early October, a delegation from the Pension Fund Management Unit (PFMU) met representatives of Eurocontrol, the European organisation for the safety of air navigation, following a request by Eurocontrol for information concerning the CERN Pension Fund’s implementation of its capital preservation strategy. Also in October, the PFMU received a visit from a representative of the Investment Management Service Team of the United Nations Joint Staff Pension Fund. This meeting allowed the two teams to share experience in updating IT operations infrastructure to best-practice solutions.

Dan-Olof Riska,
Chairman, Pension Fund Governing Board