The UN’s pension fund is building its VC portfolio from scratch

In an unexpected move reflective of shifting market dynamics, the United Nations Joint Staff Pension Fund is branching into venture capital (VC) and private credit. Despite 2023 witnessing a dramatic 47.5% slump in global VC fundraising – the lowest since 2015 – and a general investor retreat from the venture market, the Fund identifies a counterintuitive opportunity to innovate its portfolio.

Addressing the Greenwich Economic Forum, Pedro Antonio Guazo Alonso highlighted the fund’s zero-to-hero approach, aiming to capitalize on what is perceived as a “sleepy” VC sector. This strategy is particularly intriguing, considering the prevailing institutional investment trend of the past year, which saw a significant pullback from VC, driven by reduced exits and major valuation corrections.

Moreover, the Fund’s inclination towards private credit aligns with broader institutional shifts seeking higher returns compared to traditional fixed income. This is underscored by private debt’s surge to nearly $1.9 trillion in assets under management by the end of 2023, marking an all-time high.

Traditionally anchored in public equities and fixed income, the Fund’s strategic realignment to include VC and private credit reflects a sophisticated response to the ongoing reassessment of risk and return profiles by institutional investors. This move not only diversifies the Fund’s investment landscape but also positions it to potentially leverage market recoveries and higher yields, challenging the conventional risk-averse frameworks in turbulent times.

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