> CERN Pension Fund:
As Groundbreaking as its Research You’ve no doubt heard about CERN, based in Geneva: the Large Hadron Collider, the search for the elusive Higgs Boson, dark matter and antiproton decelerators...?
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nd that’s where most people’s knowledge of the epicentre of scientific advancement starts and stops. CERN’s experiments and findings are above the heads of most of us, only make understandable by dumbed-down precis and easily digested headlines. But, in the same way that movie stars and royalty must brush their teeth and visit supermarkets, CERN has a “real life” as well. Not everything going on in the organisation is molecular and miraculous. Founded in 1954, the European Organization for Nuclear Research (Conseil Européen pour la Recherche Nucléaire, to give it its full title and explain the acronym) was one of Europe's first inter-governmental bodies. It works with 23 member states and eight associate-member states, not all of them European. There are some 3,500 CERN employees in 2020 — and not all of them are scientists. Workers in any capacity, regardless of glamour, must consider things such as retirement. And in the same way that CERN leads scientific exploration to give insights into such as subjects as antimatter and the early universe, its efforts in the humble, lesser-known space of pension funds are equally noteworthy. The fund provides benefits to the staff and fellows of CERN. It operates as a capitalised, defined-benefits scheme with some CHF4.4bn (£3.8m) in assets under management, and provides pensions and social security benefits (including death and disability benefits) to some 7,500 members and beneficiaries in 48 countries. The challenging risk/return objectives of the fund, coupled with challenging market conditions called, over the years, for an in-depth rethinking of its operating models. This meant questioning even established and well accepted practices. Pension fund CEO Matthew Eyton-Jones says the one thing which sets CERN apart from the rest in this area is tackling everything possible in-house, rather than outsourcing — as many funds do. 56
CEO: Matthew Eyton-Jones
“CERN is a little bit unusual, because it’s an intergovernmental organisation outside of the Swiss national system of pensions and social security. (The same is true for organisations such as the United Nations.) It has to create its own social security system inside the organisation.” There have been several transformations over the years because of changing demographics: more people retiring, and less younger workers coming through. Longer lifespans are changing the equation. “Pension funds are all underfunded to a degree, so we have the challenge of altering ours to reach full funding,” says Eyton-Jones. Major changes came in 2010 when the benefit structure was made less generous. “That’s in-line with what’s happened elsewhere. There was a fundamental change in our investment strategy in about 2012, and we moved away from a traditional investment model CFI.co | Capital Finance International
of equities and bonds to alternative assets: private equity, hedge funds, real estate, and we have continued with that theme. “We spend a lot more effort on risk-management, as well. That, traditionally, wasn’t the case. Investment performance has been very good: positive performance every year since at least the beginning of 2012. “The staff are happy with the way the fund is going, it’s targeted to be fully funded in the future.” Not all changes were well received by the workforce at the time, but that, as EytonJones points out, was the case worldwide. The fund is well maintained, with a governing board and sub-committees (which include external experts) meeting regularly to ensure a solid base for the CERN nest egg. A 30-strong team work for the Pension Fund , and it’s a “stimulating work environment”, the CEO says. Investment Governance Framework