State Universities Retirement System Request for Proposal. Investment Consulting Services

Transcription

1 State Universities Retirement System Request for Proposal Investment Consulting Services

2 Table of Contents I. Request For Proposal Summary Statement 3 II. Background Information 3 III. Specific Services Requested from the Investment Consultant 4 IV. Minimum Qualifications 8 V. RFP Specifications 9 VI. Projected Schedule of Events 11 VII. Selection Criteria 11 VIII. Investment Consultant Questionnaire 12 IX. Fee Proposal 19 X. Appendix A 21 2

3 State Universities Retirement System (SURS) Request for Proposal (RFP) Investment Consulting Services I. RFP Summary Statement The State Universities Retirement System ( SURS or the System ) is requesting proposals from investment consulting firms to provide general investment advice and/or real estate consulting to the Board of Trustees. This search was authorized by the Board of Trustees and seeks to identify potential full-service general and/or real estate, retainer investment consultants. The consultant(s) will report to the Board of Trustees and will also be required to work with and provide assistance to the SURS investment staff. It is anticipated that SURS will enter into a five (5) year contract with the consultant(s), in accordance with the provisions of section of the Illinois Pension Code (40 ILCS 5/ ). II. Background Information Agency Description SURS is the administrator of a cost-sharing, multiple employer public employee retirement system. SURS membership includes employees of the Illinois public universities and other affiliated organizations. Currently, SURS membership totals more than 200,000 active, inactive and retired participants. SURS maintains both a defined benefit and defined contribution plan. As of June 30, 2012, the date of the most recent actuarial valuation report, the funded status of the defined benefit plan was 42.1% based on the actuarial value of assets and 41.3% on a market value of assets basis. For more information, please see the 2012 SURS Actuarial Valuation report. Defined Benefit Plan Investment Program SURS investment program, as of March 31, 2013, totaled $14.9 billion. The actual and target asset allocations as of March 31, 2013, are as follows: Actual Target U.S. Equities 32.1% 30.0% Non-U.S. Equities 20.7% 20.0% Global Equities 8.2% 10.0% Fixed Income 20.3% 19.0% Private Equities 7.2% 6.0% Real Estate 7.3% 10.0% TIPS 3.6% 4.0% Opportunity Fund 0.7% 1.0% 3

4 Defined Contribution Plan Investment Program As of March 31, 2013, the defined contribution plan assets totaled approximately $1.2 billion. Additional information regarding the System s investment program can be found in the Investment Section of the System s Fiscal Year 2012 Comprehensive Annual Financial Report (CAFR). Legislated Investment Restrictions Relating to the Republic of the Sudan and Iran In 2007 the Illinois General Assembly passed Public Act , restricting investment in companies domiciled in, managed or controlled by, or doing business with the Republic of the Sudan. SURS investment managers are required by law to abide by the restrictions. This Public Act can be found at Additionally, information pertaining to the Iran divestment law, Public Act , approved by the Illinois General Assembly on September 11, 2007, can be found at State Ethics Laws On April 3, 2009, Illinois Governor Pat Quinn signed Public Act into law. Public Act amends the Illinois Governmental Ethics Act and provides guidelines for ethical practices concerning state pension plans. Investment consultants seeking to be considered for this mandate should be familiar with and must comply with the provisions of this Act. Public Act encourages the Board to increase the racial, ethnic, and gender diversity of its fiduciaries, to the greatest extent feasible within the bounds of financial and fiduciary prudence. In furtherance of this Act, it is the goal of the Board to use its best efforts to increase the racial, ethnic, and gender diversity of its fiduciaries, including its investment managers and consultants. The Board encourages minority-, female- and persons with a disability-owned investment consultants to submit proposals to this RFP. A section of the Illinois Procurement Code concerning prohibitions of political contributions for certain vendors, (30 ILCS 500/50-37), may or may not apply to SURS investment managers or consultants. SURS is not subject to the Illinois Procurement Code generally (30 ILCS 500/ ). However, each investment manager and consultant should be familiar with the provisions of section of the Procurement Code and comply with this section if the investment manager or consultant deems it appropriate. III. Specific Services Requested from the Investment Consultant Enumerated below are the specific services requested from the Investment Consultant: General Advisory: A. Formulation and review of investment goals, objectives and policies: Formal annual review of asset allocation including a review and assessment of the underlying capital market assumptions. 4

5 Annual review of Investment Policy Statement, and assistance in drafting any necessary revisions. Assist with rebalancing activities and transition management, including pre- and post-trade cost evaluation. Implementation of current asset allocation plan. Provide recommendations for and assist in the implementation and enhancement of existing risk management strategies. Annual review of the SURS investment program including development of important strategic and policy-related recommendations. Annual review of SMP Investment Policy. Review and provide recommendations on the structure of each asset class and provide summary reports for each of the asset classes to coincide with the asset class review. Provide an independent alert to impending risks that may affect the fund. B. Review of fees and contracts: Review guidelines and objectives for new and existing investment managers, review benchmarks, contracts and fees, recommend revisions, and participate in negotiations with investment managers to effect revisions. Review and opine on LPA amendments (e.g. fundraising or investment period extensions, etc.) C. On-going monitoring of investment managers and service providers responsible for SURS investment program, both defined benefit and SMP, particularly with regard to consistency of investment style, organizational stability, and performance: Review and opine on the annual organizational and performance reviews for each of the System s investment managers and securities lending provider. Review and opine on the annual organizational and performance reviews prepared by staff for each of the System s SMP investment service providers and investment options. Communicate with SURS regarding any important developments regarding investment managers or service providers and make recommendations for manager assignment changes when appropriate. Conduct an independent annual review of the Manager Diversity Program (MDP), including a recommendation on the continuation or termination of the program. 5

6 D. Performance measurement and reporting: Prepare and present written and verbal quarterly summaries of investment manager activities, performance, and risk to the Board of Trustees. Quarterly reports on the investment risk and performance of the total fund, by asset class, and by manager will include an analysis of the current market environment and key events in the financial markets, a review of the performance of the major market indexes, an analysis of the asset allocation of the current investment program, and a return attribution analysis. Quarterly reports will also contain written commentary on the investment results of all portfolios (including real estate and alternative investments) in the context of their objectives and benchmarks, specific commentary on factors affecting performance, and a review of notable organizational issues for each investment manager. Quarterly reports must be finalized no later than seven weeks after the end of the previous quarter, depending on the Board meeting schedule. All performance returns must be calculated both gross and net of fees. E. Manager searches: Conduct equity; fixed income; real estate, alternatives, custodian/securities lending, SMP investment provider searches as necessary in accordance with SURS Statement of Investment Policy. The consultant will maintain an extensive database which includes minority- and female-owned firms and firms owned by persons with a disability, and must demonstrate non-discriminatory practices in the construction and maintenance of this database. Prepare investment manager RFPs based on criteria defining the need in the investment portfolio. Review investment manager RFP responses alongside Staff to identify qualified candidates based on the criteria presented in the RFP. Attend manager search due diligence meetings. Prepare and present search report to Investment Committee. F. Fiduciary Education: Educate Board of Trustees and Staff regarding significant trends in institutional investments and new investment opportunities. Educate Board of Trustees and Staff regarding significant trends in defined contribution marketplace. 6

7 Provide access to all research and non-exclusive educational opportunities for Staff and the Board of Trustees including periodic client conferences and database training, as necessary. G. Meeting attendance: Attend all Investment Committee meetings, Trustee Educational Forums, and, as requested, at Quarterly SURS Board meetings. There are a minimum of seven investment committee meetings and one Trustee Education event per year that are each approximately four hours in length. The majority of the investment committee meetings currently are held in Chicago, Illinois. Related investment meetings and discussions. Meet with Staff to assist in the development of investment committee agendas. Formal interviews with existing and potential investment managers, including the Self-Managed Plan, as requested. Ad hoc due diligence meetings with investment managers and Staff. H. Other: Real Estate: Make meeting space available to SURS as reasonably requested for meetings of the SURS Board of Trustees and its committees, meetings with SURS staff, and for manager searches. SURS will not pay for the use of meeting rooms, but SURS will be responsible for payment of all food and beverages requested or arranged by SURS in conjunction with any such meeting. Conduct such other services under the contract as may be reasonably asked of an investment consultant by a public pension plan. Availability by phone, or in-person meetings when appropriate to Staff and Trustees for further discussion or questions. Attend meetings of the Investment Committee and Board of Trustees when real estate issues arise to provide an assessment of any investment or manager issue arising during the period, to discuss topical issues and possible policy impact to SURS, and to present any recent research conducted by Investment Consultant. An annual review of the Statement of Investment Policy focusing on the structure and diversification of the portfolio and including an analysis of investment pacing based on cash-flow and current commitments. Support the selection of real estate investments including search(es) for commingled funds, individual funds or partnerships appropriate for SURS to meet the requirements of the annual investment pacing analysis by analyzing 7

8 investments coming to market, analyzing other appropriate investment opportunities and conducting detailed due diligence. Ongoing monitoring of SURS real estate managers and related real estate investments focusing on investment performance and organizational issues such as, but not limited to, changes in ownership, retention of professional staff, fee changes and new products. Review and recommend courses of action for all fund document amendments. Annual reporting. Review and opine on the annual organizational and performance reviews for each of the System s real estate managers. Consultant will prepare an annual real estate report. The report will include an analysis of the current market environment, a summary of the most recent events in the financial markets, a review of the performance of the major market indexes; an analysis of the asset allocation of the current investment program; a complete return analysis; and a review of the investment results in the context of their objectives and benchmarks, along with specific commentary on factors affecting performance. Access to all real estate research, published or unpublished, and general memoranda produced by Investment Consultant. Availability by phone, or in-person meetings when appropriate to Staff and Trustees for further discussion or questions. IV. Minimum Qualifications: The Proposer must meet all of the following minimum qualifications to be given further consideration. Failure to satisfy any of these qualifications and requirements upon submittal of the Proposal will result in the rejection of the Proposal. The Proposer must certify in writing on the Minimum Qualifications Certification, Appendix A, that it meets all of the minimum qualifications. Such certification must include evidence of how each qualification is met and must be signed by an individual who is authorized to bind the Proposer contractually. 1. As of [ ], and for at least the five (5) most recent continuous years, the firm must have a verifiable operating history with at least three (3) institutional fund clients with similar size, complexity and asset mix to SURS. 2. As of [ ], the primary contact dedicated to the SURS contract must have at least ten (10) years experience in providing consulting services to institutional fund clients. 3. A qualified firm is an investment consulting firm registered as an investment adviser under the Investment Advisers Act of The firm will promptly advise SURS if it, at any time, is not so registered. Investment consultant also affirms that in its investment advisory capacity, it is a fiduciary with respect to SURS. SURS retains the sole right to decide whether any Proposer is qualified to bid, including determining whether any Proposer s qualifications are sufficiently comparable to satisfy all of the above minimum qualifications. 8

9 V. RFP Specifications: If, in response to this RFP, trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged or confidential and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business, such claim must be clearly made and such information must be clearly identified. The information must be identified in the RFP response and provided separately from the remainder of the RFP response. Such a claim is not definitive. SURS has the right and obligation to determine whether such information is exempt from disclosure under the Illinois Freedom of Information Act (5 ILCS 140/7.5). However, no information will be determined to be proprietary, privileged or confidential unless it is identified and separated as indicated herein. Specific Items Requested from Respondent Firms: Enumerated below are the specific items requested from respondent firms. 1. Letter of Transmittal. A letter of transmittal must be submitted on the Proposer s official letterhead. The letter must identify all documents provided collectively as a response to the RFP, and must be signed by an individual authorized to bind the Proposer contractually. An unsigned proposal will be rejected. The letter must also contain the following: a. Statement that the proposal is being made without fraud or collusion; that the Proposer has not offered or received any finder s fees, inducements or any other form of remuneration, monetary or non-monetary, from any individual or entity relating to the RFP, the proposal or the Board s Consultant selection. b. Statement that discloses any current business relationship or any current negotiations for prospective business with the Board or any SURS Board Members or SURS Staff. 2. Minimum Qualification Certification. The Proposer must complete the certification in Appendix A and provide all supporting documentation. 3. Questionnaire. The Proposer must address the questionnaire items in the RFP in the order in which they appear in the RFP. Further, each question number and question in the RFP shall be repeated in its entirety before stating the answer. Certain questions require supporting documentation, which should be submitted as attachments to the questionnaire. 4. Fee proposal. Respondent firms must submit their fee proposal in the format prescribed. The fee proposal shall include all costs and expenses for providing the services to SURS as described in this RFP and shall be guaranteed for the term of the contract. 9

10 Submission Deadline: The completed RFP must be delivered by [ ]. Earlier responses are welcome. Any RFP delivered after the deadline will not be considered. Please send an electronic copy, as well as one complete hard copy, to the following: State Universities Retirement System 1901 Fox Drive Champaign, IL invest@surs.org Submission of Questions: In order to clarify any issues in this Request for Proposals, the System will respond only to questions that are presented in writing via to [ ]. All questions should be submitted to SURS by [ ]. These questions will be consolidated into a single Q&A document and responded to by the System on, or about, [ ]. The Q&A document will be posted on the SURS web site at without divulging the source of the query. Contract Terms: The contract term shall be five (5) years. Illinois Public Act limits the duration of a contract with a consultant to five (5) years. No contract to provide consulting services may be renewed or extended. At the end of the term of a contract, however, the consultant is eligible to compete for a new contract as part of a competitive proposal process. SURS Quiet Period Policy: Please note the Quiet Period Policy that establishes guidelines by which the Board of Trustees and staff will communicate with prospective service providers during a search process. The Policy is available at Please review Section VII of the Investment Policy and be familiar with Quiet Period guidelines. Rights Reserved: SURS reserves the right to amend any segment of the RFP prior to the announcement of a successful contractor. In such an event, all responders will be afforded the opportunity to revise their proposal to accommodate the RFP amendment. SURS reserves the right without prejudice to reject any or all proposals submitted. There is no express or implied obligation for SURS to reimburse for any expenses incurred in preparing proposals in response to this RFP. Ex-parte Communications: The State Officials and Employees Ethics Act (5 ILCS 430/5-50) provides that all ex parte communications concerning investment, rulemaking or quasi-adjudicatory matters pending before a State agency must be documented and some must be reported. An ex parte communication is any written or oral communication by any person that imparts or requests 10

11 material information or makes a material argument regarding potential action concerning an investment, a rulemaking process, or a quasi-adjudicatory matter. An ex parte communication does not include statements publicly made in a public forum or communications among employees of the State agency. An ex parte communication from an interested party or his or her official representative or attorney to an employee or the agency must be memorialized and made a part of the record. An interested party is a person or entity whose rights, privileges, or interests are the subject of or are directly affected by an investment, regulatory or quasiadjudicatory matter. An ex parte communication other than that described above must be reported by the staff member or Board Trustee immediately to the agency s Ethics Officer. The communication must be memorialized and made a part of the record. The communication must be filed with the Executive Ethics Commission, accompanied by a memorandum from the Ethics Officer. VI. Projected Schedule of Events: [ ] Dissemination of RFP [ ] Deadline for questions to SURS [ ] Responses to questions submitted to SURS [ ] RFP responses due by 4:30 pm CST [ ] Identify firms for further consideration [ ] Staff interviews with selected firms [ ] On-site visits of Finalist Candidates [ ] Finalist presentations to SURS Board of Trustees [ ] Contract Award Date VII. Selection Criteria: SURS will consider all the information requested by this RFP, including the following (in no particular order), in making its decision: A. Registration with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940, or otherwise qualified under the Illinois Pension Code. B. Willingness to assume a fiduciary role. C. Commitment and dedication of necessary resources to support the SURS Board and Investment Staff. D. Independence of the firm. E. Willingness to listen and acceptance of being challenged. F. Recommendations regarding strategy, investment policy and asset allocation. G. Expertise of the investment management industry / Depth of all asset classes including alternative strategies (private equity, hedge funds, infrastructure, etc.). H. Expertise of the public pension funds industry. 11

12 I. Awareness of the Illinois legislative climate. J. Extensive knowledge of minority-, female- and persons with a disability-owned investment firms. K. Significant research regarding investment managers / Ability to lead manager searches for complex investment strategies. L. Networking relationships / Access to the best investment management firms. M. Insight of the latest trends, topical issues and access to best thinking. N. Diversity of the organization (including the SURS account service team). O. Reasonable fee structure. P. Ability to provide Trustee and Staff education and training. Q. Willingness and courage to provide recommendations outside of the norm. VIII. Investment Consulting Services Questionnaire: Firm Name: Contact Person: Address: Telephone: Date Completed: Please indicate which services your firm is responding to provide: General Consulting Real Estate Consulting Both Unless otherwise noted, candidates should respond to all of the following questions. If responding for both general and real estate consulting, please include complete responses for both services. 1. General Information: a. Identify the location of the main office, and, if different, the office from which services would be provided to SURS. Does your firm have an office located in Illinois? b. State the firm s mission statement. c. Provide a brief history of your firm and its operations. Include the year formed, ownership structure, and any ownership changes that occurred during the past five years. d. Are you willing to assume a fiduciary role in your services as investment consultant to SURS? Do you consider yourself a fiduciary under Illinois Pension Code with respect to the recommendations you provide to clients? e. List your firm s lines of business and the approximate contributions of each business to your organization s total revenue. If you are an affiliate or subsidiary of an organization, 12

13 what percentage of the parent firm s total revenue does your subsidiary or affiliate generate? f. Is your firm registered as an investment adviser under the federal Investment Advisers Act of 1940 or exempt from registration? If so, when was the firm first so registered? Please provide a copy of your most recent Form ADV, Parts I & II. g. Please describe the impact as a result of the passage of SEC Rule 206(4)-5. How do you comply with the compliance requirements of this Rule? h. Please provide details on the financial condition of your firm. The most recent annual report filed with the SEC is acceptable, but any recent material changes should be included. i. Does your firm have a Client Advisory Board or similar structure? Please describe. j. Does your firm have a business continuation and disaster recovery plan? Please describe the key features of the plan. k. Is your firm, its parent or affiliate a broker/dealer? l. Does your firm provide investment management services to U.S. tax-exempt investors? If so, to what extent? m. Does your firm accept investment managers as clients? If so, for what products? Please disclose the investment management firms that are clients and the revenue received from these firms during the past five (5) years. n. What percentage of your plan clients utilize money managers, investment funds, brokerage services or other service providers from whom you receive fees? o. Do you have any policies or procedures to address conflicts of interest or to prevent payments or relationships from being considered when you provide advice to clients? p. Do you have any arrangements with broker-dealers under which you or a related company will benefit if money managers place trades for their clients with such brokerdealers? q. Identify the total number of consulting clients (by full-retainer or project), by type (corporate plan, public plan, etc.). What is the average client to consultant ratio? What is the maximum number of clients assigned to a consultant? Identify the different classification of employees within the firm and the totals for each classification. r. Identify and provide biographies of the primary and backup consultants who would be assigned to this engagement. How many clients do these consultants currently serve? Who are the clients these consultants currently serve? Which of these consultants would attend the SURS investment committee meetings? What measures will your firm employ to ensure that either the primary or the backup consultant be readily available to answer questions from the SURS Investment Staff? s. What is the turnover of professional staff (senior management and consulting personnel) over the last five (5) years? Please list staff positions hired, resigned and terminated within the last five (5) years, including a description of each position and the reason for the hire, resignation and/or termination. t. Describe the firm s compensation and incentive program for hiring and retaining key consultant personnel. How does the firm tie client performance and satisfaction to a consultant s compensation? u. What other programs do you have in place to retain key staff? Please be detailed and specific. 13

14 v. Describe your firm s efforts in diversity as they relate to staff. Please complete the table below, with data as of [ ]. Senior Management Professional/Technical Clerical % Minorities % Women Population Size w. Does your firm have experience with plans with serious funding challenges? Does your advice to these plans differ from advice provided to well funded plans? If so, how? x. Provide a listing of full-retainer clients lost or gained during the past three (3) years. Indicate if the primary and backup consultant identified in 1.n. (above) was the primary consultant for either the clients gained or lost. y. Provide a listing of all public fund clients. Include the size of the fund and the length of service to them. z. Describe your firm s commitment to research and system enhancements. aa. Describe the structure and organization of your firm s research department include the number and experience of analysts. bb. Does your firm gather and maintain its own data or does it utilize a third party s database? cc. How does your firm evaluate the quality of its consulting services? Describe any benchmarks the firm has developed to evaluate its performance and the performance of its primary/lead consultants. dd. Describe the levels of coverage for errors and omissions insurance and any other fiduciary or professional liability insurance the firm carries. List the insurance carriers supplying the coverage and supply certificates evidencing the coverage. ee. Has there been any litigation against the firm or its principals/owners/officers within the past three (3) years? ff. Has there been any SEC or other regulatory action against the firm or its principals/owners/officers within the past three years? gg. Has the firm adopted the CFA Code of Ethics and Standards of Professional Conduct? If so, how is employee compliance monitored? 2. Performance Measurement and Portfolio Analytics: a. Describe the content and format of your firm s quarterly performance reports for the total fund, major asset classes, and individual investment managers. Provide a sample report for one of your firm s clients that are structured similarly to SURS. b. Can these reports be customized to accommodate SURS information needs? Are there charges for these additional information requests? Within what time frames can these requested changes be implemented? c. What is the anticipated availability dates for each report in terms of the number of calendar days after SURS submits individual and consolidated returns to your firm (turnaround time)? d. Describe your firm s source, if any, to determine comparable plan sponsor returns. Indicate the size (# s and $ s), composition (# s and $ s), and data compilation method. e. Describe your firm s view on the most relevant methods of evaluating performance. 14

15 f. Describe your firm s performance attribution capabilities. Include a breakdown of domestic and international performance attribution capabilities. Does your firm s quarterly reporting package contain attribution analysis at the total fund, asset class and investment manager level? g. Are your performance reports and attribution analysis tools available on-line? 3. Asset Allocation Model/Issues (General Consulting Only): a. Describe your firm s capabilities and experience in providing asset allocation consulting services to SURS. b. How often does your firm recommend a formal review of asset allocation studies? c. Describe your firm s capital markets model. Is the model proprietary, or does your firm rely on an outside vendor s model? If your firm relies on an outside vendor, indicate the name of the vendor, name of the model, etc. d. How does your firm develop inputs to the model? e. Does your firm develop standard inputs to the model for all clients? Can these inputs be customized based upon individual client views, needs or requirements? f. Provide your firm s current inputs to the asset allocation model. Include at a minimum expected returns, standard deviations and correlation coefficients for U.S. equities (large caps, small caps, total market), international equities (developed and emerging markets), global equities, U.S. bonds, U.S. TIPS, international bonds, treasury bills, real estate and any other significant asset classes for which your firm has developed inputs. g. Describe your firm s view of market timing. h. Describe your firm s view on rebalancing. Include discussion on targets, ranges, frequency, and implementation methods. 4. Risk: a. How do you define risk? b. Briefly describe the risks to which a public pension fund is exposed. c. How does your firm monitor risk? List what measurements are used when evaluating risk. At what level are these risk measurements used: total portfolio, asset class, asset style, investment manager? Which measurements are most important in the analysis of risk? Discuss your views on investment manager tracking error. d. Describe your firm s view on risk budgeting. Have you created a risk budget model that is utilized by your clients? e. Describe any risk management capabilities and associated costs that are offered to clients. 5. Manager/Portfolio Evaluations: a. Discuss the steps your firm would take to analyze SURS current investment portfolio. b. Describe your firm s philosophy with respect to manager evaluations (formal review, ad hoc, etc.). c. Provide a copy of a recently completed external investment manager s performance evaluation. d. Briefly describe any on-going due diligence process. What critical issues are examined in the due diligence process? e. Provide one example of a written recommendation to hire, and one recommendation to terminate a manager that you have made within the last 12 months. Include copies of 15

16 supporting documentation you provided to your client. At what point would the firm recommend terminating an investment manager? f. How often are on-site due diligence visits conducted with your client s managers? How many on-site visits has your firm conducted over the past 3 years. g. For a list of managers utilized by SURS, please click on the following link: Please provide a list of these managers with which your firm has direct experience. 6. Manager Searches: a. Describe in detail your manager database and search process. b. Does your firm have a database of minority-, female and persons with a disability-owned investment management firms? c. Describe how firms are added to your database. d. Describe your firm s record in hiring minority-, female- and persons with a disabilityowned investment managers. e. Illinois Public Act requires goals be established for the management of assets by minority-, female- and persons with a disability-owned firms. The goals adopted by the SURS Board are included in Section XVI(A) of the SURS Investment Policy, found at How can your firm assist us in meeting these goals? f. Have your most recent manager searches resulted in the same manager being selected for multiple clients? Provide the results (table format) for the three (3) most recent manager searches for U.S. equities, non-u.s. equities, fixed income and real estate managers. At a minimum identify the finalist candidates and indicate which firm was selected. Identify by name the clients for which these searches were completed. g. Describe your firm s experience in retaining alternative investment managers (direct real estate, private equity, hedge funds, infrastructure, etc.) h. Does your firm utilize an approved manager list? If so, how often is it updated and how do you ensure that all firms have an opportunity for inclusion? How many strategies are approved? How many strategies have been added/dropped in the past 3 years? 7. Real Estate: a. Discuss the steps your firm would take to analyze SURS current real estate portfolio. b. What is your firm s philosophy and approach to investing in international real estate? Does your firm currently have pension fund clients with international real estate investments? c. What is your firm s philosophy and approach to investing in public REIT securities as part of an overall real estate allocation? d. For a fund of SURS size and staff resources, what do you believe is the most advantageous vehicle through which to invest in real estate separate accounts, funds or fund-of-funds? Please discuss. 8. Alternative Assets: a. Discuss the role of alternative assets (including private equity, real estate and infrastructure) within a pension fund portfolio. b. Identify your firm s view of appropriate and inappropriate alternative investments for a public fund. 16

17 c. Discuss your firm s expertise with respect to each of the items enumerated in 8.b. (above). d. For a fund of SURS size and staff resources, what do you believe is the most advantageous vehicle through which to invest in private equity separate accounts or fund-of-funds? Please discuss. e. What services are included in a general retainer relationship related to private equity, real estate and infrastructure (i.e., pacing models, etc.)? How would these services be expanded under a specialty retainer relationship? f. What are your firm s thoughts regarding the following: 1. Advisory board seats 2. Benchmarks 3. International investments 4. Leverage 9. Passive Management/Securities Lending/Cash Management (General Consulting Only): a. Describe your firm s view of the role of passive management (by asset class) in your client s portfolio. b. Indicate the active/passive allocation in your typical public pension fund clients. c. Describe your firm s view on securities lending. Do you typically recommend lending with the client s custodian or with a third party lender? Describe your viewpoint on each method of implementation. d. Briefly describe the capabilities associated with the evaluation and monitoring of securities lending programs. Briefly describe the capabilities associated with the evaluation and monitoring of short term investment funds (STIF) or other cash management programs. e. Do you believe a plan should have a permanent allocation to cash? Why or why not? 10. Other Issues: a. Describe your firm s view on performance-based fees. What percentages of your firm s clients utilize these types of arrangements? b. Describe your firm s capabilities in providing educational opportunities for trustees and staff. Does your firm hold an annual investment conference for its clients? Is there a cost for clients to attend educational opportunities? c. (General Consulting Only) Discuss your firm s philosophy on transition management. Do you recommend clients maintain a pool of approved transition managers? Have you assisted with a search for qualified transition managers? d. What are your firm's consulting specialties and strengths? What differentiates your firm from your competitors? What are your firm s limitations? Why should SURS hire your firm rather than your competitor(s)? Please list your top five (5) competitors. e. Briefly describe how a new client would transition to your firm. Do you backload transaction and/or investment performance data? What problems have you encountered in transitioning a new client to your firm from their previous consultant? Please provide at least one reference (name, fund name, address, phone, ) of a recent client of yours whom we can contact regarding the transition process. f. Has your firm adopted the Principles for Responsible Investment ( PRI )? If so, when? If adopted, please include a discussion of any actions taken, if any, as a result of the adoption of PRI. 17

18 g. If your firm has not adopted the PRI, has there been any discussion regarding the Principles? If so, what were the key issues or concerns surrounding the PRI? h. Disclose any relationship you have or have had with any SURS Board member, consultant, or employee. If there are no conflicts of interest, please state, There are no conflicts of interest to report. Briefly describe your philosophy relating to the consultant s relationship with Board member, staff, investment managers, and brokers. i. Please provide a sample contract for Investment Consulting Services. 11. References: a. Provide a list of the five (5) largest public fund clients to which you provide full-retainer investment consulting services including name, contact, telephone number, asset values, number of years the client has retained your firm and the product(s) or service(s) the client uses. SURS may contact any of these clients for reference purposes. 18

19 Fee Proposal SURS will be evaluating fee proposals for full retainer services as well as project-based services. SURS preference is to pay for recurring services on a fixed fee basis, well-defined projects (asset/liability studies, manager searches, etc.) on a separate fixed fee basis, and nonrecurring ad hoc projects on an hourly rate basis. The retainer fees quoted in this proposal must be in force for the entire five-year contract period. Additionally, the hourly-based rates shall be based upon a defined set of positions (i.e., senior consultant, consultant, data analyst, etc.) and must remain in effect for the duration of the contract period. Please refer to the list of services required on page four of the RFP. Items A through H should be included in the annual retainer amount. Investment manager searches should not be included in the annual retainer amount. Year 1 Year 2 Year 3 Year 4 Year 5 Total for Contract Period 1. Annual retainer for consulting relationship (Includes one asset / liability study in contract period and travel to attend all required meetings) $ $ $ $ $ $ 2. Project based services a. Additional Asset/Liability Studies $ $ $ $ $ b. Real Estate Advisory $ $ $ $ $ c. Public Markets Manager Search $ $ $ $ $ d. Private Markets Manager Search $ $ $ $ $ e. Custodian/securities lending Search f. g. Other items not included in items A through H in the list of services required. Please specify. $ $ $ $ $ 3. Include a listing of hourly rates for members of the firm that would be effective [ ], and be valid for each of the five years in the contract period. These rates would be used for items contemplated in Item 15 in the description of requested services. 19

20 Firms electing to bid on Real Estate consulting only. Investment manager searches should not be included in the annual retainer amount. Year 1 Year 2 Year 3 Year 4 Year 5 Total for Contract Period 1. Annual retainer for Real Estate consulting relationship (Includes travel to attend all required meetings) $ $ $ $ $ $ 2. Project based services a. Public Markets Manager Search $ $ $ $ $ b. Private Markets Manager Search $ $ $ $ $ c. Due diligence to re-up with existing manager. $ $ $ $ $ Firms submitting a bid on the total relationship. Items A through I should be included in the annual retainer amount. Investment manager searches should not be included in the annual retainer amount. Year 1 Year 2 Year 3 Year 4 Year 5 Total for Contract Period 1. Annual retainer for consulting relationship (Includes one asset / liability study in contract period and travel to attend all required meetings) $ $ $ $ $ $ 2. Project based services a. Additional Asset/Liability Studies $ $ $ $ $ b. Real Estate Advisory $ $ $ $ $ c. Public Markets Manager Search $ $ $ $ $ d. Private Markets Manager Search $ $ $ $ $ e. Custodian/securities lending Search f. Other items not included in items A through I in the list of services required. Please specify. $ $ $ $ $ 20

21 Appendix A MINIMUM QUALIFICATION REQUIREMENTS AND CERTIFICATION. Proposers must satisfy each of the following minimum qualifications for this RFP, in order to be given further consideration by the Board of Trustees. Failure to satisfy each of the requirements will result in the immediate rejection of the proposal. Failure to provide complete information will result in the rejection of the proposal. Please circle YES or NO where indicated. If evidence is requested, please provide complete documentation. 1. Proposer is an investment adviser registered with the Securities and Exchange Commission under the federal Investment Advisers Act of (Yes/No): If yes, please provide Form ADV I and II. 2. Proposer and its proposed team have all authorizations, permits, licenses and certifications required by federal and state laws and regulations to perform the services specified in this RFP at the time Proposer submits a response to the RFP. (Yes/No): 3. If retained for consulting services, Proposer agrees to serve as a fiduciary as defined by the Illinois Pension Code. (Yes/No): 4. Proposer agrees to provide the services as detailed in the Specific Services Requested from the Investment Consultant section of this RFP and any other requirements as stated in this RFP. (Yes/No): 5. As of [ ], and for at least five (5) most recent continuous years, the Proposer must have a verifiable operating history with at least three (3) institutional fund clients with similar size, complexity and asset mix to SURS. (Yes/No): 6. As of [ ], the primary contact dedicated to the SURS contract must have at least ten (10) years experience in providing consulting services to institutional fund clients. (Yes/No): If yes, please provide evidence. IF PROPOSER PROVIDED A NO RESPONSE TO ANY OF THE MINIMUM QUALIFICATION REQUIREMENTS ABOVE, PROPOSER SHOULD NOT SUBMIT A PROPOSAL TO SURS. PLEASE CERTIFY THE PROPOSER S SATISFACTION OF THE MINIMUM QUALIFICATIONS BY PROVIDING THE PROPOSER S AUTHORIZED SIGNATURE BELOW. Authorized Signer Name: Title: Respondent Firm: Signature: Date: 21