Changing the Face of the Investment Management Industry sm Transition Management Questionnaire

Transcription

1 Changing the Face of the Investment Management Industry sm 2009 Transition Management Questionnaire

2 Progress Investment Management Company, LLC 33 New Montgomery Street, 19th Floor San Francisco, CA T F Copyright Progress Investment Management Company, LLC All rights reserved. No part of this Transition Questionnaire may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without the written permission of Progress Investment Management Company, LLC except where permitted by law.

3 2009 Transition Management Questionnaire Progress Investment Management Company, LLC I. Firm Background Name Address City, State, Zip Code Website FINRA No. Contact Information Sales/Client Contact Name Phone Fax Trading Name Phone Fax Operations Name Phone Fax Settlement Name Phone Fax 1

4 Ownership Structure (Describe the firm s ownership structure. Include any parent, subsidiary, or affiliated firm relationships) Type of Firm Registration (i.e., NASD, NYSE and etc. Please list all Registrations and Certifications.) Registered Investment Advisor (Please provide ADV Forms I and II) MBE/WBE/DBE/Veteran Certifications (List certifications held) 2

5 Transition Management Questionnaire Progress Investment Management Company, LLC Violations and Infractions Has your firm been cited for, or subject to, any of the following within the last 5 years? If so, please give details: Net capital violation Regulatory sanctions imposed against your firm or any employee or principal An audit or investigation by the SEC, IRS, DOL, FINRA or other regulatory body 1) When was the firm s inception date and inception date of your firm s offering transition management in the U.S.? 2) How is your firm structured to provide transition management and why is this beneficial to your clients? Please specify and discuss all that apply, such as brokerage affiliate, stand-alone agency, introducing broker, asset (index) management affiliate, custody affiliate, principal only. 3) Describe the levels (dollar amounts) of coverage the firm has for SEC required fidelity bonds, errors and omissions insurance, or any other insurance coverage the firm has to indemnify transition management against losses. II. Personnel 1) Provide a list of biographies of the key personnel who are involved in managing asset transitions for clients. Describe the transition management experience of each individual. Identify what role each person would serve in an asset transition. 3

6 2) How long has the current transition management team been together? Identify and discuss the causes and impact of turnover (departures or hiring/promotions) of any key professionals in the transition management group in the past five years. 3) Does the transition management team work separately from other trading groups within your firm and are they solely dedicated to transition management? How are potential conflicts of interest avoided? 4) Do you have a risk and compliance team that oversees the transition process? Please describe your risk management and compliance process. 5) If your firm has no transition management experience, what is the experience level of your traders? Number of years on the trading desk? 6.) Typically, how many people work on each transition? Do they manage multiple transitions simultaneously? If so, how do you manage the work flow? 4

7 Transition Management Questionnaire Progress Investment Management Company, LLC III. Capabilities 1) What markets and security classes do you have the ability to execute orders in? Please include security classes by volume, years of experience and initial inception date. 2) Do you have the ability to accept and deliver reports in an excel format, both inter-day and at completion? 3) Do you have access to basic algorithms? If so, how are they utilized to manage the transition? 4) Can you trade versus all standard benchmarks? 5) Do you facilitate your own order execution? 6) What types of insurance coverage do you provide? 7) Please explain your Reg NMS compliance. 5

8 8) Does the firm engage in any proprietary trading? If so, do you have safeguards in place to avoid any conflicts of interest? 9) Who is your clearing agent? 10) Do you take inventory in any security? 11) Does your firm have a seat on any major exchanges? IV. Process 1) Please describe firm s transition management philosophy. 2.) What are the driving factors that influence the transition strategy for a particular transition? 3.) Please outline a sample timeline for U.S. / Non-U.S. / Fixed Income transitions. 6

9 Transition Management Questionnaire Progress Investment Management Company, LLC 4.) Does your firm subcontract transition management to a third party? If yes, please describe and disclose all revenue or commission sharing arrangements. 5) Describe the firm s trading capabilities within U.S. equities, international equities (developed and emerging markets), domestic fixed income, high yield, TIPS, and international fixed income. Does the trading strategy differ by asset class? Is the firm a specialist in any particular market or region? Are dedicated resources and personnel segregated by asset class or geographic region? 6) What distinct competitive advantages does your firm have over other firms? If any, please identify your niche asset class for transition management. 7) How does your firm define a successful transition? Do you use Implementation Shortfall, VWAP, or T-Standard to measure your transitions? 8) Identify the firm s courses of liquidity for U.S. / Non-U.S. / Fixed Income transitions by asset class and provide indication of the breadth of those sources of liquidity. 7

10 9.) What is the communication process with the client, custodian, and investment managers during a transition? 10.) Do you internalize order flow? If so, how do you manage best execution and avoid any conflicts of interest? 11.) Do you utilize a crossing network to control cost and maintain exposure? Is this an internal or external crossing network? 12.) Describe your firm s approach to the execution of foreign exchange. Is there any charge via spread/ mark up/mark down earned by either the transition manager or affiliated entity? 13.) Explain how the firm manages explicit and implicit trading costs in a transition. 14.) What is your customary fee or rate for transition services for each asset class? 15.) Do you implement commission recapture programs? 8

11 Transition Management Questionnaire Progress Investment Management Company, LLC 16.) What was the last trade error? If any, how was it resolved? When was the last claim on your E&O insurance? 17) Please complete the following chart as it relates to recent portfolio transitions: Total $ (in millions) Round Trip As of 12/31/2008 As of 12/31/2007 As of 12/31/2006 As of 12/31/2005 U.S. Equity assets transferred Non- U.S. Equity assets transferred Fixed Income assets transferred Total No. of transitions Number of Retainer Clients / Panels Avg. pre-trade cost estimate (in bps) Avg. post-trade actual cost (in bps) Percentage of transitions falling outside expected range of cost (%) (two standard deviations) 9

12 18) Please complete the following chart as it relates to implementation shortfall per asset class: Pre Trade Estimate vs. Post Trade Standard Deviation (in bps)* Mean Difference (in bps)** Number of Transitions All Transitions Fixed Income 4 Fixed Income Large-Cap 4 Large-Cap Mid-Cap 4 Mid-Cap Small-Cap 4 Small-Cap International Equity 4 International Equity Fixed Income Core 4 Fixed Income Core Plus Fixed Income Core 4 Fixed Income High Yield Fixed Income 4 Large-Cap Fixed Income 4 Mid-Cap Fixed Income 4 Small-Cap Fixed Income 4 International Equity Developed Markets 4 Emerging Markets Large-Cap 4 Mid-Cap Large-Cap 4 Small-Cap Large-Cap 4 International Equity Mid-Cap 4 Small-Cap Mid-Cap 4 International Equity Small-Cap 4 International Equity *The mean standard deviation of pre-trade implementation shortfall estimates. **The difference between the mean of pre-trade implementation shortfall estimate and the post-trade implementation shortfall. 10

13 Transition Management Questionnaire Progress Investment Management Company, LLC V. Minority and Women-Owned Brokers 1) Please provide your approved list of Minority and/or Woman-Owned brokers (please list by asset class and security type). 2) Please describe your process of approving your Minority and/or Woman-Owned brokers and what due diligence was conducted? 3) Please describe the areas of expertise of your approved Minority and/or Woman-Owned brokers. 4) Please provide a list of Minority and/or Woman-Owned brokers you ve terminated relationships with over the last 5 years and reason for termination. 5) What percentage of your business with Minority and/or Woman-Owned brokers is stepped out commissions versus allocating them actual trades? Please indicate the reasons for step outs. 6) Would you consider partnering with a Minority and/or Woman-Owned broker dealer, if applicable? 11

14 VI. Reporting 1) Please provide a complete set of sample pre-trade reports that you customarily provide clients. 2.) Please describe the methodology and discuss the estimated bid/ask spread, opportunity cost, and market impact, when submitting a pre-trade report. 3.) Are you able to provide daily, real time on-line or Internet reporting access to clients and/or managers to view the activity during the transition period? If yes, please describe. 4.) Please provide a sample post-trade analysis report that you customarily provide clients. VII. Legal: Is there a standard transition management agreement that must be executed? 1.) Will you act as the named fiduciary throughout the transition period? 2.) Please disclose all economic benefits your firm, including subsidiaries or closely held firms, receives other than a fee or commission for transition services. 12

15 3.) Do you have procedures in place to manage confidentiality and information leakage? If so, please describe. 4.) Do you have any counterparty relationships? If so, please explain why this would not have any adverse impact on the transition. VIII. Values: List values that are important to your firm. 1) 2) 3) IX. Client List (References): Please provide a sample list of your clients and three references.

16 Transition Management Questionnaire Progress Investment Management Company, LLC Investors and potential managers can learn more about Progress by visiting www. progressinvestment.com