Active Investment Management Services RFP #I (Phase 1) Response to Inquiries

Transcription

1 Active Investment Management Services RFP #I (Phase 1) Response to Inquiries Length of Track Record 1. The RFP states The Product must have a proven and verifiable performance record that commences on or before January Is this minimum requirement negotiable? 2. Our global equity fund s track record is short by 10 months (launched Nov. 2011). That being said, our global equity fund is based off of the long book of our long/short fund which dates back to Would a pro forma track record be accepted 3. We would like to submit our Global Fixed Income portfolio (inception is Feb 1, 2011) which appears slightly out of spec, perhaps as little as 24-hours! As of Sept 30, 2017, its 3-yr, 5-yr and Since Inception peer rankings are 5th, 12th and 15th percentile respectively. Are you interested in this submission, despite the Feb 1 inception? 4. Will managers be considered if they have two unfunded months in early 2011? If not, is there a reason why these managers will not be considered? For context, the previous IPERS RFP issued in February 2016 requested five years of uninterrupted performance ending December 31, 2015, the most recent quarter-end prior to the RFP issuance. For the current RFP the equivalent period would require five years of uninterrupted performance ending September 30, The launch date of the proposed product does not meet the criteria set out in the RFP. We have performance data for the long book of a long-short fund which launched in May 2009, where the long book uses a very similar approach to the proposed strategy. Would it be permissible to combine the two together? 1 P a g e

2 6. The track records that XXX would like to submit are the actual track records for the funds presented, these track records are compliant with all SEC directives and the funds financial statements are audited annual by funds independent auditors, KPMG LLP. Is this sufficient for participation? (please note our track record is not currently GIPS certified) Response: We will accept it, but only on the condition that the firm agrees to cooperate and pay for independent verification of the Product s performance record in the event the Product is selected. 7. When reviewing the pre-qualifications and minimum requirements for the RFP we noticed that there is a GIPS performance requirement and simulated and back-tested performance is not allowed. We would like to inquire about whether simulated currency hedged returns would be allowed. We manage a Global Absolute Return strategy in a variety of base currencies with the only difference between the strategies being the base currency hedge. As is standard practice, we have created a super composite which includes all of the base currency returns and hedges those actual returns into a common USD performance. We utilize the same methodology to hedge these returns as is widely accepted in the industry and is also standard practice for hedging benchmark returns into different hedged currencies. Therefore, we have both GIPS compliant track records in a variety of currencies along with these currency hedged returns for the super composite. Is this something IPERS would review as part of this search? 8. Is there a minimum requirement for the length of the portfolio manager tenure on the product under consideration? 9. We have managed real estate securities portfolios for over 30 years and have been managing global real estate securities portfolios since We would like to propose a product which meets the minimum requirements for this search. Given the IPERS RFP focus on products with the persistent risk-adjusted alphas, we believe our strategy, which is a subset of our product, would be most appropriate for this RFP. Our Core strategy s track record, however, starts in Can you please confirm whether our Core strategy as a subset of our product would be eligible for submission in response to this RFP? Response: No, it would not. 2 P a g e

3 10. Section C: The Product must have a proven and verifiable performance record that commences on or before January 2011, with returns that comply with the CFA Institute s GIPS performance reporting standards, Compliance Rule 2-34 of the NFA Manual, or other well-known performance measurement standards. (Note: simulated or back tested results for any portion of this period are not acceptable). we have not retroactively verified its returns with GIPS performance reporting standards. Can you please provide an example of other well-known performance measurement standards? Response: See our response to question #6 above. 11. Track Record - Is the attached track record for the commingled fund suitable for the minimum requirements? Please note, our funds track records are not GIPS compliant, but they are calculated based on U.S. GAAP accounting methods. Furthermore, the NAVs are calculated by SEI Global Services, Inc. ( SEI ), the funds independent administrator. Response: See our response to question #6 above. 12. Are you willing to accept a carve out track record from an actual performance track record? Assets Under Management 1. We offer our strategy as a mutual fund and as separate accounts. May the mutual fund assets count towards the stated $400 million minimum requirement? 2. We would like to perhaps submit information for an equity strategy. Would the assets being run as the equity portion of a multi-asset class fund count towards meeting the $400 Million minimum requirement for this equity strategy? 3 P a g e

4 3. Per the Minimum Requirements of the RFP, the product must have a minimum AUM of $400,000,000 as of 9/30/17. Will IPERS and Wilshire accept total strategy assets to meet this requirement. Total strategy/product assets would include Assets Under Management (AUM) and Assets Under Advisement (AUA). Response: IPERS will only accept the AUM for the Product in determining if it meets the minimum requirements. 4. Our Large Cap is around $370 mm in assets which does not meet the $400 mm criteria laid out in the instructions, but at the firm level, we manage around $4.7 bln and this would be what we consider to be the strategy level assets. Can you please advise whether or not it would be possible to submit for the Large Cap? 5. With regard to the above mentioned RFP (# I ), is it possible to provide more detail regarding the minimum AUM requirements? In the Definition Section, the Product is defined as a separately managed account in which the Manager has full discretion. Does this mean that there must be a single managed account with at least $400 million? Or does it relate to the overall strategy or all long only accounts with a similar objective? Clarification with regard to minimum AUM requirements would be greatly appreciated. Response: For purposes of meeting the AUM minimum requirements of the RFP, the firm must have a performance composite for the submitted product that has at least $400 million AUM as of 9/30/17. A performance composite can include commingled funds and separate accounts provided they are managed as the same product. 6. Would you consider a strategy based on committed assets under management, with regards to a particular (small cap equity) strategy we would like to propose, we recently won a $700 million mandate. This mandate is expected to fund in multiple tranches with approximately $350 million being funded in Q With this new account, the respective strategy will have roughly $400 million in assets. Firm-wide assets exceed $30 billion. 7. Our company was founded in 1991 and offer several systematic quantitative investment solutions. We believe our XXX fund may exhibit persistent risk-adjusted alphas uncorrelated with IPERS strategic asset allocation, liabilities, and alphas of other public market products. However, XXX s track record begins on January 2014 and thus, will be just coming into its fifth year since inception. Based on your minimum requirements, would we be rejected if we submit a Proposal letter to IPERS and investment return data to Wilshire Associates? Response: Yes, the product will be rejected. 4 P a g e

5 8. What level of volatility is assumed for the minimum assets under management requirement of $400,000,000? Response: $400,000,000 is the minimum amount of AUM there are no assumptions on levels of volatility. 9. We would propose a diversified portfolio allocated across the spectrum of asset classes on which we advise. Those asset classes have total assets under management of approximately $410 million. Would this satisfy the minimum requirement as outlined in Section C Paragraph 2 of RFP #I ? 10. Minimum requirement #2 states that the product must have a minimum AUM of $400,000,000. We have a non-us small cap 130/30 strategy with less than the minimum required AUM, however we have over $6 billion AUM in our long-only non-us small cap strategy as well as $700mm in our 130/30 portfolios, broadly. Would you consider the non-us small cap 130/30 strategy despite the AUM requirement in this case? 11. We offer an emerging markets managed volatility portfolio that was incepted in March 2011 and does not meet minimum requirement #3. We have been managing emerging market portfolios since 1994 and managed volatility portfolios since Would you consider this despite the two-month gap from January to March 2011? 12. We have a strong structured product capability with significant AUM but no individual vehicle that meets the AUM requirement. Would IPERS be open to this strategy as we think we have significant competitive advantage here? 13. An international equity fund which meets your interest for alpha does not meet the minimum requirement of $400 million. However, the team broadly manages international equity portfolios far exceeding this minimum. Shall we note the exact amount we manage in international equities if we submit for this fund? Or, will this strategy not be considered because the fund itself does not meet the minimum? Response: The strategy will not be considered. 5 P a g e

6 14. In regards to AUM as of 30 September 2017, we currently stand under $400 million in Product AUM, but are in final stage consideration for a number of similar mandates that would place the Product AUM above this threshold, these are with large public pension plans. Response: The product does not meet the minimum requirement for AUM. 15. We have a long-only global equity strategy which at the end of September 2017 was below the stated minimum AUM of US$ 400m. However, as the proposed strategy is part of a wider strategy which includes a larger long-short fund and the long book of this fund is very similar to the proposed long-only strategy, would we be able to combine these assets to meet the minimum requirement? 16. As of 9/30/17 our asset level is below the required $400m so I wanted to check before we started working on the RFP. Can you please advise? FAV Strategy AUM: $259 MM Strategy Total Assets: $335 MM Response: The product does not meet the minimum requirement for AUM. 17. As a firm, we manage over $2B in dedicated EM Equity assets and over $10B within EM equity across multiple EM, International and Global strategies, yet over $300m in this specific product. Given our product does not meet the minimum AUM, we are offering a founder s fee structure that will include a performance-based fee arrangement. The product would meet all other requirements. Would this be permissible for submission to you? 18. AUM The AUM of this Strategy was approximately $390M as of 9/30/2017, but surpassed the $400M minimum requirement as of 10/31/2017. May we submit the strategy given the current AUM meets the minimum requirement? Response: No 6 P a g e

7 Porting 1. In regards to the recently issued RFP. One point that is not clear is whether the futures overlay to port the product over to a well-known public market index is something that would be implemented by the investment manager or by IOWA PERS. If it is the investment manager, would IOWA PERS be willing to accept the un-ported track record? Response: Assume for now that it will be the investment manager s responsibility, but IPERS reserves the right to perform this function itself. You should provide the product s gross of fee track record. 2. We have a currency strategy which incorporates exposure to alternative risk premia, and can be implemented with little or no capital allocation (thus ported on to a public market index). The strategy in its current form dates from July Before that, there were two parts of the strategy that were run separately with track records dating to These strategies were then blended into Multi-Strategy in July 2012 and run as a single portfolio, alongside two newly added strategies. Both of these earlier component strategies are currently in the Wilshire database. Multi-Strategy s track record is also in the database and goes back further in time, but before 2012 includes both live and simulated components. Because we think that this strategy might be a unique complement to the other proposals you receive, we would like to find a way to submit this proposal, but we also want to be entirely frank and clear from the beginning regarding the inception date requirement. One potential solution would be to use an average return of the two first strategies in the period between January 2011 and July 2012, as these were both live in that period. Response: The Multi Strategy product would not qualify. 3. While we understand that we cannot submit hedge funds, we could manage these strategies in a SMA and port the returns onto any benchmark. Would this be an approach IPERS would consider as we think this is pure alpha which seems to be the overall goal? For clarification, IPERS will accept strategies/products currently managed in hedge funds. However, IPERS will only invest in a product through a separate account due to custody risks. The firm should not submit a proposal if it currently only manages the product in a hedge fund and is unwilling to take on a separately managed account for IPERS investment. 7 P a g e

8 4. We would like to submit our structured credit offering (investment grade, cross over and HY) which is not benchmarked against a public market index. This offering, which does not correlate with IPERS core allocation, has a total return objective. Does the portability requirement refer to the proposed strategy (i.e. structured credit itself) or to the possibility of IPERS being able to replicate part of their fixed income beta through futures and release some of that capital to invest in Structured Credit? Response: The latter. Products, Product Types, Benchmarking 1. Are managed futures eligible investments, per the RFP? Response: IPERS will consider a managed futures strategy/product, provided it meets the minimum requirements stated in the RFP. 2. Are firms permitted to submit more than one product for consideration? Response: Yes, firms are encouraged to submit all of their products that meet the minimum requirements stated in the RFP. 3. Can you please further define hedge fund strategy, specifically what would not be permitted for the mandate? In part one A, the definition of Product specified leverage and/or shorting may be permitted. Response: IPERS will accept strategies/products currently managed in hedge funds. However, IPERS will only invest in a product through a separate account due to custody risks. The firm should not submit a proposal if it currently only manages the product in a hedge fund and is unwilling to take on a separately managed account for IPERS investment. 4. Will IPERS consider a fund-of-one structure as opposed to an SMA? 8 P a g e

9 5. In regard to section B, Definition of Product, the language states that the definition of said Product is not to include hedge fund structures. Is this language meant to disqualify fund of fund managers (or other intermediaries who invest in external managers), or are standalone hedge funds excluded as well? As we manage a hedge fund, I want to make sure we re eligible for the RFP before we begin a proposal. Response: It disqualifies fund of fund managers or other intermediaries who invest in external managers, but it does not disqualify a strategy/product currently managed in a stand-alone hedge fund. See also our response above to question #3 in this section. 6. I wanted to inquire about the Definition of Product per the RFP. May I ask whether both the product for evaluation and the prospective investment mandate would be a separately managed account (i.e. single investor structure where the Manager is not the asset owner)? Any further information on structure of the product to be included in the proposal and prospective mandate would be much appreciated. Response: See responses to questions #3-5 in this section. 7. I have read your RFP issued on Oct. 16, 2017, and understand a proposed product must fit IPERS Public Equities Policy Betas. Would a Japan country specific product benchmarked off one of the Russell / Nomura Japan Equities, MSCI Japan Equities, or TOPIX indices be eligible for consideration? 8. My firm is interested in proposing a few different products for the Iowa Public Employees Retirement System Active Investment Management Services RFP #I (Phase1) and wanted to confirm if a separate Proposal Letter should be sent for each product or if all of the products we are putting forth should be noted on one proposal letter. Response: If you have multiple products, you can submit one Proposal Letter but you must include a table that provides all of the requested information in question 2.A.2(f) for each Product. 9. Given the comments regarding fit with the IPERS policy betas in Part 1.A.1 of the RFP (see excerpt below), does IPERS have interest in receiving proposals for a global equity strategy benchmarked to the MSCI All Country World Index? Is there reasonable expectation a global equity strategy benchmarked to the MSCI All Country World Index can be a fit for the IPERS public market program? Response: IPERS will accept such a product for evaluation and consideration. 9 P a g e

10 10. Would you consider a global equity mandate, where the beta is a combination of US and Non-US; for example, MSCI ACW? 11. Please advise whether discretionary FX strategies will be considered for this RFP. Response: Yes, discretionary strategies will be considered. 12. Are you favoring a specific asset class for the search? 13. We have questions on the following asset classes and if they are acceptable to IPERS: SMID Growth (Benchmark is the Russell 2500 Growth) and Global Growth (Benchmark is the ACWI and or MSCI). According to the document that was made public, these two asset classes were not listed but I did not know of this meant they were excluded. Please let me know if SMID Growth and Global Growth are acceptable. Response: Yes, both are acceptable. 14. Is the Bank of America Merrill Lynch 100 Technology an acceptable benchmark? Response: Yes, but you should know that IPERS has a strong preference to implement strategies without OTC derivatives for porting. 15. Is there a limit as to the number of investment strategies a firm can submit? Response: No, you should submit all products that meet the minimum requirements. 16. We currently have XXX as an incumbent strategy. Should we resubmit this strategy for consideration or will the incumbent strategy be considered automatically? Response: All incumbent strategies will be automatically considered. 17. In an effort to focus our strategies, is it possible to obtain information on IPERS Strategic Allocation, liabilities, etc. so we can run a correlation analysis? Our hope would be to submit strategies that are most relevant to IPERS. Response: No, please submit all strategies that meet the minimum requirements and IPERS will assess suitability. 10 P a g e

11 18. In order to manage a separate account, can you confirm there is an existing network of global custodial banks to allow holdings of non-us securities? Any additional information on this would be helpful. Response: IPERS currently uses BNY Mellon and its global custodian network. 19. The RFP states that the product definition does not include collective funds using multiple underlying sub-advisors. We provide that type of service, but there seems to be a focus away from using multiple sub-advisors. However, we received an that was directed from Wilshire s Portal, leading us to believe that we should respond to the RFP. With this in mind, we would like to clarify, do long-only manager-ofmanagers utilizing separately managed accounts qualify for this request? Response: No, they do not qualify. 20. In addition, if we are able to respond to the RFP given the services that we provide to clients, we wanted to know if proposing our Best-in-Class strategy would be appropriate. Usually, these portfolios are benchmarked to a custom benchmark, but we can think about how a Best-in-Class portfolio, which incorporates those asset classes mentioned in the RFP, can be pegged to a well-known benchmark. We would plan to propose our International Equity strategy, but would also like to include our Best-In-Class strategy. Response: As stated above, the product does not qualify if it is a manager of managers or fund of funds product. If your product does meet the minimum requirements, please submit the returns clearly indicating an appropriate benchmark/benchmark combination. 21. I seek clarification if you would consider an active long only equity manager whose investment philosophy is to only consider investments in African (including South Africa) listed equities. Response: Yes, but you should know that IPERS has a strong preference to implement strategies without OTC derivatives for porting. 22. Will you please confirm whether additional fixed income asset classes will be considered beyond those listed in Part 1.A as specific IPERS policy betas: fixed income (U.S. Treasuries and government agencies, investment grade corporate debt, high-yield corporate debt, emerging market debt, mortgage-backed securities, assetbacked securities)? We have thoroughly reviewed the RFP document and understand the search qualifications along with the Product definition as provided in Part 1.B. Our convertibles securities product meets all of the qualifications and we believe it may be a fit for IPERS alpha search should this asset class be included for further consideration. 11 P a g e

12 Response: IPERS is willing to consider fixed-income products that invest in sub-asset classes of IPERS core plus benchmark (the Bloomberg Barclay s U.S. Universal Index) or similar broad fixed-income indexes. 23. We will be submitting our Select Equity strategy for your Active Investment Management Services RFP. Select Equity has over $550 million in assets under management, and an attractive track record dating back to We believe a more concentrated portfolio may also be suitable for the opportunity you describe. The alternatives we are considering would either be a carve out from an existing product, or a product that represents assets under advisement as opposed to assets under management. Our question is this- If we are successful in Phase I of your RFP process with our Select Equity strategy, will you consider these other investment opportunities as our discussions with your firm unfold in Phase II or Phase III of your selection process? Response: No, we will only consider the strategies/products submitted in response to the RFP. 24. We would like to check whether our FX strategy is one which you would consider? Response: FX strategies will be considered. 25. The definition of the product section states that the product can employ leverage and/or shorting, would a simple equity long-short product be permissible for this RFP? 26. We plan on submitting multiple products for consideration. Should we submit a separate Proposal Letter for each product or is a single Proposal Letter for multiple products acceptable? Part 2.A #2.b indicates that Proposal Letter must state that the firm and each submitted Product meet all of the minimum requirements listed in Part 1.C of this RFP. Is a single statement indicating that all minimum requirements are met acceptable or do we need to provide a separate statement for each requirement indicating how each requirement is met? Response: A statement indicating that all products submitted with the Product Letter meet all of the minimum requirements is sufficient. 27. Part 2, Section A, 2, f, provides a table that should be submitted for all products in response to the initial RFP. How should we submit multiple entries? a. Should we submit separate letters and tables for each product? b. If one letter should be submitted, does each product require its own individual table, or can multiple products be submitted in one table with additional columns? c. Can an excel table be attached to the RFP with the data? 12 P a g e

13 Response: We suggest a single Proposal Letter that addresses the requirements in Part 2, Section A.2 items (a) through (e). We further suggest a single table that lists all of the requested information in Part 2, Section A.2(f) for each Product. Feel free to format the table as you wish as long as it provides the required information for each Product. We prefer a table within the Product Letter, not a separate Excel spreadsheet. 28. Can you please clarify whether or not IPERS will be reviewing regional/countryspecific products within international equity? 29. Does the MSCI Emerging Markets Investable Market Index (IMI) meet IPERS benchmark criteria for this search? 30. Section B: Illiquid or private market securities are not permissible we have exposure to securities that would be described as private and/or illiquid. Does this preclude us from the RFP? Response: The Product is not acceptable if it invests any part of its strategy in private market securities. We only want strategies that trade publicly traded securities. 31. Does the long beta exposure need to be explicitly one of the broad betas that are mentioned in the RFP (below) or can the long beta be a component of one of the below-listed betas (i.e. India Equity, which is a beta within EM Equity)? (U.S. equity [large and small caps, growth and value]; international equity [large and small cap, growth and value, developed and emerging]; fixed income [U.S. Treasuries and government agencies, investment grade corporate debt, high yield corporate debt, emerging market debt, mortgage-backed securities, asset-backed securities]; and public real assets [REITs, MLPs, and U.S. TIPS]) Who will be held responsible for maintaining market-neutrality? The manager or IPERS? Can long-only strategies be submitted? Response: The long beta exposure of the Product can be a component of the listed betas, but should be widely recognized as sub-asset classes or styles that have widely used benchmarks and/or futures contracts so that IPERS can clearly identify the component beta or lay off the component beta if it is not needed. The implementation of a beta overlay (if any) will be determined on a case by case basis. Long only strategies will be considered. 13 P a g e

14 32. I thought it would be worth inquiring about the viability of a Canadian Equity strategy. It s a market we have experience and expertise in which also has a unique and inefficiently structured market and benchmark (S&P/TSX). Canada presents an alpha opportunity commensurate with the Emerging Markets without the vast array of regulatory issues, and is a market with less correlated alpha to most Pension s strategic allocations. The quantitative investment factors we use lead to vastly different exposures then most active managers which reinforces our view that the space is underrepresented in investment programs, is a rich alpha harvesting ground and offers an uncorrelated source of alpha. As such, we have had conversations with asset owners in the past regarding the viability of portable alpha, utilizing our long only portfolio. There are other options, both US and Internationally based that XXX managers, however, we feel this best aligns with your objectives and qualifies as among our best ideas with a strong long-term track record and consistent batting averages. I ve attached a fact sheet as of 6/30 (third quarter materials are currently going through compliance) as well as a snapshot of the Canadian market s inefficiency. Response: Products benchmarked to a well-known Canadian equity index will be considered. 33. Our strategy which is run by our Portfolio Managers on a discretionary basis trades currency volatility on an over-the-counter OTC basis, which is standard for currency products. It fulfils your requirements of liquid investments and public trading; however, it does not strictly encompass securities. Response: The product will be considered, but you should know that IPERS has a strong preference for products that do not utilize OTC derivatives. 34. We are an existing manager for IPERS, managing an Equity Account. We would like to re-submit our current strategy for this search. We have both the strategy (GIPS Composite performance) as well as a separate entry for IPERS account named Equity Strategy segregated acct in the Wilshire Compass Portal. For the letter due December 8th, do we identify the strategy composite returns or IPER s specific returns invested in our Strategy segregated acct in Wilshire Compass Portal? Being an existing manager for IPERS, does the same criteria apply to new applicants and existing fund managers? i.e. will the stock limit remain in place (as per client request in the IMA)? Will IPERS search consider Risk Premia strategies? Can we submit Risk Premia strategies? Response: Existing products need not be re-submitted. We will use your composite information while evaluating your existing strategy. IPERS will consider all strategies as long as they meet the product definition and minimum requirements. 14 P a g e

15 35. Since our mandate is implemented with futures (that is largely, and in some cases, completely unfunded), it is completely portable and benchmarked to a zero return benchmark. This would appear to violate Products must be benchmarked against a well-known public market index, but would appear to be ideally suited to IPERS desire to port this return stream on top of the entire fund which is how investors usually apply our program. Could you please clarify if this is acceptable? Response: Yes, this is acceptable. 36. We understand you are opposed to hedge fund structures is the opposition to fund wrappers and custody agreements? Are you willing to consider a strategy that goes long and short public equities and utilizes leverage? Response: IPERS is willing to consider long/short strategies that employ leverage. However, we will only invest in such strategies if it is through an SMA or fund of one structure where we can ensure custody and other terms are acceptable to IPERS. 37. Are you willing to accept off-policy beta allocations, such as global equity or regional strategies (e.g. China)? 38. We plan on submitting US IG Corporates, Broad Market or Short Duration HY, and potentially the hedged strategies. Should we also submit the strategies we currently manage for them (XXXX and XXXX) or is that unnecessary? Response: It is not necessary to submit strategies that you currently manage for IPERS. 39. We are a Brazilian asset manager and our portfolio have just Brazilian companies. May we apply for ACTIVE INVESTMENT MANAGEMENT SERVICES RFP? Response: Yes, if your product meets all the minimum requirements in the RFP. Fee Structure, Performance Record, Administrative, etc. 13. Does IPERS have a specific performance-based fee arrangement that you ask your managers adapt to or will the manager be able to propose a performance-based fee arrangement that may vary from a standard template already in place at IPERS? Response: IPERS generally will accept a fee arrangement that includes a low base fee based on AUM, a performance fee based on profitability since inception (or a high water mark) and a maximum annual fee payment. 15 P a g e

16 14. Could you please interpret and clarify what constitutes a verifiable performance record found in the minimum requirements section? Response: The products claim of performance should be verifiable by independent audits/standards and should be available to IPERS or its agents for verification prior to funding. 15. Can you please specify any liquidity requirements for the mandate? Response: Ideally, IPERS prefers daily liquidity. 16. I wanted to make sure I understood what Gross-of-Fees means. We report all returns net of our fees. You want us to take those, extract the fees, and report the gross returns as if there had not been any fees charged? Do I understand that correctly? 17. Is a performance based fee schedule a mandatory requirement? 18. Given the asymmetrical nature of the High Yield asset class, would IPERS be open to a negotiated management fee in lieu of a performance fee? 19. Do you have an approximate target allocation for the potential mandates? 20. In order to manage a separate account, can you confirm there is an existing network of global custodial banks to allow holdings of non-us securities? Any additional information on this would be helpful. Response: IPERS utilizes the services of BNY Mellon and its global custodian network. 21. For fixed income, do you have thoughts on how a performance based fee would be structured? Is it possible to use the Bloomberg Barclays US Aggregate benchmark for performance based fees even though you will monitor your entire portfolio against the Bloomberg Barclays Universal Aggregate benchmark? Response: Yes, if your Product is benchmarked against the U.S. Aggregate. 16 P a g e

17 22. On Page 9, Section M, the RFP indicates that IPERS would have the authority to terminate any resulting contract without cause. Would IPERS object to a contractual provision that would allow the selected manager to withdraw from performing services with advance notice to IPERS? Response: Perhaps, we can address that when/if we negotiate contracts. 23. Regarding the terms and conditions stated on pages 9-10, Section O, would IPERS be willing to clarify that IPERS would be accountable or responsible for the improper disclosure of information properly designated as confidential under Iowa laws governing the examination of public records (Iowa Code 22.1 et seq.)? 24. Although we fully support IPERS s desire to obtain candid references, some of the language proposed in the final paragraph of Section O is quite broad. Is IPERS able to clarify that this language is not intended to act as a waiver of any contractual or legal right, remedy, or obligation that may exist as to a responding firm and any of the third parties referred to in this paragraph? 25. May the Proposal Letter include information not expressly requested by the instructed outline? For example, may we include a brief executive summary of our Firm? Response: No, additional information is not necessary. 26. Proposal Letter instruction 2(e) states that we must identify any sections of the proposal that the firm is identifying as confidential. Since we will not become privy to the questions contained in the Phase 2 Questionnaire until short-listed, we assume that this request is presently limited to Phase 1 information. Will we be given the same identification opportunity under Phase 2? Response: We will allow you to identify confidential sections at every phase of this search process. 27. What is the approximate size of the mandate? Do you anticipate awarding more than one firm for this search? Can IPERS provide its current asset allocation and list of managers and corresponding strategies? Response: Mandate sizes haven t been decided at this time. Multiple firms may be selected at the end of this search. IPERS asset allocation and other information is available at 17 P a g e

18 28. Will IPERS provide a sample contract for manager review/comments? 29. We wanted to reconfirm that we are required to provide a performance-based fee arrangement even if we offer very competitive fees and meet all other criteria? 30. Can you share potential mandate size? 31. Can you share your restricted list based on your Sudan and Iran Investment Restrictions and Divestment policy? Response: Lists are available at What is the cash policy/requirement of IPERS? Response: IPERS policy requires us to hold 1% of cash with a range between 2% and 4%. 33. How do you define persistency of risk adjusted returns, and what metrics do you use? Response: IPERS uses multiple quantitative and qualitative metrics to understand the quality and sources of alpha. 34. What is the expected minimum size of the awarded mandates? Response: Mandate sizes haven t been decided at this time. 35. The evaluation criteria states that Phase 1 of this search will include an evaluation of various metrics (risk and beta characteristics, return to risk ratios, success ratios, drawdowns, correlation to equities, and liability proxies) that will be used in the quantitative analysis. Have you established targets for these metrics and if so, could you please share what these targets are? Response: There are no established targets for these metrics. 18 P a g e

19 36. We were looking to see if you could provide any estimate on the dollar amount of the search? This information would be helpful to us when pricing out our bid. Response: Mandate sizes haven t been decided at this time. Pricing information is not required at this time. 37. What is the desired Target Volatility for the strategy to be managed? Response: We do not have a desired volatility target for a strategy. We anticipate having many different strategies that have different volatility targets. 38. Is there a particular time horizon that you are focusing on for your alpha screens? I am guessing you are looking more closely at 3 and 5 year averages, but I wanted to see if I could get clarification. 39. The strategy we will suggest utilizes derivatives and due to the regulatory environment post the 2008 financial crisis, many clients have found the efficiency of our private funds to be very beneficial. However, for a separately managed account, in order to execute derivative transactions, do you have or would you be willing to put in place an extensive set of necessary agreements and documentation to allow the investment manager to execute trades in a variety of different types of derivatives? Can you explain what derivative (i.e. ISDA, options, futures), clearing, and prime brokerage agreements you have in place that an investment manager can utilize or do you typically leverage the manager s agreements (where appropriate)? Response: IPERS will consider these strategies, but has a strong preference to avoid over-the-counter derivatives. If necessary, IPERS will execute the agreements required to implement a strategy. IPERS currently has a managed account platform in place with its own administrator, clearing brokers, etc. so we have some experience in this area. 40. Our product is customized to each client s SAA, ranges and objectives. Hence any creation of a composite gross-of-fee return would be completely irrelevant to the search or IPERS ability to understand the value of the services we perform because each of our mandates is unique to each client s portfolio and not suited to combination with another client. For example, for a US public fund we manage a program with Equities and Bonds (with specific ranges and a short duration focus and where they controlled the program in the early days), whereas for another corporate client we trade Equities, Bonds and Commodities (where the liability of the bonds is long duration), and a third set of accounts have different ranges because this is an OCIO client. Further, we had clients in our history with non-discretionary mandates and the current clients are on a fully discretionary basis. Instead, could we submit a simulation of our current program as it would apply to IPERS SAA and investment policy statement? This would appear to violate simulated or back tested results for any portion of this period are not acceptable, but our program is possibly 19 P a g e

20 one of those unique cases where a back-test actually makes the most sense and the composite would be completely useless. We would be happy to provide the returns of all our client portfolios, and reference information, and explain why the program returns differ from one another. Response: Custom investment programs that do not readily yield itself to a product definition will not be allowed in this search. 41. Please define uncorrelated. Are you searching for strategies with a target beta of 0 or simply a low relative correlation to existing exposures? Response: We are looking for strategies whose alpha does not exhibit a predisposition to long or short beta irrespective of market conditions. 42. How will IPERS be managing the duration and the beta (i.e. are you going to hire passive managers, utilize derivatives to get duration and beta or hire an overlay manager?) Response: IPERS may employ the use of internal allocation, an overlay manager, or the investment manager itself to manage the beta and duration. 20 P a g e