CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER INTRADEPARTMENTAL CORRESPONDENCE

Transcription

1 Date: October 22, 2014 CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER INTRADEPARTMENTAL CORRESPONDENCE To: From: {:Retirement Board Members Mary C. Higgins, Interim Retirement Plan Manager Subjec : Board Agenda Item 9: Discussion of Request for Proposal for General Consulting Services; and Possible Action (October 22, 2014, Regular Retirement Board Meeting) Recommendations: That the Board of the Administration (Retirement Board) of the Water and Power Employees' Retirement Plan (Plan) interview and select one of the following four candidates for the Plan's General Consultant: Summary Meketa Investment Group, Inc. (Meketa) NEPC, LLC (NEPC) Pension Consulting Alliance, Inc. (PCA) RVK, Inc. (RVK) The General Consultant provides advice to the Retirement Board and staff on the investment and management of the Plan's assets including asset allocation, manager selection and performance monitoring. The Retirement Board has engaged the services of PCA as the Plan's General Consultant since PCA was selected again in 2005 and 2008 after Request for Proposal (RFP) processes were completed. The contract was extended for only one year in 2011 due to matters discussed in closed session and pending information from the City Attorney. The contract was subsequently extended twice more, and currently expires on December 31, The final extension was needed to complete the current RFP process, which was authorized by the Retirement Board on February 12,2014. The RFP was advertised in Pension & Investments on May 26, 2014, with a deadline of June 16, 2014 to submit the response. Only the four firms listed above submitted proposals and are scheduled for interviews today. All four respondents met the Required Minimum Qualifications (RMQ) without material exceptions (Attachment A), while two of the four identified issues with the Preferred Criteria (Attachment B). A brief description of each firm is attached (Attachment C). 9.1

2 Evaluation Process The respondents were evaluated based on their responses to the RFP questions. The RFP questionnaire was organized into seven sections as shown in the following table along with the weighting for each section: Results SECTION WEIGHTS Organization 10% Professional Staff 20% Clients/Experience 15% Investment Process/Asset Allocation 25% Alternative Investment Experience 10% Reporting/Other 5% Fees 15% Detailed results of the staff evaluation of the responses to the General Consultant RFP are shown in Attachment D. The table below summarizes the scores of the respondents. RESPONDENT SCORE RVK 86.5 NEPC 86.0 PCA 80.0 Meketa 73.5 While all of the respondents scored above average and can satisfactorily perform the requested services, RVK and NEPC earned the highest scores, owing to their respective combinations of strong client teams, well-articulated investment and asset allocation processes, ongoing research processes and resources, and experience with comparable clients. The following documents are attached: Attachment A - Required Minimum Qualifications Attachment B - Preferred Criteria Attachment C - Overview of Respondents Attachment D- Results of Staff Evaluation Resolution No ywolfson Investment Officer MCH/JW/SV/MS 9.2

3 Attachment A Required Minimum Qualifications (RMQs) The following table lists the RMQs that all respondents to the General Consultant RFP were required to meet: ~ ~~~ lmij~o ~ «~~f~~ =-----=--=] Organization A. Proposer must have been in existence for at least five (5) full years. B. Proposer must not have been the subject of material litigation or claims or censured by the Securities and Exchange Commission (SEC) or subject to regulatory action within the last three (3) years. c. Proposer must carry the appropriate coverage for errors and omissions and professional liability insurance as indicated in Appendix A of this RFP. D. The Proposer must comply with City of Los Angeles and Los Angeles Department of Water and Power requirements as indicated in Appendix B & C of this RFP. E. The Proposer must agree to obtain a City of Los Angeles Business Tax Registration Certificate. F. The Proposer must complete the RFP questionnaire in its entirety as well as the City's required attachments pertaining to Workers Compensation, Child Care, and Equal Employment Opportunity, if applicable. Investment Professionals A. The Proposer must have provided investment consulting services comparable to those detailed in the "Services to be Provided" on Section II of this RFP to at least three (3) public pension plans with at least $5 billion in assets, for a minimum of three (3) years as of March 31, B. The Proposer must have a minimum of three (3) full-retainer institutional private equity investment experience and not less than three (3) years with the firm. c. The Proposer must be directly responsible for the management of the account, and all personnel responsible for the account must be employees of the firm. D. The Proposer must have at least five (5) investment professionals dedicated full-time to general consulting services. E. The Proposer must be able to recommend policy and investment guideline changes. F. The Proposer must have representatives available for presentations to, and consultation with, the Board on a wide variety of investmentrelated issues. Fiduciary Role A. The Proposer must be able to act as a fiduciary with respect to the Plan. All four respondents officially signed the Minimum Qualifications Certification section of the RFP, which states they have met the RMQs and understand the PCs. 9.3

4 Attachment B Preferred Criteria (PC) In addition to the RMQs, the RFP contained a set of PCs that Staff believed were desirable hurdles for the respondents to meet. The following table shows the PCs as stated in the General Consultant RFP: Preferred Criteria A. The Proposer should not have been involved in any material litigation in the past five (5) years. B. The Proposer should be able to adhere to client-specified portfolio constraints. C. The Proposer should have at least three (3) existing U.S. based, tax-exempt clients utilizing similar general consulting services. D. The firm should be SEC registered. As shown in the table below, all respondents fulfilled the PCs with the exception of NEPC and PCA, which have been involved in litigation within the past five years. Most of the cases have been settled or dismissed, and neither firm believes that the litigation has had or will have an adverse effect on the financial condition of the firm or its ability to provide services to the Plan. Firm Respondent Meets PC comments PCs? Meketa y Under Preferred Criteria A: Firm lists involvement NEPC N in litigation twice since 2009; both have been settled or dismissed. None are pending. Under Preferred Criteria A: Firm lists involvement PCA N in litigation twice since 2012; one case has been dismissed, while one case is still pending. RVK y 9.4

5 ATTACHMENT C Overview of Respondents Meketa Meketa Investment Group (Meketa) is an independent investment advisory firm founded in 197 4, which provides general consulting and alternatives consulting services. The firm is 1 00% employee-owned by 14 senior professionals, of which founder John E. Meketa holds 59.5%. The firm intends to continue to expand its ownership as the company grows. Meketa has provided consulting services to tax-exempt clients since 1978, began providing its services to its first public pension fund client in 1998, and advises $99.6 billion in assets for 93 full-retainer general consulting clients as of March 31, Meketa is headquartered in Boston, MA, and maintains additional offices in San Diego, CA; Miami, FL; Portland, OR; and London. NEPC NEPC, LLC (NEPC) has provided general and alternative assets consulting services to public pension plans since 1986, when the firm was founded by current Chairman Richard Charlton. NEPC is an independent firm, 100% employee-owned by 33 partners, and plans to continue to distribute equity to additional employees on an ongoing basis; no single individual owns more than 22%. As of March 31, 2014, NEPC serves 310 fullretainer clients with $627 billion in assets. The firm is headquartered in Boston, MA, and has six additional offices located across the country: Detroit, Ml; Las Vegas, NV; Redwood City, CA; Charlotte, NC; Atlanta, GA; and Chicago, IL. PCA Pension Consulting Alliance, Inc. (PCA) is an independent investment consulting firm founded in 1988, which provides investment advisory services in general consulting, alternative investments, and real estate. The firm has provided its services to public pension plans since inception. PCA is 100% employee-owned by founder and Managing Director Allan Emkin; the firm is in the process of implementing its first round of ownership expansion by the first quarter of 2015, which will result in a five-employee ownership structure. The firm advises $345 billion in assets for 21 full-retainer general consulting clients, and is headquartered in Portland, OR, with two offices in New York, NY and Encino, CA. RVK RVK, Inc. (RVK) has provided general consulting services to public pension plan and tax-exempt clients since its inception in In addition to general consulting, RVK also offers real estate consulting services. RVK is an independent, 1 00% employeeowned firm, with 18 shareholders; its largest shareholder, Rebecca A. Gratsinger, CEO, owns 31.3%. All owners are required to be active in the business, and the firm is committed to expanding its ownership base to additional employees in the future. The firm advises over $542 billion in assets for 180 full-retainer general consulting clients. RVK is headquartered in Portland, OR, with two regional offices in Chicago, IL and New York, NY and various satellite offices around the country. 9.5

6 Scoring of the RFP Staff evaluated the finalists based on their responses to the RFP questions and conducted reference calls to their existing clients. The information obtained through the reference calls was incorporated into the scoring table below. The RFP questionnaire contained 78 questions, organized into seven sections as shown in the following table along with the weighting for each section: SECTION WEIGHTS Organization 10% Professional Staff 20% Clients/Experience 15% Investment Process/Asset Allocation 25% Alternative Investment Experience 10% Reporting/Other 5% Fees 15% Each section was further broken down into categories as shown in Table 1 on the following page. The weight for each category is shown in the Maximum Score column. The column that specifies the "average score" is equal to 70% of the Maximum Score for each section. Overall, RVK and NEPC received similarly high scores, owing to the depth and strength of their client teams, well-articulated investment and asset allocation processes, robust research processes and resources, and experience with comparable clients. While both firms scored similarly high in many categories, RVK scored higher than NEPC and the other respondents due to the depth and breadth of its professional staff and the proposed team, while NEPC scored highest in its investment process/asset allocation and client experience. PCA proposed the most competitive fees for the three-year period; RVK's fee proposal was the next most competitive, followed by NEPC and Meketa. 9.6

7 Table 1: Scoring Summary Meketa NEPC PCA RVK A. nization Ownership/management, firm Sub-Total B. Professional Staff Depth and breadth of general consulti team D. Investment Process/Asset Allocation Philosophy/ Asset Allocation/Portfolio construction Asset-Jiabili Manager/Partner selection/due Sub-Total E. Alternative Investment F. Various

8 ANALYSIS To aid the Board's review, following are summaries of staff's findings on key elements of the RFP that directly impact the effective operation of the Plan. 1. DEPTH OF PROPOSED CONSULTING TEAM Table 2, below, summarizes the key professionals assigned to the proposed general consulting teams. As many consulting firms manage responsibilities on a team basis, it is important to evaluate the collective depth of the proposed consultant teams as a whole rather than that of any one resource individually. In addition to the key professionals summarized below, each firm also proposed various support and/or back office personnel. Table 2: Proposed Consulting Teams Meketa :: :. NEPC Primary Consulting Team Firm 1 GC 2 Primary Consulting Team Firm GC Ted Benedict, Principal/Consultant 7 14 Laura Wirick, Sr. VP/Consultant 6 7 Larry Witt, Vice President 2 2 Don C. Stracke, Senior Consultant Allan C. Martin, Partner Average Team Experience Average Team Experience PCA. ~. ~;: ",; RVK Primary Consulting Team Firm GC Primary Consulting Team Firm GC Rebecca Gratsinger, CEO/Sr. Consultant Neil Rue, Managing Director Jim Voytko, COO/President/Sr. Consultant David Sancewich, Principal 9 12 Jeremy Miller, Consultant 8 11 Kay Ceserani, Principal 6 21 Ryan Sullivan, Consultant 8 8 Nick Woodward, Consultant (Back-up) 7 7 Average Team Experience Average Team Experience "Firm" columns denote the years of employees' tenure at each respective firm 2 "GC" columns denote the years of employees' overall experience in providing general consulting (GC) services The respondents proposed teams of consultants with varying levels of experience in the industry and in their respective firms. Staff found the combined average firm tenure and average number of years of general consulting experience on each team to be sufficiently high at NEPC, PCA and RVK. Comparatively, Meketa's team have slightly fewer years of general consulting experience, as well as lower average firm tenure. Meketa proposed a three-person team, comprised of one lead consultant, Ted Benedict, and two secondary consultants, Laura Wirick and Larry Witt, in addition to two support staff. The team averages 7.7 years of experience in providing general consulting services and 5 years at the firm, which is slightly less compared to the other respondents; however, Mr. Benedict has 18 years of experience in the financial services industry, while Ms. Wirick has previous experience at an endowment setting investment and asset allocation policy. In addition, Mr. Benedict currently holds ownership in the firm. All members of the team are based in San Diego, CA. 9.8

9 NEPC proposed Don Stracke, Senior Consultant, as the lead consultant for the Plan, and Allan Martin, Partner, as backup consultant, in addition to a support analyst to assist the consultants with ongoing projects. The team averages 15.5 years of general consulting experience and 9.5 years at NEPC. In addition, both Mr. Stracke and Mr. Martin have extensive investment experience prior to serving in general consulting roles, and have worked with each other at three separate organizations, including NEPC, for a total of 16 years. Both consultants are located in Redwood City, CA. PCA proposes to continue with its current team, which includes Neil Rue as lead consultant and David Sancewich and Kay Ceserani as secondary consultants; support would continue to be provided by Senior Analyst Colin Bebee. Mr. Rue and Ms. Ceserani each have extensive general consulting experience. Mr. Rue, Mr. Sancewich, and Ms. Ceserani are experienced, with an average of over 20 years of general consulting experience and an average firm tenure of over 12 years. The team is located in Portland, OR. RVK proposed a large, multifaceted team, comprised of four main consultants, including Rebecca A. Gratsinger, Jim Voytko, Jeremy Miller, and Ryan Sullivan; back-up consultant Nick Woodward; and two additional support analysts. RVK shows breadth of experience in its broad-based team approach, with Ms. Gratsinger and Mr. Voytko adding significantly to the depth of the proposed team. Considered together, the five average 16.2 years of general consulting experience, and 10.6 years at the firm. The team is primarily based in Portland, OR, while Mr. Miller is located locally in San Clemente, CA. 2. INVESTMENT PROCESS AND ASSET ALLOCATION As asset allocation is the primary driver of the Plan's investments returns, it is important to consider the general consultant's investment process when the Board makes significant asset allocation decisions for the Plan. Staff evaluated each respondent's philosophy and process, and found NEPC's process to be simultaneously robust and forward-looking. Meketa uses analytical software to examine historical asset class behavior and evaluate optimum portfolios under various scenarios and constraints; however, the firm believes its value add stems from its qualitative research. Meketa determines forward-looking risk profiles of different asset classes and managers through holdings-based analytics, analyzed across each asset class in aggregate. The firm also incorporates risk budgeting, stress testing, scenario analysis and liquidity analysis, including use of its internally developed Economic Regime Management methodology, which develops mean-variance optimization around a set of economic scenarios. NEPC integrates sophisticated risk management analysis in its construction of a client's portfolio. The firm believes it is important to consider asset allocation from a risk budgeting perspective to understand each asset class's contribution to total plan risk, as well as analyzing asset allocation structure under different economic scenarios. Accordingly, NEPC has developed a number of proprietary tools to this end, including a risk budgeting model, scenario analysis, liquidity analysis, active risk budgeting, and factor analysis. While the firm supports different asset allocation structures, it also advocates a dynamic asset allocation, which may include opportunistic allocations to 9.9

10 allow investors to tilt toward secular opportunities, and global tactical asset allocation strategies to allow investment managers to tactically allocate across markets in shorter time horizons. PCA partners with third-party vendor Cheiron in its asset/liability studies and integrates it into a framework to determine an appropriate asset allocation policy for the plan. Cheiron uses "what if" tests to gauge variables such as investment returns and asset class mixes, and stochastic simulation to project future returns under different economic scenarios. After using this process to develop the asset allocation, performance-based and style analysis is used to determine optimal managers to add to each asset class. For an additional fee of $100,000, clients may use Cheiron's simulation-based risk-budget asset allocation methodology, GASSY, which uses random re-sampling of the past 40 years of asset class return data to project a potential range of financial outcomes. This service is not included in the proposed retainer fee. RVK uses MPI Stylus Pro as its primary tool for asset allocation modeling, using proprietary capital market assumptions of future return expectations, in order to develop an optimized efficient frontier and potential asset allocation structures for consideration. The different asset allocation structures are stress-tested using Monte Carlo scenario analysis to demonstrate potential downside return, and asset class-based Mean Benchmark Optimization analyses are used to allocate active risk efficiently. RVK has also implemented FinAnalytica risk models to produce total portfolio risk evaluation. 3. MANAGER RESEARCH/DUE DILIGENCE PROCESS The thoroughness of the general consultant's manager research and due diligence process is an increasingly significant consideration, given the growing size and complexity of the Plan, its asset allocation, and underlying manager mix. Staff evaluated all respondents and found them to be similar in overall process, but differentiated by use of proprietary databases used to canvas the universe of investment managers, level of staffing of research professionals to conduct in-depth analysis of the investment managers, and overall experience in conducting searches for clients similar to the Plan in size and mandates. RVK, NEPC and Meketa were all highly competitive in their research processes, and RVK and NEPC were similarly experienced in performing searches for larger sized plans. The manager databases used by each firm are summarized in Table 3: Table 3: Manager Databases Criteria Meketa NEPC PCA - RVK ' 1 Proprietary database(s) X X X Crane Money Fund Intelligence Database evestment Alliance X X X X HFR (hedge funds) X X Morningstar X X X X Nelson's 9.10 X X

11 Most firms use a combination of internal proprietary databases and external third-party databases for initial screens and information gathering of the universe of investment managers. As many of the firms use similar third-party databases and therefore have access to the same source data, it is important to understand the level of proprietary information that each firm gathers and its respective research and evaluation process. Meketa's 12-person research team meets with investment managers on an ongoing basis, both in-house and on-site, and documents all meetings in its proprietary research database. For a public markets search, the team screens the universe through a variety of databases, develops a short list, and conducts on-site due diligence to meet with key investment professionals, management, and members of the operations staff. Meketa's Marketable Securities Investment Committee provides final vetting of the managers for inclusion in its "bullpen" of research-approved firms. Its internal database consists of approximately 2,000 investment managers with over 3,500 respective investment products. NEPC's search process is similarly robust, with a dedicated 48-person research staff, including 29 research consultants. The research team first conducts an initial performance review and ranks the universe of managers using internally-developed Performance Analytics Statistical Software, along with external resources evestment Alliance and StyleAdvisor. The team subsequently identifies a set of managers for further analysis and meets with the investment team. A centralized Due Diligence Committee vets the managers, which is used to develop a short list of research-approved managers to provide to a client. NEPC's proprietary manager database houses its qualitative review of 2,283 products, including due diligence observations, one-on-one manager meeting writeups, and key historical data on products, personnel and organizational changes. PCA does not have a dedicated manager research department, as the function is absorbed among different roles within the firm; evaluation of investment managers is performed as a result of an RFP/RFI process. As summarized in Table 3, PCA uses a variety of third party databases such as evestment Alliance, HFR, Morningstar, and Nelson's, but does not maintain an internal, proprietary database. RVK has a dedicated, 14-person manager research group, comprised of seven research consultants and seven research analysts. The team screens and ranks the universe of managers; analyzes the fundamental strategy and investment process and verifies database information through meetings with key investment professionals; and conducts onsite due diligence visits on a short list of managers to interview key employees and support processes. RVK uses a proprietary Manager Comments Database, which covers 2,467 products for 1,241 firms, for storing qualitative manager information. In addition, RVK maintains a proprietary alternatives database, RADAR, which tracks 986 products for 320 hedge fund of funds, real estate, and private equity firms. In addition, the firms were requested to provide data relating to the number of searches performed on behalf of their clients in recent years. Table 4 on the following page summarizes each firm's resources and recent search activity. 9.11

12 Table 4: Manager Searches (a),;.._,, Criteria Meketa N.EPC PCA RVK No. of dedicated research staff No. of manager searches completed in None dedicated(b) (c) No. of manager searches completed in 2013 tor 11 (c) 34(c) 5 33 clients over $5 billion (a) Data provided in the table excludes private equity and real estate searches, unless otherwise noted (b) Research functions are absorbed by various staff within the firm (c) Number may be inclusive of private markets searches, and may not be directly comparable with other firms In general, NEPC and RVK performed the greatest number of searches in 2013 for clients with assets of at least $5 billion (i.e., clients of a similar size to the Plan). The higher volume of search activity would suggest not only greater experience in performing searches for similar sized clients and mandate sizes, but also presumably broader insight and familiarity with the current universe of investment managers as a result of performing some level of evaluation and due diligence for these searches. 4. EXPERIENCE WITH COMPARABLE CLIENTS Staff further evaluated the respondents' demonstrated history and current experience of working with clients similar to the Plan. While a larger client base or a greater amount of assets under advisement may be positive to the extent that the firm has sufficient resources to support it, it is also important to consider the overall longevity and stability of the firm's client base and its experience in serving clients with similar attributes to the Plan. Accordingly, greater experience in working with larger public pension plans is generally more desirable. All four firms have a dedicated history of providing general consulting services for over 25 years. NEPC, PCA and RVK have all been serving public plan clients since inception, while Meketa took on its first public plan client 16 years ago. A broad overview of each respondent's client base is summarized in Table 5. Table 5: General Consulting Client Overview 1 Criteria Meketa '} NEPC PCA RVK Full-retainer client assets under advisement ($ billions) $99.6 $627.0 $344.6 $542.0 No. of full-retainer clients No. of public pension plan clients No. of public pension plan clients with assets> $5 billion 2 Net gain (loss) in clients (2009to ) 1 As of 3/31/14 2 Representative of clients similar WPERP in size and type (3)

13 Overall, NEPC and RVK were most competitive in this category for their respective combinations of larger client bases, sizeable assets under advisement, greater quantity of clients comparable to the Plan, and positive client growth over the past five years. Meketa and NEPC have the most favorable client-to-consultant ratios, which may be an indicator that the firm has sufficient resources to support its client base. Meketa has shown very strong growth in its number of clients in recent years, with a net gain of 27 clients over the past five years for a current full-retainer client count of 93, while maintaining a low 4:1 client-to-consultant ratio. However, judging from its current $99.6 billion in assets under advisement, Meketa's market share appears to be based on clients of a smaller size. Meketa serves five public plans with assets in excess of $5 billion, which is similar to PCA, but fewer than either NEPC or RVK. NEPC advises over $627 billion in assets for 310 full-retainer clients, including 77 public plans. NEPC has had strong client growth over the past five years, with a net gain of 48 clients, while maintaining a 6:1 client-to-consultant ratio. The firm serves the greatest quantity of public pension plan clients of the four respondents, and provides its services to 15 public plans with assets over $5 billion. PCA advises $344.6 billion in assets under advisement for 21 full-retainer clients. Its client base is the smallest of the four respondents, although the size of its assets under advisement appears to indicate that PCA advises larger clients on average; of the 10 public plans that PCA advises, six exceed $5 billion in assets. PCA's client base has decreased over the past five years, with a net loss of three clients during the past five years as clients selected new providers, and only one new addition over the same time period; PCA strives to maintain a 7:1 client-to-:consultant ratio. RVK serves 180 full-retainer clients with $542 billion in assets under advisement. Notably in 2012,. RVK lost 11 relatively smaller clients, which followed the departure of four consultants who left RVK to form a boutique consulting firm. Despite this, RVK continued to add clients, for a net gain of 9 clients over the past five years. The firm currently serves 44 public defined benefit plans, including 12 plans with assets in excess of $5 billion. The firm serves its client accounts on a broad team basis, and as such does not manage a specific client-to-consultant ratio. 5. FEE PROPOSAL Respondents submitted proposed retainer fees for each year of the three-year contract period, which included basic services identified in the RFP: advising on investment policies and guidelines, assisting in manager searches, making asset allocation recommendations, providing quarterly performance analysis, and other services. While most respondents included the cost of an asset/liability study in the annual retainer fee, RVK proposed an additional cost for the study. Figure 1 below illustrates the proposed aggregate three-year fees, plus any additional costs, as applicable, for comparison purposes. 9.13

14 Figure 1: Fee Proposal for Three-Year Contract Period $2,500,000 $2,000, o.r) $1,500,000 Total Fees Asset/Liability Study Year 1 $1,000,000 Year 2 Year 3 $500,000 $- Meketa NEPC PCA RVK Of the respondents, PCA proposed the lowest fees, followed by RVK. NEPC's fee proposal fell about the average of the four respondents, while Meketa proposed the highest fees. Meketa's proposed fee was the highest at $1,785,000 for the three-year period (flat fee of $595,000 annually). However, this retainer includes a number of additional fund coordination services not provided in other fee proposals, including manager fee negotiations, supervision of manager transitions, cash flow coordination, custodian selection and evaluation, etc. As many of these services are currently performed in-house by staff, and fall outside the scope of the RFP, staff believes that it would not be prudent to incur higher fees in order to encumber these services. NEPC's fee proposal was average, with a three-year fee of $1,314,000 ($425,000 in Year 1, escalating to $438,000 in Year 2 and $451,000 in Year 3). The fee encompasses the services requested in the HFP, including liability-based asset allocation studies every three to five years. PCA proposed the lowest fee of $999,000 for the three-year contract period (flat rate of $333,000 per year). The cost of an asset/liability study is included if working in conjunction with the Retirement Board's current actuarial consultant, The Segal Company. However, a more robust stochastic risk-factor-based project would cost an additional $100,000, which is not reflected in the above chart. RVK proposed the next most competitive fee, an aggregate of approximately $1,219,050 for the three-year contract period (inclusive of an annual retainer of $385,000 for the first 9.14

15 two years; $396,550 in year 3, reflecting a 3% increase per year beginning in the third year; and one asset/liability study at $52,500). Additional project-based fees would apply for investment due diligence on individual hedge funds, private real estate, and private equity, if requested by the Retirement Board; staff does not foresee using the General Consultant for these services. All firms indicated that fees are negotiable. 9.15

16 RESOLUTION TO SELECT THE PLAN'S GENERAL CONSULTANT RESOLUTION NO WHEREAS, the Board of Administration (Retirement Board) of the Water and Power Employees' Retirement Plan (Plan) released a Request for Proposal (RFP) on May 26, 2014;and WHEREAS, the Retirement Board received four responses to the RFP from Meketa Investment Group, Inc., NEPC, LLC, Pension Consulting Alliance, Inc., and RVK, Inc.; and WHEREAS, staff evaluated and scored information from the respondents based on organizational issues, professional staff, clients, investment process/asset allocation process, alternative investment experience, reporting, and fees; and WHEREAS, at the regular Retirement Board meeting held on October 22, 2014, the Retirement Board interviewed all four respondents to the RFP; and WHEREAS, the Retirement Board them selected RVK Inc. to be the Plan's general consultant, subject to agreement of the contract terms. NOW, THEREFORE, BE IT RESOLVED that the Board President and Interim. Retirement Plan Manager are hereby authorized to enter into a contract with RVK Inc., pending negotiation of contract terms. I HEREBY CERTIFY, the foregoing is a full, true, and correct copy of a Resolution adopted by the Retirement Board of Administration [created by Section 1102 (b) of the Los Angeles City Charter] at its regular meeting held on October 22,