POLICEMEN S ANNUITY AND BENEFIT FUND OF CHICAGO, ILLINOIS

Transcription

1 REQUEST FOR PROPOSAL POLICEMEN S ANNUITY AND BENEFIT FUND OF CHICAGO, ILLINOIS Transition Management Services The Retirement Board ( the Board ) of the Policemen s Annuity and Benefit Fund of Chicago ( the Fund ) is requesting proposals from qualified firms interested in providing Transition Management Services ( Offerors ). All forms/required documents needed for submitting a Request for Proposal ( RFP ) are available on the Chicago PABF website at Information regarding the RFP may not be available in any other form or location. Bidders are responsible for monitoring the website. Bidders are also responsible for reviewing and completing the required documents under the Investment/Search/Documents portion of the website. The Fund is a pension trust fund of the City of Chicago established in The Board is made up of eight members. Decisions in regards to awarding mandates shall be at the sole discretion of the Board in exercising their investment authority to ensure the prudent investment of Fund assets. To learn more about the Fund you may visit our website at: The Fund is governed by Illinois Compiled Statutes, which can be viewed at: SUBMISSION OF PROPOSALS: The Board s investment consultant, NEPC, LLC ( the Consultant ) shall oversee the RFP process. If you are interested, you must submit an original hardcopy and electronic copy of the complete Proposal by 10/30/2014 to: Search Contact: NEPC, LLC Attn.: Sebastian Grzejka One Main Street Cambridge, MA sgrzejka@nepc.com SERVICES TO BE PROVIDED The Board of the Fund is seeking proposals from qualified firms to provide Transition Management Services. The purpose of employing a Transition manager is to facilitate the restructuring of the portfolio in an efficient manner and provide exposure to the market when appropriate. The Fund s hiring of Transition investment managers will require the execution of a management service contract

2 The Fund is not obligated to award a contract to any of the respondents to this RFP. MINIMUM QUALIFICATIONS Please provide a cover letter with your response in which an authorized person initials the firm s ability to meet the below minimum requirements. A failure to do so will constitute an incomplete response resulting in automatic elimination. To be considered for appointment as a Transition manager pursuant to this proposal, investment management firms must at least provide or demonstrate the following: a) Any person or entity providing to Chicago PABF the services sought by this RFP must agree to serve as a fiduciary to the Fund within the meaning of IL Legislation and to act in accordance with all requirements and standards of conduct applicable to fiduciaries. b) The proposing firm must be SEC-registered or exempt from registration with the nature of the exemption provided. The firm must submit its full Form ADV (Parts I and II); c) The proposing firm must have been in operation for at least three years, as of September 30, 2014; d) Provide a copy of the firms EEOC disclosure statement and description of any initiatives or guidelines your firm has on the inclusion of women and minorities. Whether you have an EEOC disclosure statement or not, each offeror must fill out and provide the chart (or similar) located on the last page of this RFP. e) As provided IL Legislation (SB 452), an applying firm must provide the following disclosures to be considered: (1) The number and percentage of staff who are minority, female, or disabled; (2) The number of contracts for services that the applying entity has with a minority owned business, female owned business, or business owned by a person with a disability; and (3) The number of contracts for service that the applying entity has with businesses other than a minority owned business, female owned business, business owned by a person with a disability, if more than 50% of the services under that contract are performed by a minority person, a female, or a person with a disability. f) Is your firm familiar with, and prepared to comply with, Articles 1 and 11 of the Illinois Pension Code g) Is your firm willing to adhere to the Illinois Freedom of Information Act (5 ILCS 140 et seq.) h) Is your firm willing to adhere to the Investment Transparency section of Illinois code - 2 -

3 and permit the Fund to list your firm on its website and a brief description of any agreement for investment services? QUIET PERIOD The Quiet Period begins when the RFP is issued and ends when a Transition manager is selected by the Board or the process is declared to be complete. Transition managers will not contact Board members during the Quiet Period. A Transition manager will be disqualified from the selection process for violating the Quiet Period. The Quiet Period for this RFP begins September 30, Questions concerning the RFP must be submitted in writing via to the investment consultant search contact ten (10) business days before the Proposal submission date deadline. Responses to properly submitted questions will be consolidated in a single Q&A document and posted on the Consultant s website on or about five business days before the Submission date deadline. EVALUATION AND SELECTION Proposals will be evaluated and subsequent judgments made taking into account the following criteria: Stability and General Experience of the Firm; as measured by the stability of the financial condition of the firm and experience in providing Transition management services to institutional clients; Key Personnel Personnel to be assigned to this account, including key professionals, applicable portfolio managers, back-up and other staff assistance, and education and experience of all such key personnel; Expertise (a) Similar work performed for other institutions, with references of such funds to be specified in the proposal; (b) Assets under transition management; and (c) Investment/Trading experience broadly defined and experience as a Transition Manager; Client References as measured both by the client gains/losses since September 30, 2010 and the quality of the references provided; Process - Consistent process implementation, as measured by outcomes and communication, buy/sell disciplines, and the implementation of risk controls. Philosophy and Style The extent to which the proposed philosophy and style best complement existing philosophies and styles and meet the requirements and expectations as presented in this RFP. Fees Reasonableness and competitiveness of fees

4 RFP Proposal Clarity and responsiveness to requirements as requested in the RFP. Selection Process: All RFP s will be reviewed with respect to the evaluation of the proposal by the he Policemen s Annuity and Benefit Fund of Chicago Board and the Board s investment consulting firm, NEPC, LLC. The Board of Trustees will be responsible for the final selection of the firm(s) hired. PRICE SHEET The undersigned agrees to provide Transition Management Services to the Chicago PABF in accordance with the Request for Proposal and Proposal Price Sheet. Transition Investment Management Services: Please detail the range of the fees charged including minimums per event for domestic equity, non-us equity, fixed income, futures, other derivatives. Please provide as much information as possible in explaining how charges would be formulated per transition event. 1. BY SUBMISSION OF A PROPOSAL, THE PROPOSER CERTIFIES: a) Fees in this proposal have been arrived at independently, without consultation, communication or agreement for the purpose of restricting competition b) No attempt has been made nor will be by the proposer to induce any other person or firm to submit a proposal for the purpose of restricting competition c) The person signing this proposal certifies that he/she is authorized to represent the company and is legally responsible for the decision as to the fee and supporting documentation provided as a result of this advertisement d) Proposer will comply with all Federal regulations, policies, guidelines and requirements e) Fees in this proposal have not been knowingly disclosed by the proposer to any other proposer and will not be so disclosed prior to award 2. GENERAL INFORMATION: Proposer Name: Phone: Fax: Mailing Address: Employer Identification Number: - 4 -

5 3. OWNERSHIP AND CONTROL: Proposer's Legal Structure: Sole Proprietorship Corporation Limited Liability General Partnership Limited Partnership Other If Proposer is a sole proprietorship, list: Owner Name: Phone: Fax: Mailing Address: Employer Identification Number: Beginning date as owner of sole proprietorship: 4. VERIFICATION I certify under penalty of perjury, that I am a responsible official (as identified above) for the business entity described above as Proposer, that I have personally examined and am familiar with the information submitted in this disclosure and all attachments, and that the information is true, accurate, and complete. I am aware that there are significant penalties for submitting false information, including criminal sanctions which can lead to imposition of a fine and/or imprisonment. (Signature) (Date) (Name and Title) QUESTIONS I. COMPANY AND PERSONNEL QUESTIONS 1. If your firm is not a Registered Investment Advisor under the Securities Act of - 5 -

6 1940, please explain why your firm is exempt. 2. Give a brief history of the firm, including but not limited to: i. The date of SEC 1940 Act registration; ii. iii. The date the firm began managing transition accounts for U.S. tax-exempt clients; Does your firm maintain a code of ethics and what does it include? Please attach. 3. Has your firm filled a Claim of Compliance Acknowledgement with the CFA Institute Asset Manager Code of Professional Conduct? If not, why? 4. Provide an executive summary of your organization s transition management business unit. 5. Is your firm a parent, subsidiary or affiliate of another firm? Provide full disclosure of all direct and indirect ownership relationships. 6. How is the firm structured to provide transition management (e.g. brokerage affiliate/custody affiliate/investment advisor)? 7. Describe the firm s background in transition management and provide the year of inception? 8. Describe what differentiates your organization from other transition managers. What is the value your organization provides to clients? 9. Does your organization focus on servicing any particular client types? If so, describe specific strengths and services/products your organization has for meeting the needs of Public Funds. 10. Include an organization chart of the transition management business unit, as well as an organization chart showing the position of the unit within the firm s overall management structure. Describe the firm s overall management structure, and how the transition management business unit fits within it. Please include organization chart detailing the trading group(s), client service, compliance, and legal support for the transition unit. 11. Discuss the costs/benefits of different transition business structures (e.g. broker/dealer custodian-bank transition subsidiaries) as it relates to the current structure. 12. Describe the levels (dollar amounts) of coverage the firm has for fidelity bonds, errors - 6 -

7 and omissions insurance, or any other insurance coverage the firm has to indemnify transition management clients against losses. 13. Please provide information around any litigation and regulatory inquiries/proceedings. 14. Please provide details on the financial condition of your firm. Most recent annual reports filed with the SEC will be acceptable; recent material changes should be included. This is not a minimum requirement, but preference will be given to managers that include this information. 15. List the insurance carriers supplying the coverage for SEC-required (17g-1) fidelity bonds, errors and omissions coverage and any other fiduciary coverage which your firm carries. 16. Descri be any potential conflicts of interest your firm may have in the management of this account. 17. Descri be any material developments in your organization (changes in ownership, personnel, business, etc.). 18. Please indicate whether the firm is certified as a Minority, Women, or Disabled Business Enterprise (MWDBE) as defined by IL PA If so, please provide a copy of the firm s certification. 19. Please discuss how the transition process/brokerage will comply with the Chicago PABF s brokerage policy. In addition, discuss how the reporting will be provided with respect to brokerage and include a sample report. II. Transition Management Team and Process 1. Describe your firm s philosophy/methodology regarding transition management for institutional clients. 2. Does your firm have experience performing transitions involving multiple asset class mandates, including global equity, fixed-income and overlay mandates? If yes, please provide details regarding your experience. Please detail how the systems which monitor equity, fixed income, foreign currency and derivative - 7 -

8 trades interact with each other. Please detail the systems used in each of these asset classes. 3. Is trading performed on an agency basis, principal basis or both? Please detail whether fixed income trades are booked as riskless principal or as agent. 4. What are the multiple sources of liquidity that you tap for all asset classes? Please detail what is classified as internal crossing and what is classified as external crossing in your pre and post trade reporting? Do you assume all internal and external crossing is free from all implicit costs? 5. Describe the quantitative tools your firm utilizes to evaluate/optimize trading for transitions. Please be as specific as possible. 6. Explain how the firm manages explicit and implicit trading costs in a transition. 7. Discuss all steps taken to eliminate information leakage to external sources. 8. On average, how many accounts are assigned to each of the primary client relationship officers? Please detail the number of transition managers located in the United States and the number of US transition/overlay events managed in 2012 and What team members are dedicated to transition management and have no other responsibilities? Please provide biographies of key personnel and what roles each person would serve. 10. Explain, based on your organization s structure, how the client relationship officer either answers client questions immediately, or how they refer to other relevant experts and how long that process takes. Who ensures follow up with the client relationship officer internally? 11. What is the organization s plan for growth in staff and clients? 12. What is the organization s plan or product development? 13. Describe your organization s commitment to service quality and customer service. Does your organization have a total quality management program? If yes, please describe. Do you survey your clients? If yes, how often? Please provide the most recent results. 14. Provide contacts, addresses and telephone numbers of 3 references of similarly sized plans. III. Operations and Execution - 8 -

9 1. Discuss the primary goals of your transition management process and the unit s approach to risk. 2. Can you apply all forms of risk management tools and derivatives (i.e., ETFs, Futures, Swaps, etc.) to manage tracking error and alleviate risk? Does your firm take discretion when implementing derivative overlays during the transition process? Does your firm require direction to utilize any risk management tools? 3. Does your firm envision utilizing securities types other than index futures, equities, and fixed income securities (e.g. swaps, options) to implement market exposures? If so, please describe how and when you would utilize these other securities. 4. Do you measure the accuracy of your pre-trade estimates versus actual results? 5. Describe how your firm maintains market exposure for a specific asset class during a transition. If the actual market exposure of a transition breaches a tolerance range set with a client how you would compensate the client for any losses? 6. Do you own your own dark pool? Is so, how can clients be sure you will continue to use other dark pools? Do you allow orders to rest in your dark pool which would cause risk exposure variances? Please provide the latest copy of your SEC Rule 606 reporting. 7. Identify internal and external dark pools that you would deploy for crossing purposes and to minimize trade impact. How can your firm assure that the use of dark pools does not disadvantage a client? Do you disclose revenue from crossing in affiliated dark pools? Do you have any arrangements with dark pools or liquidity venues where you are not charged to execute in their pool? 8. How do you handle a situation where a transition client has an order and your investment management arm has the same order? Are they grouped together? What protections are in place to ensure the transition account is not disadvantaged? How do you handle when two or more transition clients have the same order? 9. How do you select brokers for execution? Do you exclude brokers who compete against you in the transition management business? How is your order routing designed? Are orders intentionally routed to market makers who do not charge for execution? Are there any liquidity venues that are specifically avoided? 10. How are you compensated for your activities in this area? How transparent is this compensation? Are commissions fully disclosed? Do you make a spread on any transactions? Do you have any arrangement with other funds or firms (e.g. soft - 9 -

10 dollar arrangements) whereby you are compensated by trading with those firms? 11. How do you ensure clients are treated and serviced equally? 12. How do you manage a global transition? Do you have the resources in other global markets to manage the event? 13. How are global events monitored? 14. What liquidity advantages do you have? 15. How do you justify your fees compared to competitors? 16. How do you control sales trading clients from sharing information with other brokers or from front running the order? Do you disclose compensation from sales trading in any given trade? Please detail what information is shared with sales trading clients. If sales trading crosses are classified as internal or external crossing in your reporting, what do you estimate the information cost is for these orders? 17. How do you handle the trading of restricted currencies during the transition process? IV. Client Reporting 1. What reporting do you provide on a final pre-trade basis? 2. What reporting do you provide during the on-going process of a transition? 3. What reporting do you provide following a completed transition? 4. Please provide brief examples of the pre-trade and post-trade reporting. 5. Will you cover the post trade transaction costs associated with having an independent third party analysis of the transition? 6. Will you provide date and time stamped individual printed data, where available, for all security and currency transactions as a matter of regular reporting? 7. Indicate whether or not you are able to provide real-time access for clients and/or managers to monitor trading activity during a transition. Describe your firm s capabilities with respect to this area. 8. Is reporting available online?

11 V. Revenue Sources 1. Identify and define in detail all sources of revenue for your firm when conducting a transition. Include commissions, markups, foreign exchange market making and order routing in addition to all other revenue sources. VI. System Capabilities & Disaster Recovery 1. What is the configuration and age of the existing hardware used for transition processing? 2. Does the Transition Management unit have limitations on access to this equipment? How is access controlled? 3. Please answer each of the following questions about your disaster recovery plan: a. Are there back-up capabilities for your systems in case of malfunction or disaster? b. How many hours before data can be retrieved? c. Is there a business continuity plan? Describe in detail. d. How often do you test the plan? e. When was the last test? f. Have they been used during the past three years? g. What was the longest duration of any such outage and what was the cause? h. What has been put in place to prevent this occurrence again? 4. Do you have hot-site back up for systems? Do you have a back-up location for personnel as well? Where are back-up sites located? 5. Does an outside auditor or consultant review the disaster recovery plan? Who? 6. Was the existing software developed internally or externally? How is it supported? If developed and supported externally, who is the vendor? 7. What down-time have you experienced in the last year? What are the normal hours of availability?

12 E m p l o y e e D i v e r s i t y [Firm] [Date] Job Categories White Hispanic or Latino Black or African American Male Native Hawaiian or Other Pacific Islander Asian American Indian or No Alaska Response Native Number of Employees Race/Ethnicity* White Hispanic or Latino Black or African American Female Native Hawaiian or Other Pacific Islander Asian American Indian or No Alaska Response Native Total Executive/Sr Officials & Mgrs First/Mid Officials & Mgrs Professionals Technicians Sales Workers Craft Workers Operatives Laborers & Helpers Service Workers Other Total # of Employees Total % of Employees Female to Male #N/A MWDDBE to Total #N/A MWDBE Male to Male #N/A MWDBE Female to Female #N/A *Employees are not legally required to self-identify their race or ethnicity. The information contained in this chart is only an estimate of the race and ethnicity of the firm's employees. Accordingly, this chart may not be used for any purpose other than to provide a basic overview of the current gender/race/ethnicity of our employees. File: EEO-1.xls

13 In completing this form the investment advisor responder agrees it will provide a program for complying with the Fund s brokerage, proxy and investment policy guidelines if selected by the Fund to become a fiduciary on its behalf as an investment advisor retained by the Fund. Please attach responses to all required disclosures under the Illinois Pension Code, including the following to our Investment Consultant: 1. The names and addresses of: the Investment Advisor, any entity that is a parent of, or owns a controlling interest in, an entity that is subsidiary of or in which a controlling interest is owned by the Investment Advisor, any persons who have an ownership or distributive income share in the Investment Advisor that is in excess of 7.5%; or serves as an executive officer of the Investment Advisor; and 2. The names and addresses of all subcontractors, if any, and the expected amount of money in compensation each will receive under the contract. For purposes of this subsection, subcontractor does not include non-investment related professionals or professionals offering services that are not directly related to investment of assets, such as legal counsel, actuary, proxy voting services, services used to track compliance with legal standards and investment fund of funds where the Board has no direct contractual relationship with the Investment Advisors. 3. A statement that contingent and placement fees must be disclosed. Signature Name (print) Title Firm Date Please be aware that all documents created as part of an STM, including the responses provided by your firm as the responding Investment Advisor, shall be considered public records and shall be made available for inspection and copying as provided in Section 3 of the Illinois Freedom of Information Act, 5 ILCS 140/1, et.seq