November 16 and 17, 2017 January 18 and 19, 2018 March 15 and 16, 2018 May 17 and 18, 2018

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1 1. What prompted your desire to conduct a search at this time? As a public pension fund, the Retirement System revisits the market regularly through a competitive search process for all professional services in order to ensure that the services provided are current with the state of the industry and priced competitively. The existing general investment consulting contract has been in place for ten years. 2. Is the current consultant being considered as part of this process? Yes, the current general investment consultant has been invited to submit a proposal and is expected to do so. 3. What are the annual fees for the existing contract that the System is paying to its current consultant? Are there project-related fees associated with the current arrangement that are not part of the base fee? The current annual retainer fee for general investment consulting services is $180,000. Current retainer services include: review of asset allocation; review of the System s Statement of Investment Policy, Objectives and Guidelines; attendance at each monthly meeting of the KPERS Board of Trustees; at least two formal planning meetings ( Offsite meetings) with KPERS Investment Staff each year; and attendance at periodic Board Committee meetings. Fees for additional services that include projects outside the retainer fees (for example, a triennial Asset/Liability Study) are negotiated at the time of request. 4. Do you have any specific issues in regards to your current consultant? No. 5. What do you think is the single most important characteristic of an investment consulting firm? The Retirement System is seeking a highly qualified general investment consulting firm which can demonstrate significant public funds consulting experience, a high degree of professional integrity, and objectivity. 6. Do you have a preliminary schedule of the Board meetings? The KPERS Board of Trustees has established the following schedule for the remainder of fiscal year 2018: November 16 and 17, 2017 January 18 and 19, 2018 March 15 and 16, 2018 May 17 and 18, When was the last time the System performed a liability-based asset allocation study? The last Asset/Liability Study was completed in January, Do you anticipate making any changes to the asset allocation of the System? Are you considering any new asset classes? The System is nearing the end of a multi-year implementation of the long term asset allocation targets. The System completed a comprehensive review of each asset class, including structure, strategy and investment managers, in fiscal year While we do not anticipate major changes in the near term, that is potentially subject to review upon the hiring of a general investment consultant. 9. What is the most important investment issue your System is currently facing? Achieving the Retirement System s 7.75% assumed rate of return is always our foremost goal. The State s current budget situation has led to a reduction in employer contributions to the System, making the management of liquidity and cash flows a high priority in the management of the investment portfolio.

2 10. What changes are currently under consideration by the Staff and Board (e.g., changes to asset allocation, implementation structure, strategy, etc.)? Please see the answer to question #8 above. 11. When was the latest asset/liability study conducted? Can you provide a copy? The last Asset/Liability Study was completed in January, Please see the link to a memo summarizing the results of the Asset/Liability Study. 12. Can you please provide details related to your investment manager search process (e.g., how you work with your current investment consultant, what are the Plan s procurement requirements, etc.)? The Retirement System s Board of Trustees has statutory authority for the hiring of investment managers to manage the System s assets, and is the final decision-maker. Depending on the nature of the investment mandate, Investment Staff may conduct investment manager searches independently, or may request assistance from the general investment consultant in conducting the search. Manager hiring and termination recommendations are made to the Board of Trustees. Upon approval by the Board, Investment Staff implement the hiring or termination decision. 13. Is the Request for Proposal (RFP) part of a regular due diligence process, or is the RFP expected to result in a change in investment consultant? The RFP is part of a regular due diligence process. (Please see the more detailed answer in question #1 above.) 14. What is the annual retainer fee for the existing investment consulting contract? What is included under this contract? Under the current investment consulting contract, are any tasks or services (e.g., asset/liability studies, manager searches, custody searches, asset class reviews, etc.) priced on a project basis, separate from the annual retainer? Please see the answer to question #3 above. 15. Are there any differences between the contemplated scope of investment advisory retainer services (as listed in Attachment C) and the scope of investment advisory retainer services which your current consultant provides? No, the current scope of services provided and the scope of services requested in Attachment C are substantially the same. 16. How many in-person meetings can be expected of the consultant per year (e.g., Board Meetings, Investment Committee Meetings, Board Educational Sessions, Investment Staff Meetings, etc.)? As indicated on Attachment C to the RFP document, the general investment consultant is expected to attend and participate in seven Board meetings per year. (This includes six two day business meetings consisting of Investment Committee and Board meetings, and one Board Educational Session.) In addition, the general investment consultant is expected to attend Offsite (planning) meetings with Investment Staff, as needed, depending on the projects which are underway. Offsite meetings are held in months during which there is no Board meeting. We expect a minimum of two Offsite/planning meetings to occur in a calendar year. 17. Can you provide a schedule (or preliminary schedule) of the meetings for the upcoming year? Please see the answer to question #6 above.

3 18. If the RFP is to rehire or replace your current general investment consultant, what prompted the search? Is the incumbent consulting firm allowed or encouraged to rebid? Please see the answers to questions #1 and #2 above. 19. What is the annual fee being paid to the current consultant(s)? $180,000 (Please see the answer to question #3 above.) 20. Do you anticipate making any changes to the asset allocation of the fund? Are you considering any new asset classes? Please see the answer to question #8 above. 21. What is the most important investment issue your fund is currently facing? Please see the answer to question #9 above. 22. What strategic decisions are currently pending with the current consultant that the new consultant would likely become involved with? There are no strategic decisions currently pending with the current general investment consultant. However, issues relating to reduced employer contributions and cash flow/liquidity management are expected to remain active for some time. We expect to continue working with the general investment consultant on an analysis of the implications of reduced employer contributions for the management of the System s investment portfolio. 23. Is the funding ratio of the plan expected to change in the next 3-5 years? The funding ratio of the plan is expected to gradually improve after fiscal year 2019, IF the required employer contributions are made as scheduled. 24. How many public markets searches has the staff or consultant done on average per year in the last three-five years? The Retirement System has conducted one investment manager search per year, on average, during the past five years. 25. Can you confirm that performing reporting is only semi-annual? The general investment consultant provides a semiannual investment performance report to the Board for fiscal year end and calendar year end time periods. The Investment Staff prepares a comprehensive monthly investment performance report, which is presented to the Board at each meeting, for the most recent monthly period prior to the meeting. 26. Regarding tables in the RFP, asset data will not be available for September 30th at the time of submission. May we use actual June 30 or would you like an estimate/preliminary September 30th data? If September 30 th actual data is not available, please submit actual June 30 th data. 27. Regarding your questions on private equity, private debt, real estates, what is the expectation for the General Consultant regarding these asset classes? While the general investment consultant does not have specific responsibility for the management of these asset classes, the general investment consultant is expected to be knowledgeable about these asset classes and their role in the investment portfolio. They are expected to engage in discussions with the Investment Staff and the private markets investment consultants on issues of strategy

4 and structure, in the context of the management of the System s entire investment portfolio. They are expected to provide customized return and risk forecasts for the System s customized private markets asset classes. 28. Does the General Consultant advise on the Real Return portfolio? What is the allocation to Infrastructure and Timber? Yes, the general investment consultant advises the System on the Real Return portfolio. The System s Real Return portfolio is currently composed of approximately 80% TIPS and GILBs, 13% infrastructure, and 7% timber investments. Please note that the System s private markets (real assets) consultant provides specific investment advice on the infrastructure and timber strategies in the portfolio. 29. Are there any Absolute Return or Hedge Fund investments in the portfolio? No 30. When was the last full Asset Liability study conducted? The last Asset/Liability Study was completed in January, Can you please provide your current Investment Policy Statement? The Retirement System s Statement of Investment Policy, Objectives and Guidelines is 93 pages long, so we would prefer to defer sharing the IPS until a later point in the search process. 32. Is the scope outlined in the RFP consistent with the current consultant s contract? If not, what items are different? Yes. 33. How many manager searches have been conducted each year, over the last 3 years? The System has averaged one investment manager search per year during the last five years. 34. Can you please provide the current fee for your investment consultant? $180,000 (Please see the answer to question #3 above.) 35. Is the investment consultant required to attend all Board meetings in person? Yes. 36. Is it possible to get a copy of the Investment Policy Statement? Please see the answer to question #31 above. 37. We would also like a list of the current investment managers. The Retirement System s current public markets investments managers include the following firms: Blackrock Mellon Capital Management Corp. State Street Global Advisors Lazard Asset Management Franklin Templeton Institutional JP Morgan Investment Management Inc. Baillie Gifford Overseas Limited Wellington Management Insight Investment

5 Adrian Lee & Partners MacKay Shields T. Rowe Price Associates, Inc. Loomis Sayles & Company Western Asset Management Company CenterSquare Investment Management Brookfield Asset Management Advisory Research Inc. Payden & Rygel Investment Counsel Russell Investments