REQUEST FOR PROPOSALS FOR INVESTMENT MANAGEMENT SERVICES I. GENERAL INFORMATION The Water Replenishment District of Southern California is currently seeking proposals from qualified firms interested in providing investment management services for the District s investment portfolio who will act in a fiduciary capacity and manage the funds in accordance with the laws of the State of California, California Government Code 53600-53686 and the District s Investment Policy. In December 2015, the District issued its Replenishment Assessment Revenue Bonds, Series 2015 for $148,345,000. The purpose of the issuance was to (i) finance the acquisition, construction, and installation of various capital projects, (ii) currently prepay the outstanding 2004 Certificates of Participation, (iii) pr epay in advance the currently outstanding 2008 Certificates of Participation, (iv) prepay in advance the currently outstanding 2011 Certificates of Participation, and (v) pay costs of issuance of the bonds. The size of District s investment portfolio is approximately $70.0 million and will be used in the next two years. A copy of the current investment policy is provided. The Water Replenishment District encourages all prospective investment advisors to examine this request of proposals (RFP) carefully. Qualified advisors, as defined below, are requested to submit proposals to provide the services described in this RFP. The District expects its investment advisor to be highly experienced, a leader and innovator in the management of investments, and is able to provide comprehensive investment advisory and portfolio accounting services. The investment advisor shall act solely in a fiduciary capacity and in a non-discretionary investment arrangement; the investment advisory must obtain approval for individual transactions. and shall not receive any fee or compensation based upon the purchase or sale of securities but, rather, the investment advisor will be compensated pursuant to the provision of its contract with the Water Replenishment District. II. PROPOSAL PROCEDURES A. SCHEDULE OF PROPOSAL Issue RFP January 19, 2017 Proposals Due February 28, 2017 Interviews, if necessary TBD 1
B. ADDITIONAL INFORMATION At no time shall any representative of the WRD be contacted, unless pre-approved by either Scott M. Ota, Chief Financial Officer or J.H. Shaunessy, Manager of Financial Services. Inquiries regarding this RFP shall be in written form only. All inquiries must include contact person, address and email address. Responses to questions will be provided to all prospective offers. Questions should be submitted to: J H Shaunessy Water Replenishment District of S. CA 4040 Paramount Blvd., Lakewood CA 90712 jshaunessy@wrd.org C. PREPARATION OF PROPOSAL Proposals should be prepared simply and economically, providing a straightforward, concise description of capabilities to satisfy the requirements of the RFP. Emphasis should be on completeness and clarity of content. Limit your response to fifteen (15) written pages on 8½ x 11 paper in no smaller than 12 point font. Appendix items, if any, are allowed. An appendix is to be presented as a back-up information and not directly in response to the questions. D. NUMBER OF PROPOSAL COPIES Five (5) hard-copies of the proposal should be submitted in addition to one electronic copy (PDF). E. SUBMISSION OF PROPOSALS Proposal shall be submitted in a sealed envelope bearing the caption: Request for Proposal for Investment Management Services and addressed to: J H Shaunessy Water Replenishment District of S. CA. 4040 Paramount Blvd., Lakewood CA 90712 jshaunessy@wrd.org (562)275-4211 All proposals must be delivered to the above office on or before at 5:00 p.m. on February 17, 2017 (Proposals received after the above date and time will not be considered.) The Water Replenishment District is under no obligation to return proposals. All cost associated with a proposal will be borne by each proposer. F. TIME AND LOCATION OF PROPOSER'S PRESENTATION Selected proposers may be invited to interview. Those proposers will be notified to arrange specific times. The District will not be responsible for any cost of the proposer s presentation. 2
G. EFFECTIVE PERIOD OF PROPOSALS All proposals must state the period for which the proposal shall remain in effect. Such period shall not be less than 120 days from the proposal due date. H. RIGHT OF REJECTION BY THE WATER REPLENISHMENT DISTRICT OF SOUTHERN CALIFORNIA Notwithstanding any other provisions of this RFP, the District reserves the right to award this contract to the investment advisor that best meets the requirements of the RFP, and not necessarily, to the lowest bidder. Further, the District reserves the right to reject any or all proposals prior to execution of the contract, with no penalty to the Water Replenishment District. I. AWARD OF CONTRACT A proposer to whom a contract is awarded shall be required to enter into a written contract with the Water Replenishment District in a form approved by legal counsel for the District. This RFP and the proposal, or any part thereof, may be incorporated into and made a part of the final contract. The District reserves the right to negotiate the terms and conditions of the contract with the selected proposer. III. MINIMUM QUALIFICATIONS To be considered by the Water Replenishment District, proposing investment advisors must: Currently manage at least $500 million of domestic fixed income assets for public entities. Assets for which periodic (daily, monthly or quarterly) advice is provided should be excluded from the calculation of funds under management. Assign a portfolio manager and a relationship manager who each have a minimum of ten (10) years of experience providing investment advice to California public entities. Be familiar with all applicable California statutes with regard to qualified investments for public entities. Be registered with the Securities and Exchange Commission under the Investment Advisor s Act of 1940. Be financially solvent and appropriately capitalized to be able to provide service for the duration of the contract. Have Errors & Omissions insurance coverage of at least $10 million. Adhere to the Code of Professional and Ethical Standards as described by the CFA Institute. 3
IV. SCOPE OF SERVICES Specific responsibilities of the selected investment manager will include, but not be limited to the following: A. Manage on a daily basis the WRD s separate investment portfolios pursuant to the specific, stated investment objectives. Place all orders for the purchase and sale of securities, communicate settlement information to District staff and coordinate security settlement. B. Serve as a general resource to WRD staff for information, advice and training regarding fixed-income investments. C. Work with WRD staff to understand cash flow projections to ensure that the investment strategy is consistent with WRD s liquidity requirements. D. Provide monthly statements with all the information required by the California Government Code and GASB. These reports must include a mark-to-market valuation. The selected investment manager must maintain accurate reports of investments including the diversity of investments and compliance with applicable investment policies of WRD and State of California statutes. E. Provide semiannual investment reports including a description of market conditions, investment strategies employed performance and suggested changes to investment strategy. The performance numbers shall be presented as required by the CFA Institute s Global Investment Performance Standards GIPS. F. The investment advisors WILL NOT provide custodial services or security safekeeping. V. EVALUATION CRITERIA The purpose of this RFP is to identify a firm to serve as the investment advisor to WRD. The firm that best meets the needs and requirements of WRD will be selected. The evaluation criteria that will be used to determine the successful proposer are listed below. A. Relevant experience managing governmental agency funds. B. The experience, resources and qualifications of the investment advisor and individuals assigned to this account. C. Proposed fees and compensation D. Investment philosophy and strategy and demonstrated investment performance. E. Ability to provide necessary portfolio accounting services according to the CFA Institute s GIPS. 4
F. Understanding of the scope of services required by WRD and ability to provide these services. A. Firm Background VI. REQUIRED INFORMATION 1. Describe the organization, date founded and ownership of your firm. Specify the number of years your organization has been providing investment management services. 2. Describe your firm s revenue sources (e.g., investment management, institutional research, etc.) and comment on your firm s financial condition. 3. Is your firm a registered investment advisor under the Investment Advisor s Act of 1940? Please attach Part II of your most recent Form ADV. 4. State the amount of fidelity bond coverage, errors and omissions, employee dishonesty, fiduciary liability insurance, or other fiduciary coverage your firm carries. Provide a Certificate of Insurance. 5. Does your firm adhere to the Code of Professional and Ethical Standards as described by the CFA Institute? B. Personnel 1. Identify the number of professionals employed by your firm, by classification. 2. Please describe your proposed project team, including role they will play, title and years at firm. Identify the primary portfolio manager and client contacts assigned to WRD s portfolio. 3. Provide biographical information on investment professionals, including number of years at your firm that will be involved in the decision-making process for our portfolio. C. Assets Under Management 1. Identify the types of accounts managed by your firm. Provide the total dollar amount and percentage managed (exclude accounts for which your services is providing periodic oversight or advice) for each of the following categories: public agency, corporations, and other. 5
Provide the percentage of assets under management for your latest reporting period using the table below. U.S. Treasury securities % Federal Agency obligations % Corporate securities rated AAA-AA % Corporate securities rated A % Corporate securities rated BBB or % lower Other % D. Philosophy/Approach 1. Describe your firm s investment philosophy. 2. What are the primary strategies for adding value to portfolios (e.g., market timing, credit research, trading)? 3. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 4. Describe your firm s in-house technical and research capabilities. Are outside sources used by the firm on a regular basis? 5. How will you handle fluctuating cash flows and the cash forecasting process? 6. Describe your firm s experience in investing municipal bond proceeds and familiarity with U.S. Treasury arbitrage restrictions as they relate to the investment of proceeds of municipal bonds. E. Portfolio Management 1. Are portfolios managed by teams or one individual? 2. Primary client contact is delegated to which of your firm s professionals? 3. Describe procedures used to ensure that portfolios comply with client investment objectives, policies and bond resolutions. F. References Please provide five local agency client references, including length of time managing their assets, client name, address and phone number. 6
G. Reporting H. Fees 1. Describe the frequency and format of reports you would provide to WRD staff. Attach a sample as part of your appendix. 2. Please describe how you typically report performance. 3. Please provide a performance composite showing performance for the past five years. The composite should consist of a minimum of ten current accounts comprising securities that are permitted under the California Government Code. NO SAMPLE PORTFOLIOS. The duration of the composite should be comparable to the Bank of America Merrill Lynch 1-3 Year or 1-5 Year U.S. Treasury Indices. Provide information about the composition and duration of the data used, including the number of portfolios making up the composite, for your presentation of performance history. The composite should be prepared and presented in compliance with the CFA Institute s Global Investment Performance Standards (GIPS ). All information regarding fees must be submitted in a separate sealed envelope. No mention of fees is to be made in the body of the proposal. 1. Please include a copy of your firm s fee schedule. State your fee in basis points for assets under management. a. Please indicate whether they include custodial fees. b. Is there a minimum annual fee? c. Are fees charged when there is no activity in the account? 7