APPENDIX B, Contd

APPENDIX B, Contd

APPENDIX B, contd.

Request for Proposal

General Investment Consultant

RFP #2013-06-01 (INV)

FIRM NAME:______

ADDRESS:______

______

E-MAIL ADDRESS: ______

TELEPHONE #:______

FACSIMILE #: ______

FEDERAL EMPLOYER IDENTIFICATION #______

NEW MEXICO TAX # (if any)______

CONTACT PERSON FOR PROPOSAL______

This page has been signed by a signatory with the authority to bind the Offeror. By signing this Signature Page, through the undersigned representative who has the authority to bind the Offeror, and by submitting a proposal in response to RFP #2013-06-01 (INV), the Offeror agrees, if selected, to perform the services required by such RFP and to adhere to all requirements, specifications, terms and conditions of the RFP. Offeror further agrees to be bound by this proposal for a minimum of 180 days from the date the RFP was issued.

SIGNED BY:______

Name (print):______

Title:______

Date:______

APPENDIX B, contd.

Request for Proposal

General Investment Consultant

RFP #2013-06-01 (INV)

Instructions: Offerors must complete all questions in Part II. NMERB Questions

Part II. NMERB QUESTIONS

A. Organization

  1. Briefly describe your firm’s background, history, and ownership structure, including any parent, affiliated or subsidiary company, and any business partners or joint ventures. Describe any planned or anticipated changes in ownership as well as any planned or anticipated changes in your lines of business.
  2. Provide an organizational chart of your firm and describe the relationship between each component and your consulting group. The chart should include the positions and functions of all professionals in your organization.
  3. Identify the key personnel in your firm and their roles within the organization including a summary of years with the firm and prior experience.
  4. Describe the levels of coverage for fidelity bonds, directors and officers coverage, errors and omissions coverage, and other fiduciary coverage that your firm carries; include the name and address of the coverage provider. Is the coverage on a per client basis, or is the dollar figure applied to the firm as a whole? Does pending cancellation of your coverage require client notification?
  5. Provide details on the financial condition of the firm (include debt/equity and debt/total assets, and other pertinent ratios). Attach your firm’s current audited Annual Financial Report.
  6. Describe the services your firm provides and give the percentage of revenue derived from investment consulting and the other lines of business. Of your affiliate groups (if any), what percentage of total revenues for that group is derived from investment consulting?
  7. How many employees does your firm have? Please break this number into specific functions and strategic areas.
  8. Describe how your professionals are compensated and any incentives used to enhance the likelihood that these individuals will continue employment with the firm.
  9. Indicate the turnover of professional staff since January 1, 2008. Provide the number of professionals that have either joined or left the firm in each of the past 5 years. For each of those who left the firm, provide the reason for leaving. Provide the names, titles and time with firm of all senior management and key professionals that have either joined or left the firm since January 1, 2008, and for each of those who left the firm, provide the reason for leaving..
  10. How many employees are chartered members of the CFA Institute? Chartered Alternative Investment Analysts? For each organization, please provide this information as an absolute number and as a percentage of total employees.
  1. Provide a brief description of the firm's growth plan and capacity to undertake this consulting relationship. What is the capacity of the firm in terms of the number of client relationships? What is the average and maximum number of clients assigned per consultant?
  2. Describe any significant changes in your organization such as ownership, restructuring or personnel layoffs that have occurred within the past three years. List the owners of the firm, and percent interest.
  3. Describe the key features of your firm’s business continuation and disaster recovery plans.
  4. Provide a list of current clients and inception date of the relationships. Please complete the following:
  1. Provide the number of consulting relationships, with AUM, gained and lost in each of the following periods:
  2. January - December 2009
  3. January - December 2010
  4. January - December 2011
  5. January – December 2012
  1. Please provide a list of five public pension fund clients who have terminated their relationship with your firm in the last five years.
  2. Describe your firm’s succession plan in the event the key personnel in this assignment should leave the firm? Do you consult with the Client for their input when considering replacements?
  1. For the team expected to be assigned to NMERB’s account please provide a resume or biography.
  1. Who will be the dedicated consultant(s) assigned to NMERB? Who will be the back-up(s)?
  2. Please describe the primary role of each consultant.
  3. Please describe this team’s experience with similar work performed for other public defined benefit plans.
  4. State whether the individuals assigned to the work have any responsibilities other than providing consulting services, and if so, specify such responsibilities.
  5. Please provide the team’s client list.
  1. Describe any services performed by your organization that may not be offered by other consultants.
  2. Please detail any significant contributions that you believe your firm has made in developing and defining “best practices” in the pension fund investment consulting field, including describing for each such practice why you believe that it is a “best practice,” by which funds the practice has been adopted and what entities have recognized it as a “best practice.”
  1. Consulting Philosophy and Process
  1. Please describe your investment consulting philosophy. Include the approach to the development of an investment policy, asset allocation recommendations and evaluation of asset changes. Please address the decision-making process and the titles and responsibilities of the various individuals involved at each stage of the process.
  1. How does your firm implement this philosophy? How would you implement this philosophy with respect to NMERB?
  1. Discuss in detail how you would provide:
  1. Assistance in the implementation and periodic updating of the investment policy for NMERB.
  1. Quarterly performance evaluations for the NMERB portfolio. These evaluations shall include the information detailed in the SCOPE OF SERVICES, Performance Reporting section of this RFP (Part 1, B., 1.). Please provide a sample of the format commonly used by your firm for client performance evaluations.
  1. Assistance in investment management searches, including compiling, summarizing and comparing data received in responses to requests for proposals or other types of manager searches.
  1. Assistance in fund asset allocation, including asset allocation studies and efficient frontiers, strategic planning and annual reviews, as needed. Please provide a sample of a recently completed asset allocation study.
  1. Assistance with federal and state investment legislation and informational seminars on topical investment issues and any other issues that may arise from time to time during the course of the contract.
  1. Review and verification of quarterly performance billings for investment managers eligible for performance based fees.
  1. Describe your firm’s approach to asset transition management.

C. Standards of Conduct

  1. Does your firm have a written code of conduct or a set of standards for professional behavior? If so, please provide a copy. How is employee compliance monitored and enforced?
  2. Has your firm adopted the CFA Code of Ethics and Standards? If so, how is employee compliance monitored?
  3. How are consultants’ recommendations to clients reviewed and monitored by your organization? Does your firm adhere to a level of consistency in consultant recommendations?
  4. Within the last five years, has your organization or an officer or principal been named as a defendant in pending or threatened litigation, or has been the subject of an administrative or regulatory, or similar proceeding or investigation (collectively hereafter, “administrative proceeding”) relating to your investment consulting assignments? If so, provide an explanation and indicate the current status or disposition of the litigation or administrative proceeding to include any damages or injunctions awarded against your organization, settlements reached, administrative fines, reprimands, license suspensions or revocations, warnings, admonishments, censure, or similar cautionary letters or notices received from administrative or regulatory bodies.
  5. Has your firm ever been required to pay damages, penalties or trade/relinquish something of value under any of its existing or past contracts as it relates to services similar to those contemplated by this RFP? If so, describe such occurrence in detail.
  1. Conflicts of Interest
  1. Disclose any business your firm, affiliates, or parent company does with any of the NMERB Investment-Related Associates listed in Appendix I.
  2. Are there any actual or potential conflict of interest issues your firm would have in servicing NMERB? If so, describe them.
  3. How does your firm identify and manage conflicts of interest?
  4. What is your firm’s policy on soft dollar payments? Do your investment consulting clients have soft dollar arrangements with your firm? If so, indicate the percentage of your clients under these arrangements.
  5. Does your firm hold or sponsor money manager or client conferences? If so, describe all conferences your firm held or sponsored in the past 24 months. If these services are offered on complementary basis to public pension plan clients with gift reporting requirements, how are these complementary services disclosed?
  6. Has your firm, or anyone in your firm, provided any gifts, travel and room expenses, entertainment or meals to any NMERB Board member or Investment Division staff member during the past 36 months? If yes, describe the expenses and their purpose.
  7. List and describe any professional relationship your firm has had with NMERB, its legislative oversight bodies, or the State of New Mexico during the past 36 months.
  8. Are there any circumstances under which your firm, or any individual in your firm, remits or receives compensation, finder’s fees or any other benefit to or from investment managers or third parties? If so, what is the extent of these payments in relation to the firm’s other revenue?
  1. Asset Allocation and Investment Policies
  1. Discuss the theory and methodology of the asset allocation models your firm employs. What are the differentiating advantages of your model? Has your model been revised in the last 5 years? If so, what was the change? How do you develop asset class assumptions and how often are your asset class assumptions updated?
  2. Discuss the theory and methodology for determining the inputs for the model.
  1. Provide your firm’s current inputs to the asset allocation model and include all asset classes for which your firm has developed inputs.
  1. Describe what your model portfolio looks like for a public pension fund client with a 7.75% target return and a 60% funded ratio. Include specific target allocations to various asset classes.
  1. Describe your firm’s capability to perform asset/liability modeling studies. Please include a sample copy of a recent study.
  1. Describe your firm’s view of market timing, dynamic allocation and tactical portfolio rebalancing.
  1. Describe your process for recommending changes to a pension system’s asset allocation in response to changes in the market environment.
  2. Explain your firm’s position/approach on the use of active versus passive management in the major asset classes. Explain your firm’s position/approach regarding internal investment management versus external investment management.
  3. Describe your firm’s ability to identify and evaluate new investment opportunities.
  1. Describe your firm’s capabilities and experience in the area of derivatives. Describe your philosophy and track record on synthetic replication for passive allocations. Describe elements of a due diligence process for assessing the risk control and performance characteristics of such investments.
  1. Describe your approach to assisting public fund clients on legislative matters and incorporating statutory requirements/restrictions into your firm’s consulting recommendations.
  2. Detail your firm’s approach to developing customized asset class structures, investment objectives, and risk management.
  3. Provide a copy of your most recent capital market forecast report.

F. Investment Manager Database

  1. Does your firm maintain an in-house/proprietary database of investment managers? If not, which vendor do you utilize for manager data? How many managers/ products are contained in the database(s) that you use?

If answered YES to in-house/proprietary database of investment managers, respond to the following questions.

  1. Do you charge investment managers direct or indirect fees to be included in your firm’s database? If so, describe the fees.
  2. Do you sell your manager database to third parties? If so, how do you receive compensation?
  3. Describe the competitive advantage that you perceive your database has over those used by other investment consultants.
  4. Describe your methodology and criteria for classification of managers by investment style, size, etc. How do you monitor consistency of style or style drift?
  5. How often are managers in your database reviewed? Under what circumstances are managers added to your database? Deleted?
  6. Describe how your firm gathers, verifies, updates, and maintains the data collected on managers for the database.
  7. How often do you meet with managers that are included in your database? Please describe a typical agenda for those visits.
  8. Do you meet with managers that are not included in your database?
  9. How many manager site visits did your staff conduct in 2012?
  10. Please provide a sample manager search report.

1.

G. Investment Manager Research & Evaluations

  1. Please describe any issues/concerns you have with NMERB’s current investment portfolio. Discuss the steps your firm would take to make a thorough analysis.
  2. Provide recommendations and the steps that could be taken to improve NMERB’s current portfolio.
  3. Describe your firm’s philosophy with respect to manager evaluations.
  1. What is your firm’s philosophy on manager turnover?
  1. Describe your firm’s process for evaluation and selection of investment managers.
  2. Describe how your firm’s process for evaluation and selection of investment managers adds value beyond the mere provision of raw data.
  3. How does your firm monitor and communicate developments at investment manager organizations to your clients?
  4. Describe the internal structure and organization of your manager research department. If no separate department exists, describe how this function is performed.
  5. Describe the manner in which external resources and sources of information are used in the research process. How does your firm integrate internal and external research?
  6. Describe the subject matter and frequency of research provided to clients, and how this research is distributed to clients.
  7. Describe any customized computer-based analytical tools your firm makes available to clients. Describe specific features.
  8. Describe your firm’s methodology for identifying and evaluating compelling strategies or asset categories for inclusion in client portfolios. To what extent do you collaborate with client investment staff in this process?
  9. Provide a copy of recently completed investment manager due diligence reports for fixed income, domestic equity, international equity and GTAA managers.

H. Performance Evaluation & Reporting

  1. Can your firm provide custom benchmarks, including investment style benchmarks and universe rankings?
  2. What amount of input and customization is available to a client in terms of modifying the content and format of an investment performance evaluation report? Are there additional charges for this request?
  1. Describe your firm’s view of the most critical factors and methods of evaluating and reporting performance.
  1. Do you calculate performance independently of the custodian? If so, do you reconcile your calculated performance to the custodians’ reports? If yes, please describe.
  2. How are performance benchmarks for the total fund, different asset classes and investment manager styles chosen and constructed?
  3. Do you use investment style benchmarks in your performance measurement process? What are the sources of the underlying data and how are these benchmarks calculated and maintained?
  4. Can your firm provide both gross and net of fee investment returns?
  5. Describe how the aggregate historical performance of your clients’ portfolios (while those assets were under your firm’s consultation) compares to that of broader universes in which your firm participates.
  6. What period of time is required to prepare reports after the end of each month and quarter?
  7. What performance and portfolio analytic systems does your firm make available to clients? How are these systems accessed?
  1. Describe your firm’s performance attribution capabilities. Include a breakdown of capabilities by total fund, asset class and investment manager level.
  1. Describe your capabilities in the development of risk/return characteristics at the total fund, asset class and investment manager level.
  1. Risk Management
  1. How do you define risk?
  1. How does your firm monitor risk for the portfolios it advises? List the measurements used when evaluating risk at the total fund, asset class and investment manager level. Describe your firm’s risk reporting capabilities. List any vendors or third parties used.
  1. What are your firm’s capabilities in risk allocation and risk budgeting or modeling at the total fund, asset class and investment manager level? Please provide examples of the firm’s risk budgeting/modeling experience.
  1. Capital Market Research
  1. Describe how internal research is structured and organized within your firm. Please describe how your research fits into the overall organizational structure of the firm.
  1. Describe how any external resources and sources of information are used in the research process.
  1. Describe your ability to provide client access to the firm’s computer based research tools. Do clients have direct access to your analysts and dedicated research team members?
  1. Describe your firm’s process for monitoring industry and market trends that impact public pension investment funds. Describe your firm’s process for

monitoring political, regulatory, and environmental influences that may impact a client’s investment program.

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