INVESTMENTADVISORYCOMMITTEECHARTER
I.Purpose
TheGeneralAssemblyhasestablishedtheInvestmentAdvisoryCommittee("IAC")toadvisetheStateTreasurerwithrespecttoinvestments. of the Teachers' and State Employees' Retirement System, the Local Government Employees' Retirement System. the Legislative Retirement System, the Firemen's and Rescue Workers' Pension Fund, the Consolidated Judicial Retirement System, and the North Carolina National Guard Pension Fund (hereinafter referred to collectively as the "Retirement Systems")1.
Thestatutestates,"ThecommitteeshallhaveadvisorypowersonlyandmembershipshallnotbedeemedapublicofficewithinthemeaningofArticleVI,Section9oftheConstitutionoftheNorthCarolinaorG.S.128-1.1."InordertohelptheIACfulfillitsadvisoryduties,theStateTreasurerhasadoptedthisInvestmentAdvisoryCommitteeCharter("Charter").TheIACshallperiodicallyreviewandevaluatethisCharterandmakerecommendationstotheStateTreasurerforchangesitdeemsareappropriate.
II.Composition
TheTreasurer'sGovernanceandTransparencyActof2009amendedN.C.G.S.section147-69.2(b1)toauthorizetheStateTreasurertoserveaschairmanexofficioandtoappointsixIACmembers.Twomembersshallbeselectedamongthemembersoftheboardoftrusteesofthe Teachers' and State Employees' Retirement System, the Local Government Employees' Retirement System. the Legislative Retirement System, the Firemen's and Rescue Workers' Pension Fund, the Consolidated Judicial Retirement System, and the North Carolina National Guard Pension Fund (hereinafter referred to collectively as the“RetirementSystems”); and four members selected from the general public . All six appointed . Four members public members musthaveexperienceinareasrelevanttotheadministrationofalarge,diversifiedinvestmentprogram,includingbutnotlimitedto,investmentmanagement,securitieslaw,realestatedevelopment,orabsolutereturnstrategies.
A.Terms.IACmembersserveatwillandtheirmembershipcanendatanytimeuponwrittennoticeofremovalwithorwithoutcauseasdeterminedbytheStateTreasurer.EachIACmembershallserveaslongastheStateTreasurerwhoappointedthemremainsinoffice,unlesssuchmemberisremovedearlierorresigns.
B. StandardofCare.NoIACmembershalloweanyfiduciary,trust,orsimilarobligationsinconnectionwithhisorhermembershipontheIACotherthanthedutytoactingoodfaithandasexpresslysetforthinthisCharterandapplicablelawandpolicies.
C. Orientation.AllIACmembersmustcompleteanorientationprogramwithinsixty daysofthedateoftheirappointment.TheGeneral Counsel and InvestmentManagement Division shall be responsible for conducting the orientation program.
1N.C.G.S.§147-69.2(b1).
Division shall be responsible for conducting the orientation program.
D. Ethics.Uponacceptinghisorherappointmentandannuallythereafter,eachIACmembershallberequiredtosignandsubmittoCompliance CounselGeneral Counsel or his or her designeeanaffirmationpledgingtoupholdboththeletterandthespiritoftheCodeofEthics.
E. Chair.Pursuanttothestatute,theStateTreasurershallbethechairmanexofficio.Thesedutiesincludebutarenotlimitedto:(1)callingspecialoremergencymeetings,whennecessary;(2)enforcingthegoverningcharterandpoliciesoftheIAC;(3)appointingorremovingIACmembers,theIACVice-ChairandstafftoservetheIAC;(4)appointingadesigneetoassumetheChair’sresponsibilitiesfortheIAC,whennecessaryand(5)conductingtheIACmeetingsinanefficientandeffectivemanner.
F. Vice-Chair.TheVice-Chair'sdutiesincludebutarenotlimitedto:(1)workingconstructivelywithallIACmembersandstaff;and(2)assumingtheChair’sresponsibilitiesfortheIACifspecificallyrequestedtodosobytheChair.
G. Secretary.TheSecretaryshallbetheDirector of Investment OperationsChief Operating OfficeroftheInvestmentManagementDivisionunlessotherwiseappointedbytheStateTreasurer.TheSecretary'sdutiesincludebutarenotlimitedto:(1)maintainingacurrentlistofIACmembers;(2)notifyingtheIACandthepublicofmeetings;(3)coordinatinganddisseminatinginformationtotheIAC;(4)maintainingofficialminutesandrecordsofallproceedingsfromIACmeetings;(5)preparingasdirectedbytheStateTreasurerpriortoeachmeetinganagendaforthemeeting,;and(6)facilitatingtheschedulingofeachmeetingandnotifyingtheIACmembersthereof.
H. LegalCounsel.TheGeneralCounseltotheStateTreasurershallserveas LegalCounseltotheIAC.LegalCounsel’sdutiesincludebutarenotlimitedto:(1)respondingtorequestsunderNorthCarolinapublicrecords laws;(2)ensuringcompliancewithopenmeetingslaws; (3) facilitating the IAC’s access to Compliance Counsel; and(43)monitoringIACmembers’compliancewiththeCode ofEthics.
III.Meetings
A. OpenMeetingLaws.AllmeetingswillbeheldincompliancewithNorthCarolina openmeetingslaw,whereapplicable.
B.ScheduleofMeetings.Eachyear,theIACwillset,publish,andpostontheStateTreasurer'swebsiteanannualscheduleshowingthetimeandlocationofregularmeetings.TheIACwilltypically meetat least quarterly[KS1]andmayconvenemoreoftenifcalledbytheStateTreasureroramajorityoftheIACmembers.
C. AttendancePolicy.IACmembersaretoattendmeetingsinperson.InurgentsituationswherepersonalattendanceisnotpossibleIACmembersmayattendbyteleconferenceorbyvideoconference.TheIACmayrequirethatstaff,consultants,andotherindividualsattendthemeetingstoprovideinformationasnecessary.
D. PublicComment.Attheendofeachmeeting,timewillbereservedforpubliccomment.TimeforpubliccommentmaybelimitedbytheChair.
IV.Responsibilities
TheIACshallberesponsibleforadvisingandassistingtheStateTreasurerintheareassetforthbelow.Inaddition,theIACwillperformanyactivitiesrelatedtothisCharterasdirectedbytheStateTreasurer.
A. AssistinSelectionandEvaluationoftheChiefInvestmentOfficer.IfrequestedbytheStateTreasurer,whentheChiefInvestmentOfficer("CIO")positionisvacantorisscheduledtobecomevacant,theIACwillassistintherecruitingprocess,interviewcandidates,and/orprovideinputonthecandidates.TheIACmayalsobeaskedtoprovideinputtotheStateTreasurerduringtheannualevaluationoftheCIO.
B. Self-AssessmentoftheIAC.InordertoensuretheIACisfunctioningaseffectivelyandefficientlyaspossible,theIACwillperiodicallyassessitsownperformanceandmakeappropriatechangeswiththeintentthattheassessmentwilloccuratleastbiannually.Duringsuchassessment,itwillalsodetermineiftheresponsibilitiesinthisCharterhavebeencarriedout.
C. ReviewandRecommendInvestmentPolicies.TheIACwillassistandadvisetheStateTreasurerontheestablishmentofthe investmentpoliciesandanyrelevantinvestmentguidelines.TheIACwill may periodicallyreviewtheexistingpoliciesandguidelinesandmakerecommendationsasnecessaryregardingmodificationsandenhancements On at least a biennial basis, the State Treasurer shall present an investment policy statement for the Retirement Systems investment program to the IAC for the IAC’s consultation. The investment policy statement must include descriptions of investment objectives and strategy, roles and responsibilities, permissible asset classes, asset allocation targets and ranges, risk management and compliance guidelines, and evaluation criteria necessary to measure investment performance.. Investment guidelines for Iinternally managed portfolios will be periodically presented to shall be subject to industry standard portfolio guidelines developed with periodic consultation by the Investment Advisory CommitteeIAC for their review and input.
D. ReviewAssetAllocations.TheIACwillreviewinformationpresentedtoitandadvisetheStateTreasureraboutthesuitabilityandproperuseofthecurrentandanyproposedassetclasses.TheIACwillreviewasset/liabilitystudiesandassetallocationstudiesfortheRetirementSystems.TheIACwillanalyzeandcommentondiversification,riskcontrol,assetclasstargetsandranges,andliquidity withinofthestatedinvestmentobjectives.
E.ReviewandCommentonInvestmentManagementStructure.TheIACwillreviewandcommentontheinvestmentmanagementstructureoftheRetirementSystemsatleastannually.Thereviewwillincludetheuseofinternalandexternalmanagement,thenumberandtypesofmanagersineachclass,theuseofactiveandpassivestrategies,anddiversification correlations amongand between portfolios.
F.ReviewandEvaluatetheSelectionandMonitoringofInvestmentManagers.TheIACwillreviewtheprocessusedbystaffandconsultantsintheselectionandmonitoringofinvestmentmanagers made for the Retirement Systems,andcompliancewithsuchprocess.TheIAChasnoindependentresponsibilityfortheselectionormonitoringofspecificmanagers.
G.ReviewPerformanceandCostReports.TheIACwillreviewthe performanceofthetotalinvestmentportfoliooftheRetirementSystems,eachassetclass,outside external investmentmanagers,andinternalmanagersatleastannuallyalongwiththecost-effectivenessoftheinvestmentprogram.Performanceandcostswillbecomparedtoestablishedbenchmarksanduniverses.TheIACwilladvisetheStateTreasureronthereasonablenessofthebenchmarksanduniverses.
H.ReviewandEvaluatetheCustodianArrangement.TheIACwillperiodicallyreviewinformationpreparedbythestaffandconsultantsaboutthequalityoftheservicesandthereasonablenessofthefeesforthecustodian.IfrequestedbytheStateTreasurer,theIACwillevaluateanddiscussfeesandservicesproposalsandofferobservationsaboutthestrengthsandweaknessesofcandidatesforcustodialandrelatedservices.
I.EvaluatetheSelectionofConsultants.IfrequestedbytheTreasurer,theIACwillevaluateproposalsandofferobservationsaboutthestrengthsandweaknessesofanycandidatesconsideredforgeneralorspecialized consultingservicesfortheRetirementSystems.
J.Evaluate Governance, Operations and Investment Practices. At least once every four years, the State Treasurer shall engage a commercial independent expert firm, pursuant to G.S. 147-69.3(g), to evaluate the governance, operations, and investment practices of the State Treasurer in order to develop recommendations for improvement. The State Treasurer must consult with the IAC to develop the scope of the evaluation.
I.K.Evaluate Ethics Policies. The State Treasurer is authorized and required to adopt certain ethics policies and procedures. The State Treasurer must consult with the IAC prior to adoption of such policies and procedures on the following topics: (1) Requiring that IMD adopt a Code of Ethics; (2) Requiring all employees of the Department of State Treasurer who have responsibility for matters related to investments to be provided with training with respect to the discharge of their duties and responsibilities to the Retirement Systems and other ancillary funds or investment programs enumerated in N.C.G.S. 147-69.2 “Ancillary Funds”; (3) Governing gifts to employees of the Department of State Treasurer who have responsibility for matters related to investments; (4) Imposing limitations on external investment managers' use of placement agents and other persons that appear before the Department of State Treasurer to ensure that these persons play only a proper role in investment opportunities; and (5) As a component of the investment due diligence, negotiations, and contracting process, requiring an independent assessment of whether circumstances exist that create a material risk that professional judgement or actions regarding a potential investment arrangement's recommendation, approval, or execution have been or will be unduly influenced by a direct or indirect personal interest.
V.Authority
TheIAChastheauthoritytoreviewbackgrounddata,historicalinformation,staffreports,consultants'reports,andanyotherdocumentsitdeemsreasonablynecessarytoformanopiniononthecapabilitiesofthestaff,investmentmanagers,custodianbanks,investmentconsultants,andotherserviceproviderstotheRetirement SystemsState Treasurer’s investment programs.Furthermore,theIACisauthorizedtoaskanyquestionsofindividualsthatarerelevanttotheservicestheyperformonbehalfoftheState Treasurer’s investment programsRetirement Systems.
TheIACalsohastheauthoritytocallupontheDepartmentofStateTreasurer'sChiefofStaff,CIO,GeneralCounsel,investmentconsultant(s),actuary,andauditor to assistitincarrying outitsresponsibilities;however,anyrequestforassistancefromoutsideserviceprovidersthatmightresultinadditionalfeesmusthavethepriorapprovaloftheStateTreasurer.
TheIACdoesnothavetheauthoritytoconvenemeetingstodiscussitemsofbusinessoutsideofthoseagreedtobytheStateTreasurer.
TheIACdoesnothavetheauthoritytosigncontracts,obligatetheStateTreasurer,orspend any portion of the operating budgetauthorize the expenditure of any portion of plan assetsthathasnotbeendesignated or authorized forIACpurposes.
VI.Expectations
IACmembersarenotexpectedtofindinvestmentopportunities,analyzeindividualinvestmentsorinvestmentmanagers,andengageinthetypesofday-to-dayinvestmentactivitiesperformedintheInvestmentManagementDivision.
IndividualIACmembersareexpectedto:(1)beinformedabouttheRetirementSystems' and other Ancillary Programs’ [MLC2]investmentpoliciesandpractices;(2)workconstructivelywithotherIACmemberstoreviewinvestmentactivities;(3)interactappropriatelywiththeStateTreasurer,thestaff,andoutsideserviceproviders;(4)bepreparedforallIACmeetingsbyreviewingagendasandsupportingmaterialspriortothemeetings;(5)attendIACmeetings,shareexpertise,andactivelyparticipateinthediscussions;(6)respectopenmeetingslawsbynotconveningmeetingswithfellowIACmemberstodiscussbusinessoftheRetirementSystemsoutsidetheproperlynoticedmeetings;(7)followconflictofinterest,disclosure,andconfidentialityrulesandpolicies;(8)dischargedutiessolelyintheinterestofthemembersandbeneficiariesandfortheirexclusivebenefit;(9)incuronlyreasonableexpensesincarryingoutdutiesasanIACmember,consistentwiththeoperatingbudgetofthe IAC;(10)liveuptohighethicalstandardsandavoidtheappearance ofimpropriety;(11)attendanorientationsessionandon-goingeducationopportunities,asappropriate;and(12)refrainfrommakingindividualtime-consumingrequeststostaffwithoutadirectiveofthefullIAC.
VII.Compensation
TheIACmemberswillservewithoutcompensationbutshallreceivereimbursementsforexpensesandallowancesconsistentwiththosegrantedtomembersofotherStateboards.IAC memberswillbereimbursed forexpensesincurredintheperformance oftheirdutiesaslongastheyarereasonable,documented,andincompliancewith theparameterssetbytheStateTreasurer.
VIII.Staffing
TheCIOoftheDepartmentofStateTreasurer'sInvestmentManagementDivisionwillattendandstaffallIACmeetings.TheCIOshallensureappropriateinternalstaffmembersareassignedtoassisttheIACandsupporttheIAC'sactivitiesbypreparingmeetingmaterials,performingresearch,andrenderingothertypesofassistanceasreasonablyrequestedbytheIAC.
AdoptedbyStateTreasurerJanet CowellDale R. FolwellonMarch__5,20175.
[KS1]To discuss with Treasurer
[MLC2]Kevin, should I include Ancillary Governmental Participant Program since (b1) changed to not be limited to Retirement Systems?