State Universities Retirement System of
Illinois (SURS)
Request for Proposal
Commodities
2015
Table of Contents
I. Request For Proposal Summary Statement 3
II. Background Information 3
III. Specific Services Requested from the Investment Manager 5
IV. Diversity Goals 5
V. Minimum Qualifications 5
VI. RFP Specifications 6
VII. Projected Schedule of Events 9
Appendix A Minimum Qualifications Certification 10
Appendix B Disclosures per Illinois Pension Code Section 1-113.21 12
Associated Documents
Commodities Manager Questionnaire (Word document) (See Attachment)
Historical Spreadsheet Data (Excel document) (See Attachment)
eVestment Alliance Database Submission (Refer to RFP Specifications)
State Universities Retirement System (SURS)
Request for Proposal (RFP)
2015
Commodities Manager Search
I. RFP Summary Statement
The State Universities Retirement System (“SURS” or the “System”) is requesting proposals from qualified firms to manage a diversified commodities portfolio which, after fees, exceeds the return of the agreed upon benchmark.
Respondents must answer all applicable questions in the questionnaire sections in order to be considered.
II. Background Information
Agency Description
SURS is the administrator of a cost-sharing, multiple employer public employee retirement system. SURS membership includes employees of the Illinois public universities and other affiliated organizations. Currently, SURS membership totals more than 200,000 active, inactive and retired participants. SURS maintains both a defined benefit plan (DB plan) and defined contribution plan.
Defined Benefit Plan Investment Program
As of March 31, 2015, the DB plan trust totaled $17.4 billion with a target asset allocation as follows:
Target
U.S. Equity 23%
Non-U.S. Equity 19%
Global Equity 8%
Core Fixed Income 19%
Emerging Markets Debt 3%
TIPS 4%
Private Equity 6%
Real Estate 6%
REITS 4%
Hedged Strategies 5%
Opportunity Fund 1%
Commodities 2%
Legislated Investment Restrictions
Section 1-110.6 of the Illinois Pension Code (40 ILCS 5/1-110.6) places certain obligations on “private market funds” (including commodities funds) concerning the control of property in the Republic of Sudan, the conduct of business operations in the Republic of Sudan, and direct or indirect investment in any company organized in, whose principal place of businesses is in, or conducts business operations in the Republic of Sudan.
Section 1-110.15 of the Illinois Pension Code (40 ILCS 5/1-110.15) requires SURS to divest or request managers to divest from investments in “scrutinized companies” that have certain business or investment relations with the Government of Iran.
Section 1-110.16 of the Illinois Pension Code (40 ILCS 5/1-110.16) requires SURS to divest in companies that boycott Israel by engaging in actions that are politically motivated and are intended to penalize, inflict economic harm on, or otherwise limit commercial relations with the State of Israel or companies based in the State of Israel or in territories controlled by the State of Israel.
Investment managers seeking consideration for this mandate should be familiar with and agree to comply with these provisions of the Illinois Pension Code.
State Fiduciary, Ethics, and Diversity Laws
Sections 1-109, 1-109.2, 1-110, 1-125. 1-130, 1-135, and 1-145 of the Illinois Pension Code (40 ILCS 5/1-109, 1-109.2, 1-110, 1-125, 1-130, 1-135, 1-145) contain fiduciary, ethics, and prohibited transaction provisions that may apply to investment managers. Investment managers seeking to be considered for this mandate should be familiar with and must comply with such applicable provisions of the Illinois Pension Code.
Section 1-109.1 of the Illinois Pension Code (40 ILCS 5/1-109.1) encourages the Board to increase the use of minority-owned businesses, female-owned businesses, or businesses owned by persons with disabilities as emerging investment managers, minority investment managers, broker-dealers, or vendors for services and contracts; and to increase the racial, ethnic, and gender diversity of its fiduciaries (including investment managers and consultants), to the greatest extent feasible within the bounds of financial and fiduciary prudence. To this end, the Board encourages minority-, female- and persons with a disability-owned investment managers to submit proposals to this RFP.
Section 50-37 of the Illinois Procurement Code concerning prohibitions on political contributions for certain vendors (30 ILCS 500/5037) may or may not apply to SURS investment managers or consultants. SURS is not subject to the Illinois Procurement Code, generally (30 ILCS 500/115.100). However, each investment manager and consultant should be familiar with the provisions of section 50-37 of the Procurement Code and comply with this section if the investment manager or consultant deems it appropriate.
Additional Disclosure Requirements
Section 1-113.21 of the Illinois Pension Code (40 ILCS 5/1-113.21), added by Public Act 98-1022, effective January 1, 2015, provides that no contract, oral or written, for investment services, consulting services, or commitment to a private market fund shall be awarded by a retirement system, pension fund, or investment board established under the Code unless the investment advisor, consultant, or private market fund first discloses:
(1) the number of its investment and senior staff and the percentage of its investment and senior staff who are (i) a minority person, (ii) a female, and (iii) a person with a disability; and
(2) the number of contracts, oral or written, for investment services, consulting services, and professional and artistic services that the investment advisor, consultant, or private market fund has with (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; and
(3) the number of contracts, oral or written, for investment services, consulting services, and professional and artistic services the investment advisor, consultant, or private market fund has with a business other than (i) a minority owned business, (ii) a female owned business or (iii) a business owned by a person with a disability, if more than 50% of services performed pursuant to the contract are performed by (i) a minority person, (ii) a female, and (iii) a person with a disability.
Each Proposer responding to this RFP must disclose this information in the form provided in Appendix B.
III. Specific Services Requested from the Investment Manager
SURS is requesting information from qualified firms to manage a diversified commodities portfolio. The purpose of this allocation is to reduce total plan risk and diversify the portfolio. It is anticipated that two or more investment managers will be hired to manage a total commitment of 2% of the total SURS portfolio. SURS will consider the following in making its decision:
· Stability and General Experience of the Firm; as measured by the stability of the financial condition of the firm and experience in providing active commodity fund management 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 – Similar work performed for other clients.
· Investment Philosophy and Process – Sound investment philosophy with consistent process implementation, as measured by outcomes, communication, and the implementation of risk controls.
· Fees – Reasonableness and competitiveness of fees.
· RFP Proposal – Completeness, clarity and responsiveness to requirements as requested in the RFP and accompanying template.
IV. Diversity Goals:
In September 2009, SURS established a goal of 10% of new allocations to alternative investments be made to firms owned by minorities, females or persons with a disability (MFDB). This goal is reviewed annually and presented to the Board as a component of the Investment Policy, most recently at the September 18, 2014 Investment Committee meeting.
V. Minimum Qualifications:
The Proposer must meet all of the following minimum qualifications to be given further consideration. Failure to satisfy any of these qualifications and requirements upon submittal of the Proposal will result in the rejection of the Proposal. The Proposer must certify in writing on the Minimum Qualifications Certification, Appendix A, that it meets all of the minimum qualifications. Such certification must include evidence of how each qualification is met and must be signed by an individual who is authorized to bind the Proposer contractually. Qualified firms meeting the Illinois statutory definition of “Minority owned business”, “Female owned business” or “Business owned by a person with a disability” are exempt from (5), (6), and (7) below and will be evaluated for further consideration at SURS’ discretion.
1. 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).
2. Proposing firm must agree to serve as a “fiduciary” to the Fund within the meaning of Illinois legislation and to act in accordance with all requirements and standards of conduct applicable to fiduciaries.
3. Proposer and its proposed team have all authorizations, permits, licenses and certifications required by federal and state laws and regulations to perform the services specified in this RFP at the time Proposer submits a response to the RFP. Proposer’s audited financial statements must be made available for review.
4. Proposer will comply with all legislation regarding investment restrictions, applicable State fiduciary, ethics, and diversity laws, including any additional disclosure requirements as outlined above.
5. The proposing firm must have an established track record of at least 3 years managing an active diversified commodities portfolio as of 6/30/15. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.
6. The proposing firm must have a minimum firm-level commodities AUM of $500 million as of 6/30/2015. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.
7. At least 50% of the proposed fund’s exposure will be achieved through derivatives (futures, options, swaps, for example). Strategies utilizing commodity-related equities, in part, will be considered.
8. The proposing firm must provide performance track record (in managing non-proprietary capital) of the proposed fund for the RFP. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.
SURS retains the sole right to decide whether any Proposer is qualified to bid, including determining whether any Proposer’s qualifications are sufficiently comparable to satisfy all of the above minimum qualifications.
VI. RFP Specifications:
If, in response to this RFP, trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged or confidential and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business, such claim must be clearly made and such information must be clearly identified. The information must be identified in theRFP response and provided separatelyfrom the remainder of theRFP response. Such a claim is not definitive. SURS has the right and obligation to determine whether such information is exempt from disclosure under the Illinois Freedom of Information Act (5 ILCS 140/7 and 7.5). However, no information will be determined to be proprietary, privileged or confidential unless it is identified and separated as indicated herein.
Specific Items Requested from Respondent Firms:
Enumerated below are the specific items requested from respondent firms.
1. Letter of Transmittal. A letter of transmittal must be submitted on the Proposer’s official letterhead. The letter must identify all documents provided collectively as a response to the RFP, and must be signed by an individual authorized to bind the Proposer contractually. An unsigned proposal will be rejected. The letter must also contain the following:
a. Statement that the proposal is being made without fraud or collusion; that the Proposer has not offered or received any finder’s fees, inducements or any other form of remuneration, monetary or non-monetary, from any individual or entity relating to the RFP.
b. Statement that discloses any current business relationship or any current negotiations for prospective business with the Board or any SURS Board Members or SURS Staff.
- Statement that the proposing firm has been in compliance with the System’s Quiet Period Policy and Ex-Parte Communications Policy.
2. Minimum Qualification Certification. The Proposer must complete the certification in Appendix A and provide all supporting documentation.
3. Diversity Disclosures per Illinois Pension Code Section 1-113.21. The Proposer must complete the required disclosures regarding staff and vendor diversity in the form provided in Appendix B.
4. Commodities Manager Questionnaire and associated Excel data. The Proposer must address the questionnaire items in the RFP in the order in which they appear in the RFP. Further, each question number and question in the RFP shall be repeated in its entirety before stating the answer. Certain questions may require supporting documentation, which should be submitted as attachments to the questionnaire. The Excel file requests historical information pertaining to the Proposer. Proposers who fail to complete the requested information in their entirety will not be considered.
5. eVestment Alliance Database Submission. The Offeror’s product and performance data will also be analyzed through the use of a third party database currently utilized by our Investment Consultant, NEPC, LLC. The database is provided by eVestment Alliance, which can be located on the web at: www.eVestmentalliance.com. Populating the eVestment Alliance database with your firm and product information is essential to the completion of the RFP process. If the database is not fully populated, your firm’s response will be considered incomplete and could be grounds for discontinuing consideration of your firm’s product for this search.
The eVestment Alliance database gathers firm and product data including but not limited to:
§ Assets under management
§ Qualitative description of firm and product
§ Investment professionals gained and lost, work experience and education
§ Product holding and characteristics
§ Performance for vehicle recommended
Please be sure to leave no fields blank. Respond as 0, none, or N/A only when necessary. You will not be contacted by our consultant to fill in missing fields. Use additional comment fields provided to make qualifying notes as applicable.
If your firm does not already utilize the eVestment Alliance database, you can participate by sending an email with your contact information to: .
A representative from eVestment Alliance will contact you shortly after to establish the firm in the database. There is no charge for supplying data to eVestment Alliance.