Los Angeles City Employees’ Retirement System
Active U.S. Bank Loan Mandate Search
Initiation: November 6, 2013
Response deadline: December 13, 2013
TABLE OF CONTENTS
A. INTRODUCTION 1
B. MINIMUM QUALIFICATIONS 1
C. Schedule 3
D. SUBMISSION REQUIREMENTS 3
E. ATTACHMENTS 5
1. Minimum Qualification Certification 5
2. Issue Type and Quality Allocation 6
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3. Assets Under Management 8
4. Fee Proposal 9
5. Clients, References and Conflicts 10
6. Standards of Conduct 11
F. EXHIBITS 12
1. Scope of Services 12
2. Questionnaire 13
3. General Conditions and Compliance 14
a. General Conditions 14
b. Standard Provisions for City Contracts (rev 03/09) 14
c. City Required Forms 14
4. Sample of LACERS Investment Agreement (Contract) 15
Active U.S. Bank Loan Mandate Search
A. INTRODUCTION
The Los Angeles City Employees’ Retirement System (LACERS) administers an investment portfolio with approximately $13.0 billion in assets. In this search, LACERS is seeking one or more qualified investment management firms to actively manage approximately $65 million in a long-only U.S. bank loan investment strategy focused on broadly syndicated loans. The proposed strategy must currently be benchmarked against one of the two following indices: Credit Suisse Leveraged Loan Index and S&P/LTSA Leveraged Loan Index.
Emerging Managers (as defined by LACERS Emerging Investment Manager Policy) are encouraged to participate in this manager search, subject to LACERS investment policies (includes the LACERS Emerging Investment Manager Policy) and any provisions specifically stated in this search document that pertain only to Emerging Mangers.
LACERS will retain sole discretion to determine the appropriate number of managers and mandate sizes based the aggregate pool of non-emerging and emerging manager finalists.
This document details the requirements and instructions for interested Proposers, who meet the minimum qualifications as outlined below.
B. MINIMUM QUALIFICATIONS
A proposing firm must fulfill all of the minimum qualification requirements to LACERS satisfaction to be given further consideration. The Proposer must complete the Minimum Qualification Certification (Attachment 1) substantiating that the Proposer satisfies all minimum qualifications and requirements. Failure to satisfy each of the minimum qualifications may result in the immediate rejection of the proposal.
1. The Proposer must be a registered investment advisor under the Investment Advisers Act of 1940 and must be a fiduciary to LACERS. If exempt from registration, please state the nature of exemption.
2. The Proposer must be directly responsible for the management of the account, and all personnel responsible for the account must be employees of the firm or a legal joint venture partner.
3. The senior members of the investment team must have worked together at the firm for at least one year.
4. The portfolio manager must have a minimum of five-year verifiable GIPS-compliant performance history actively managing broadly syndicated U.S. bank loans for institutional clients. Emerging Managers see Minimum Qualification Number 13.
5. The firm must have a minimum of $50 million under management in the proposed product as of June 30, 2013.
6. The proposed product’s assets under management must be of sufficient size that LACERS’ expected mandate size would not comprise more than 20% of the proposed product total assets.
7. Must be willing to accept the Credit Suisse Leveraged Loan Index as the mandate benchmark along with an objective of outperforming the benchmark by 50 basis points (net-of-fees), annualized over a full market cycle (normally three-to-five years).
8. At least 60% of rolling twelve (12) month information ratios for the proposed product must be positive versus the product benchmark and the product benchmark is one of the options indicated in Section A, gross of fees, for the last five (5) years (36 of 60 months) ended June 30, 2013.
9. The proposed product must have produced an average annualized rolling 60-month information ratio of at least 0.50 since inception as of June 30, 2013 versus the product benchmark and the product benchmark is one of the options indicated in Section A.
10. The monthly and quarterly product composite returns and quarterly portfolio characteristics since inception for each proposed product have been submitted to Wilshire Associates’ manager product databases through June 30, 2013 via the Compass portal (http://compassportal.wilshire.com) and have been verified as to their accuracy versus company performance records for each product.
11. A Wilshire Due Diligence Questionnaire (“DDQ”) for the subject product has been completed and submitted to Wilshire’s Manager Research group in the past two years as of June 30, 2013. (If a DDQ has not been completed and submitted within the past two years as of June 30, 2013, then the Questionnaire located in Exhibits Section F.2 must be completed according to the instructions in Section D. Submission Requirement.) NOTE: Proposals must be directed to in order to be considered.
12. The performance history submitted to Wilshire Associates’ manager product databases must be actual results (not simulated or back-tested) and fully in compliance with CFA Institute (CFAI) Global Investment Performance Standards (GIPS).
13. Emerging Managers are required to submit GIPS-compliant performance information for no less than the most recent three years of their five year verifiable track record.
14. The Proposer must carry the following insurance coverage or must have applied for it by contract execution:
a. General Liability / --- / min / $ 1,000,000b. Error and Omissions (Professional Liability) / --- / min / $ 1,000,000
c. Fiduciary Liability / --- / min / $ 1,000,000
d. Workers’ Compensation and Employer’s Liability / --- / min / $ 1,000,000
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LACERS reserves the right to require a higher insurance coverage, if it deems necessary.
Please see the LACERSGeneral Conditions, No.30,Bonding, Insurance and Indemnificationfor evidence of insurance coverage requirements.
All minimum qualifications, except for no.14 – insurance coverage, must be met as of, December 13, 2013 – 5:00 P.M. Pacific Standard Time (PST).
C. SCHEDULE
1. Search Document Available to Prospective Proposers November 6, 2013
Should a firm need further clarification on the specifications contained in this document, the Proposer may e-mail questions to . The subject line of the e-mail should show the name of your firm and ‘Active U.S. Bank Loan Mandate Search’. Responses to questions will be posted at:
http://www.wilshire.com/investment-consulting/manager-research/manager-search
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2. Written Questions Submission by E-mail November 20, 2013 –
5:00 P.M. PST
3. Response to Written Questions Posted on Wilshire’s Website: December 4, 2013
4. Final Date for Proposal Submission December 13, 2013 – 5:00 P.M. PST
5. Interviews of Finalists TBD
6. Contract Start Date TBD
D. SUBMISSION REQUIREMENTS
1. Response Format. To be eligible for evaluation, a proposal must adhere strictly to the format set forth below. Failure to do so may result in disqualification. Proposers must address each of the required sections indicated below. Completeness, clarity and brevity are stressed in the responses. All forms provided in this response must be completely filled out. If a question does not apply to you, please write in “not applicable” and then state the reason why the question does not apply to your firm.
The content and sequence of the proposal will be as follows:
Section Title
I Cover Page
II Table of Contents
III Letter of Transmittal
IV Required Documents
I. Cover Page
Title for cover page: “Active U.S. Bank Loan Mandate Search”.
II. Table of Contents
Immediately following the cover page, there must be a comprehensive Table of Contents of the material included in the proposal. The Table of Contents must clearly identify the proposal section/subsection and the applicable page numbers.
III. Letter of Transmittal
A letter of transmittal must accompany all responses and be placed as the first page of this search document. The letter of transmittal must further state that the response to this search is valid for six (6) months subsequent to the proposal due date. The letter of transmittal MUST:
1. Identify the search as “Active U.S. Bank Loan Mandate Search”;
2. Identify the submitting organization;
3. Identify the name and title of the person authorized by the organization to contractually obligate the organization;
4. Identify the names, titles, telephone and fax numbers, and e-mail addresses of persons to be contacted for clarification;
5. Certify that your firm has fully complied with all provisions of this document and that all statements are true and accurate, and that the firm has not knowingly made any false or misleading statements in its proposal; Emerging managers must certify that their firm qualifies as an Emerging Manager pursuant to the Emerging Manager Investment Manager minimum criteria contained in the LACERS Emerging Investment Manager Policy – Public Markets.
6. Be signed by a person authorized to contractually obligate the organization.
IV. Required Documents
1. Minimum Qualification Certification (see Attachment 1)
2. Allocation Based on Issue Type and Quality (see Attachment 2)
3. Assets Under Management (see Attachment 3)
4. Fee Proposal (see Attachment 4)
5. Clients and References (See Attachment 5)
6. Standards of Conduct (See Attachment 6)
7. Scope of Services (See Exhibit 1)
8. (if applicable) Questionnaire (see Exhibit 2)
9. City requirements (see Exhibit 3 – General Conditions and Compliance)
10. Sample of LACERS Investment Management Agreement (Contract) (see Exhibit 4)
2. Responses including all Required Documents must be e-mailed to and no later than December 13, 2013 – 5:00 P.M. PST.
E. ATTACHMENTS
ATTACHMENT 1
MINIMUM QUALIFICATION CERTIFICATION
Proposer Firm Name: ______
The Proposer warrants that it will meet all of the Minimum Qualifications presented in
Section B by December 13, 2013.
If submitting proposal as an Emerging Manager according to the LACERS' definition, the Proposer certifies that the firm meets this definition.
______
Authorized Signature Print Name
______
Title Date
Active U.S. Bank Loan Mandate Search Page 5
ATTACHMENT 2
ALLOCATION BASED ON ISSUE TYPE
Proposer Firm Name: ______
Complete the following two tables (in percent rounded to nearest whole number) in independent worksheets within a single Excel spreadsheet, providing information for the subject product for every quarter-end from inception through 6/30/13, and provide it as Appendix I in search submission materials. Do not send data as .PDF. Password protection is acceptable, as long as the password is provided in the submission documents.
ATTACHMENT 2 (continued)
ALLOCATION BASED ON QUALITY
ATTACHMENT 3
ASSETS UNDER MANAGEMENT
Proposer Firm Name: ______
Complete the following table in an Excel worksheet, providing information for the subject product for each period indicated, and provide it as Appendix II in search submission materials. Do not send data as .PDF. Password protection is acceptable, as long as the password is provided in the submission documents.
as of 6/30/13 / as of 6/30/12 / as of 6/30/11 / as of 6/30/10 / as of 6/30/09 / as of 6/30/08Total AUM for all firm products (in US$ million)
Total # of accounts
Average account size (US$ million)
Total AUM for Institutional Clients (US$ million)
Average account size of Institutional Clients (US$ million)
Total AUM for proposed product
(in US$ million)
Total # of accounts
Average account size (US$ million)
Total AUM Institutional Clients (US$ million
Total # Institutional Clients
# of accounts gained
Amount (US$ million) gained
# of accounts lost
Amount (US$ million) lost
ATTACHMENT 4
FEE PROPOSAL
Proposer Firm Name: ______
1. Provide the fee schedule for this Product as disclosed in the firm’s ADV (if applicable). Under the firm’s published fixed fee schedule, what would the annual cost (expressed in basis points per annum) be to LACERS if the mandate size is assumed to be $65 million? State if fee is based on separate account or comingled vehicle.
Emerging Managers should also submit a fee proposal based on a mandate size that is 20% of their product AUM as of June 30, 2013 or $10 million AUM, whichever AUM figure is larger. State if fee is based on separate account or comingled vehicle.
2. Provide the following information for use in a performance fee structure calculation:
a. Base Fee: the firm’s proposed annual fee (quoted in basis points per annum) calculated on average market value of assets under management in the account, paid quarterly in arrears that would be considered the minimum fee the firm would receive regardless of poor performance.
b. Participation Rate: the firm’s proposed annual percentage rate representing the percentage share of any alpha (the excess performance above the mandate benchmark expressed in basis points) it produces in a one-year period.
c. Maximum Fee: the total fee, consisting of Base Fee and Performance Fee combined, expressed in basis points per annum on average market value of assets, that the firm proposes as the maximum fee it can earn in any one-year period.
d. Describe any additional costs or fees (not included in a through c above) that LACERS would be expected to pay to the firm if the mandate is managed in a separate account.
3. Describe any additional set-up or on-going operational costs (legal fees, audit fees, country registration fees, etc.) that LACERS could expect to incur as a result of investing in the firm’s Product.
4. Is your firm willing to accept a fee structure that employs a “high-water” component? If not, how would you propose that both current and since inception results get reflected in the performance fee calculation?
Attachment 5
Clients and References
A. Provide references of the five (5) largest public pension plan clients (by portfolio asset size) using the format below. Please secure advanced permission to contact at least three (3) of these references. If there are fewer than three references, then include all.
Client Name / Mandate / Relationship since (month/year) / AUM (US$ million) / Contact Name / Title / Telephone# / E-mail1.
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B. Provide a list of all accounts that have been lost from the product within the last five (5) years using the format below:
Client Name / Mandate / Size of Fund (US$ million) / Reason(s) for Termination1.
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ATTACHMENT 6
STANDARDS OF CONDUCT
Please complete the Standards of Conduct form and return as Exhibit 5 of the Required Documents.
STANDARDS OF CONDUCT