Pension Reserves Investment Management Board 84 State Street, Suite 250 Boston, Massachusetts 02109 February 4, 2003 Dear Potential Provider: The Massachusetts Pension Reserves Investment Management Board (PRIM) is requesting proposals from qualified firms interested in providing enhanced cash investment management services. In order for proposals to be considered by PRIM, each prospective provider must respond to the Request for Proposals by submitting an electronic copy of its proposal via e-mail by 3:00 p.m., EST, Tuesday, March 4, 2003 to [email protected]. In addition, an original of the proposal and four copies should be sent to: Mr. Stanley P. Mavromates, Jr. Deputy Chief Investment Officer Senior Investment Officer, Public Markets Pension Reserves Investment Management Board 84 State Street, Suite 250 Boston, Massachusetts 02109 Further instructions for proposal submission, including information regarding the number of copies to be sent to Wilshire Associates, are included in the Request for Proposals. Questions concerning the Request for Proposals must be submitted by 3:00 p.m., EST, Tuesday, February 18, 2003. 1 Timothy P. Cahill, Chair James B. G. Hearty, Executive Director
Transcript
Pension Reserves Investment Management Board
84 State Street, Suite 250
Boston, Massachusetts 02109
February 4, 2003
Dear Potential Provider:
The Massachusetts Pension Reserves Investment Management Board (PRIM) is requesting proposals from qualified firms interested in providing enhanced cash investment management services.
In order for proposals to be considered by PRIM, each prospective provider must respond to the Request for Proposals by submitting an electronic copy of its proposal via e-mail by 3:00 p.m., EST, Tuesday, March 4, 2003 to [email protected]. In addition, an original of the proposal and four copies should be sent to:
Mr. Stanley P. Mavromates, Jr.Deputy Chief Investment Officer Senior Investment Officer, Public MarketsPension Reserves Investment Management Board84 State Street, Suite 250Boston, Massachusetts 02109
Further instructions for proposal submission, including information regarding the number of copies to be sent to Wilshire Associates, are included in the Request for Proposals. Questions concerning the Request for Proposals must be submitted by 3:00 p.m., EST, Tuesday, February 18, 2003.
We appreciate the time and effort required to respond to this Request for Proposal. Each firm submitting a proposal to PRIM can be assured that the same time and effort will be expended in evaluating the proposals that are submitted for consideration. We look forward to your response.
Sincerely,
James B. G. Hearty
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Timothy P. Cahill, ChairJames B. G. Hearty, Executive Director
Table of ContentsI. INTRODUCTIONII. BACKGROUND INFORMATION
A. LEGAL STRUCTURE OF PRIM.B. PRIM’S ADVISORS. 5C. GENERAL DESCRIPTION OF PRIM’S ASSETS.D. TOBACCO DIVESTITURE.
III. SCOPE OF SERVICES 6IV. MANAGEMENT AGREEMENT 6V. PROPOSAL SPECIFICATIONS 7
A. PROPOSAL DEADLINE. 7B. REQUIRED ATTACHMENTS AND ENCLOSURES. 7C. PUBLIC RECORD. 8D. WITHDRAWAL/IRREVOCABILITY OF RESPONSES. 8E. WAIVER/CURE OF MINOR INFORMALITIES, ERRORS AND OMISSIONS. 8F. COMMUNICATIONS WITH PRIM. 9G. QUESTIONS RELATING TO THIS RFP. 9H. INCURRING COSTS 9I. REJECTION OF PROPOSALS. 9
VI. SELECTION PROCESS 10A. NON-QUALIFYING PROPOSALS. 10B. SELECTION OF FINALISTS. 10C. SELECTION OF INVESTMENT MANAGERS. 10
VII. TENTATIVE TIME TABLE 10VIII. MINIMUM CRITERIA 11IX. SELECTION CRITERIA. 12X. QUESTIONS AND REQUESTS FOR INFORMATION 14XI. FEE PROPOSAL 26XII. REPRESENTATIONS AND WARRANTIES 27XIII. Exhibits 28
A. PRIM Asset Allocation & Investment Managers 29B. Sample Investment Management Agreement 32C. Disclosure Forms 50D. Chapter 32 of Massachusetts General Laws 59E. Massachusetts - The Conflicts of Interest Law 89
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Pension Reserves Investment Management Board
REQUEST FOR PROPOSALS
ENHANCED CASHINVESTMENT MANAGEMENT SERVICES
I. INTRODUCTION
The Massachusetts Pension Reserves Investment Management (PRIM) Board is soliciting proposals from firms interested in providing Enhanced Cash Investment Management Services for the daily “sweeping” of the excess cash in each of PRIM’s portfolios. The average daily balance in the “sweep” vehicle is approximately $650 million. The Board will accept and evaluate proposals that are expected to generate at least 50 basis points of alpha over three-month LIBOR per annum. In addition, the investment strategy has to meet PRIM’s daily liquidity needs. More detailed descriptions of these services are set forth under the heading "SCOPE OF SERVICES".
II. BACKGROUND INFORMATION
A. Legal Structure of PRIM
The Pension Reserves Investment Management (PRIM) Board is charged with the responsibility of investing and reinvesting the assets of the Pension Reserves Investment Trust (PRIT) Fund. The PRIT Fund is a pooled investment fund consisting of the assets of the State Employees' and Teachers' Retirement Systems as well as assets of other public employee retirement systems in the Commonwealth of Massachusetts (referred to as participating and purchasing systems). The PRIT Fund's primary investment objective is to accumulate assets through investment earnings and other revenue sources to meet future pension liabilities. As of December 31, 2002, the PRIT Fund had assets of approximately $26.0 billion. PRIT funds are generally invested with a longer-term
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perspective and higher target returns than most retirement systems. The Fund was originally established to address the unfunded liability of the pension system. The Massachusetts State Teachers’ and Employees’ Retirement Systems Trust Fund (“MASTERS”) merged into the PRIT Fund as of December 31, 1996.
The nine-member PRIM Board is chaired by the State Treasurer and Receiver-General of the Commonwealth, Timothy P. Cahill. The Governor or his designee is also a member of the Board. Other members include appointees of both the Governor and Treasurer, and four representatives of State employees and teachers. All members serve without compensation.
The Board oversees the Fund under the terms of its Operating Trust dated July 15, 1988 and most recently amended on September 22, 1998. The members of the Board, in conjunction with the Executive Director, who serves at the pleasure of the Board, determine policies and make decisions concerning the administrative and investment operations of the Fund.
The PRIM Board has established advisory committees, Investment, Administration, Audit and Real Estate, to provide a broader range of input to the Board on an informal basis. These committees are generally comprised of two or three Board members and private citizens with investment or business expertise. PRIM's investment managers deal primarily with the staff and Investment Committee. All policies and investments are ultimately approved by the Board.
B. PRIM’s Advisors
Outside advisors are engaged for their particular expertise and retained to assist the Board and its staff in the areas of General Portfolio Strategy and Investments, Real Estate, and Private Markets. Wilshire Associates is PRIM's general consultant, Pathway Capital is the alternative investment consultant, and The Townsend Group and Morris & Morse provide real estate consulting services. PricewaterhouseCoopers, certified public accountants, are the Fund’s auditors. Mellon Bank is the Fund's custodian and is responsible for providing record-keeping and analytic performance valuations for the Fund.
C. General Description of PRIM’s Assets
Exhibit A includes a description of PRIM’s asset allocation as of December 31, 2002.
D. Tobacco Divestiture
On October 7, 1997, the Massachusetts legislature enacted legislation, H. 3905, that forbids the PRIT Fund from purchasing securities “of any company which derives more than 15 percent of its revenues from the sale of tobacco products.” The legislation also required the PRIT fund to divest itself of all such securities within three years; this divestment was largely completed before the end of 1997.
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III. SCOPE OF SERVICES
The purpose of this Request for Proposal is to select an investment adviser to manage PRIM’s enhanced cash portfolio of the daily “sweeping” of excess cash in each of PRIM’s portfolios. The average daily balance in the “sweep” vehicle is approximately $650 million in assets. PRIM will accept proposals to manage these assets that are expected to generate at least 50 basis points of alpha over three-month LIBOR per annum. In addition, the investment strategy used to manage these assets has to meet PRIM’s daily liquidity needs. The average duration of the portfolio is targeted at 0.5 years and will not exceed 1 year. The portfolio is expected to maintain an average market weighted quality to a level equal to AA or better quality rating. Proposals submitted for other strategies will NOT be accepted.
PRIM may select an investment adviser based on PRIM’s evaluation of the Proposals in accordance with the Selection Criteria contained in Section IX of this Request for Proposal. Investment advisers selected to perform these services will be required to perform the following additional services for PRIM: (1) submit monthly asset, transaction and performance statements within two weeks of each calendar month end; (2) attend semi-annual performance reviews in Boston, Massachusetts; (3) provide monthly accounting and performance reconciliations to PRIM’s custodian; and (4) participate in annual site visits.
Currently, all funds of PRIM, including the funds to be managed in accordance with this RFP, are subject to the investment restrictions as detailed in Schedule C of the standard investment management agreement.
IV. MANAGEMENT AGREEMENT
PRIM will require that the manager or managers selected enter into its standard investment management agreement (the “Agreement”), including the appropriate investment guidelines and reporting requirements which are attached to this RFP as Exhibit B. Each firm responding to this RFP shall be required to state under the Representations and Warranties, set forth in Section XII hereof, that it will agree to and execute a contract containing the provisions set forth in Exhibit B.
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V. PROPOSAL SPECIFICATIONS
A. Proposal Deadline
The completed proposal, which must include all attachments, must be delivered electronically via e-mail to [email protected] by 3:00 p.m. EST on Tuesday, March 4, 2003 (the “Proposal Deadline”) to PRIM. Any Proposal delivered after the Proposal Deadline will not be considered. In addition, an original and four copies of the Proposal (one copy must be unbound and ready to photocopy) should be sent to the attention of:
Mr. Stanley P. Mavromates, Jr.Deputy Chief Investment Officer
Senior Investment Officer, Public MarketsPension Reserves Investment Management Board
84 State Street, Suite 250Boston, Massachusetts 02109
Copies of this RFP can also be obtained electronically through the PRIM Board website at www.mapension.com or be obtained via e-mail by requesting a copy from [email protected].
In addition, please send two copies of your proposal to the following representative of PRIM’s general consultant:
Ms. Kathleen K. Barchick, CFAManaging Director
Wilshire Associates Incorporated1299 Ocean Avenue, Suite 700
Santa Monica, CA 90401
The questions and/or requests made in this RFP should be duplicated in their entirety in the Proposal with each question and/or request repeated before the answer or response.
B. Required Attachments and Enclosures
In addition to the responses to the RFP questions, the following information will be attached to the firm’s response.
1. Cover Letter The Proposal must be accompanied by an original and four (4) copies (one unbound) of a cover letter and one copy sent via e-mail, which will be considered an integral part of the Proposal, and which shall be signed by at least one individual who is authorized to bind the firm contractually. This cover letter must include: (a) the firm name, address and telephone/fax numbers; (b) the client contact; (c) the title or position which the signer of the cover letter holds in the firm; and (d) a statement to the effect that the Proposal is a firm and
2. Representations and Warranties The Warranties contained in Section XII hereof, signed by an authorized officer of the firm, must be included as an attachment to the cover letter referenced in (1) above.
3. Disclosure Statement Attached to this RFP as Exhibit C are two Disclosure Statements which each firm submitting a Proposal must complete and submit as an attachment to the cover letter referenced in (1) above.
4. Fee Proposal The original and four copies of the fee proposals (one copy must be unbound and ready to photocopy) of the proposing firm, on the forms contained in Section XI hereof (the “Fee Proposals”) must be placed in a separate, sealed envelope, clearly identified on the outside as “Fee Proposal submitted by (COMPANY NAME).” Also include one copy to Wilshire Associates.
5. Any additional material must be submitted separate from the response.
C. Public Record
In accordance with Chapter 66, Section 10 and Chapter 4 of the Massachusetts General Laws, upon the expiration of the Proposal Deadline, all Proposals shall be deemed a public record and shall be subject to requests for public disclosure.
D. Withdrawal/Irrevocability of Responses
A proposer may withdraw and resubmit a Proposal prior to the Proposal Deadline. No withdrawals or re-submissions will be allowed after the Proposal Deadline.
E. Waiver/Cure of Minor Informalities, Errors and Omissions
PRIM reserves the right to waive or permit cure of minor informalities, errors or omissions prior to the selection of finalists, and to conduct discussions with any qualified proposers and to take any other measures with respect to this RFP in any manner necessary to serve the best interest of PRIM and its beneficiaries.
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F. Communications with PRIM
PRIM’s Procurement Officer for this RFP is:
Mr. Stanley P. Mavromates, Jr.Deputy Chief Investment Officer
Senior Investment Officer, Public MarketsPension Reserves Investment Management Board
84 State Street, Suite 250Boston, Massachusetts 02109Telephone: (617) 946-8444Facsimile: (617) 946-8472
As of February 4, 2003, firms which intend to submit a Proposal should not contact any PRIM staff, members of the Investment Committee, members of the PRIM Board, or employees of the Massachusetts Treasury, other than the Procurement Officer. An exception to this rule applies to firms which currently do business with PRIM, such as PRIM’s current investment managers, but any contact made by such firms with persons other than the Procurement Officer must be limited to that business, and must not relate to this RFP. In addition, firms which intend to submit a Proposal should not discuss this RFP with any employee of PRIM’s custodian, other PRIM managers, consultants, or PRIM’s legal counsel or other advisors.
FAILURE TO OBSERVE THIS RULE IS GROUND FOR DISQUALIFICATION.
G. Questions Relating to this RFP
All questions concerning this RFP must be received by the Procurement Officer by 3:00 p.m. EST on Tuesday, February 18, 2003 (the "Question Deadline") in writing or by facsimile. Questions received in accordance with this section will be answered and circulated by facsimile to all firms who have proposed a question or who request in writing a copy of the questions and the responses. Questions submitted after the Question Deadline will not be considered.
H. Incurring Costs
PRIM will not be liable for any costs incurred prior to entering into the Contract with the successful proposer or proposers.
I. Rejection of Proposals
PRIM reserves the right to reject any non-qualifying Proposal, as well as the right to reject all Proposals submitted under this request for proposal.
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VI. SELECTION PROCESS
The Selection Process under this RFP will be as follows:
A. Non-Qualifying Proposals
PRIM will evaluate each Proposal to determine if it was submitted in accordance with the requirements set forth in this RFP, including whether the proposing firm meets the minimum criteria. All non-qualifying Proposals not subject to the waiver/ cure of minor information will be rejected at this time and the proposing firm so notified.
B. Selection of Finalists
The Proposals will be evaluated by a Search Committee to be formed by the PRIM Board. It is anticipated that the Search Committee shall include a member of the Investment Committee or its representative, as well as PRIM staff. Proposers may be invited to a due diligence interview with the Search Committee. Based on the Selection Criteria set forth in Section IX of this RFP (including the Fee Proposals), the Search Committee will select finalists to serve as investment manager to PRIM.
C. Selection of Investment Manager
A member of the Search Committee may make a due diligence site visit to the finalists' offices. The Search Committee shall then rank the finalists and make its recommendations for selecting an investment manager to the PRIM Investment Committee and the PRIM Board.
The finalists selected by the Search Committee may be required to make an oral presentation to the Investment Committee, the PRIM Board, or both. The Investment Committee may accept the recommendations of the Search Committee or, based on the Selection Criteria set forth in Section IX of this RFP, may rank the firms differently from the Search Committee and recommend another firm or firms to provide investment management services to PRIM. The engagement will be awarded by the PRIM Board.
VII. TENTATIVE TIME TABLE
The following is the tentative time schedule for PRIM’s search for firms to provide investment management services. All dates are subject to modification by PRIM with notice.
Issuance of RFP: February 4, 2003
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RFP Question Deadline: February 18, 2003(Firm) 3:00 p.m. EST
RFP Response Deadline: March 4, 2003(Firm) 3:00 p.m., EST
Notification of Finalists: April 25, 2003(Tentative)
Search Committee May 2, 2003Interviews: (Tentative)
Investment Committee May 21, 2003Interviews: (Tentative)
PRIM Board Meeting: June 5, 2003(Tentative)
Projected June 30, 2003Commencement Date:
VIII. MINIMUM CRITERIA
A Proposer must meet the following minimum qualifications to be given further consideration in PRIM’s search for an investment manager(s). Failure of a firm to meet the minimum qualifications applicable to the investment management services for which it is submitting a Proposal will result in the Proposal’s immediate rejection.
A. Basic Minimum Qualifications
All firms submitting Proposals must meet the following minimum criteria:
1. The investment professionals must have at least a five-year performance history in the subject product or similar strategy as of December 31, 2002.
2. The investment professionals whose performance history is submitted must be the team responsible for the management of this account.
3. The candidate must have at least $5 billion in institutional (taxable and non-taxable) assets under management in the subject product or similar strategy as of December 31, 2002.
4. The candidate 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).
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5. The candidate must have at least one tax-exempt institutional client invested in the subject product or similar strategy, as of December 31, 2002.
6. The candidate must have been in operation as an investment management organization for at least five years as of December 31, 2002.
7. The candidate must agree to accept a separate account structure.
8. The candidate must be willing to include the attached representations and warranties in the contract if selected as the manager to the PRIM Board.
IX. SELECTION CRITERIA
PRIM will apply the following criteria in the selection of an investment manager(s). The Search Committee will assign a rating of either "Highly Advantageous", "Advantageous", "Acceptable", "Not Advantageous" or "Unacceptable" to all qualifying Proposals in each of the categories listed below. Any Proposal receiving a rating of "Unacceptable" in any applicable category will not be considered further. Using these ratings as a guide, the Search Committee will select finalists to move to the next stage of the Selection Process and recommend the retention of an investment manager to the Investment Committee. For a more detailed description of the Selection Process, see Section VI hereof.
A. Basic Selection Criteria Applicable to all Proposing Firms
1. Stability and General Experience of the Firm
a. Stability of the firm, as measured by the quality of the organizational structure of the firm; the existence of, or potential for, significant developments in the firm; and the expected financial stability of the firm.
b. Experience of the firm in providing investment management services to similar institutional investors, as measured by the firm's history of providing such services; and the similarity of a firm's clients to PRIM.
c. Adverse organizational issues, such as the existence of litigation or other investigations; and the existence of financial problems.
2. Quality, Stability, Depth and Experience of Personnel
a. Experience of portfolio manager(s) in providing similar services to similar institutional investors, as measured by the length of time the portfolio manager(s) has served as a portfolio manager to such investors; demonstrated expertise in providing such services to other such investors; demonstrated organizational skills, and demonstrated ability to interact with both the staff and oversight body of pension funds.
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b. Experience of professionals in providing investment management services as measured by the length of time dedicated support staff have provided such services to similar institutional investors.
c. Depth of personnel, as measured by the firm's account/portfolio manager and account/investment management personnel ratios; and back-up procedures for providing services to PRIM in the absence of the portfolio manager(s).
d. Stability of the firm's professional base, as measured by personnel turnover since December 31, 1999.
3. Client Relations and References
a. Stability of the firm's client base, as measured by the number of accounts gained or lost since December 31, 1999.
b. Quality of references from clients, as measured by responses relating to quality and responsiveness of investment management services; knowledge and accessibility of the portfolio manager(s); and the quality of client services.
4. Philosophy/Process/Strategy
a. Philosophy and investment strategy that are consistent with adding alpha over the three-month LIBOR rate.
b. Process of interaction with custodian in order to maintain full investment (daily sweep) of cash.
c. Risk control procedures used to minimize adverse macro/micro economic impact to the portfolio (credit risk, yield curve risk, interest rate risk, debt option risk, etc.).
5. Performance and Fees
a. The total cost of performing investment advisory services as measured by the Fee Proposal.
b. The historical performance of the product as measured by its cumulative and annual performance compared to an appropriate index.
Name (print): _______________________________________
Title: _______________________________________
Date: _______________________________________
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A. COMPANY BACKGROUND AND GENERAL DESCRIPTION
1. Indicate your firm’s fiduciary classification:
______ Bank
______ Insurance Company
______ Registered Investment Advisor (Investment Advisors Act of 1940)
______ Affiliate of Fiduciary(Name and Classification): ___________________________________
______ Other: __________________________________
2. Give a brief history of the firm including:
a) the month and year of SEC 1940 Act registration,
b) the month and year the firm began managing enhanced cash investments in public companies,
c) the month and year the firm began managing enhanced cash investments in public
companies for U.S. tax-exempt clients,
d) the month and year the subject product or similar strategy was introduced.
3. Describe the ownership of the firm, including but not limited to:
a) ownership structure,
b) affiliated companies or joint ventures,
c) if an affiliate, designate percent of parent firm’s total revenue generated by your organization,
d) if the firm is a joint venture partner, identify the percentage of ownership and revenues recognized by each partner to the combined association,
4. Provide an organizational chart diagramming the relationships between the professional staff as well as the parent-subsidiary, affiliate, or joint venture entities.
5. List the total number of persons in the subject product employed by discipline.
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Total
Portfolio Managers Research Analysts Economists Marketing Trading Administration Credit Research Client Service Other (Specify)
Total
6. Describe the levels (U.S. dollar amounts) of coverage for SEC-required (17g-1) fidelity bonds, errors and omissions coverage and any other fiduciary coverage, which your firm carries. List the insurance carriers supplying the coverage.
7. Over the past five years, has your organization or any of its affiliates or parent, or any officer or principal been involved in any business litigation, regulatory or legal proceedings? If so, provide a detailed explanation and indicate the current status. Also provide complete Form ADV (Parts I and II and accompanying schedules).
8. Describe in detail any potential conflicts of interest your firm may have in the management of this account. Include any activities of affiliated or parent organizations, brokerage activities, investment banking activities, or any past or current relationships with PRIM Board members and investment staff. Include any other pertinent activities, actions, or relationships not specifically outlined in this question. Also disclose any business relationship with Wilshire Associates.
9. Describe all outside marketing/sales services (including product design and development) for which your firm has contracted over the last three years for the marketing of your investment services to the institutional, tax-exempt market. Specify any such arrangements as they relate to the product being proposed. Indicate whether the fees paid for such services are charged to client portfolio assets.
10. Describe the material developments in your organization (changes in ownership, personnel, business, etc.) over the past three years in detail.
11. Do you have a plan and arrangements in place for an alternative worksite should your facilities become inoperative because of fire, earthquake, etc. Describe.
12. Describe your firm’s overall business strengths, weaknesses and uniqueness.
(d) Total assets managed in enhanced cash for U.S. tax-exempt clients in separate accounts ($ millions)
Accounts
2. Please list the 5 largest tax-exempt accounts currently managed in the subject product.
(12/31/02)Name Date of Inception Market Value
3. List all clients and asset amounts gained in the subject product over the past three years as of December 31, 2002.
4. List all clients and asset amounts lost in the subject product over the past three years as of December 31, 2002.
5. What is the minimum account size you will accept on a separate account basis?
6. Describe the objectives of your firm with respect to future growth in the product, commenting on:
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Additional resources for portfolio management, research, trading, client service and tools/models to enhance the investment process or manage growth; and,
Size limitations with respect to assets under management in the product. How did you arrive at those asset limits?
7. Identify three clients that have terminated accounts in the subject product over the past three years that can be contacted as references. Provide the firm name, contact person and title, phone number, product name, fund account value and reason for termination.
8. Provide the client name, address, phone number, contact name, title, and account type (e.g. defined benefit, defined contribution, endowment) of three accounts, who are invested in the subject product that can be contacted as references. Also indicate the length of your relationship and assets under management for each reference.
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C. PEOPLE/ORGANIZATION
1. How many portfolio managers are employed in the product? How many research analysts support this product? Please specify locations, state the number of accounts each manages and include the dollar value of assets under management.
2. Provide a list of the professionals involved in the subject product in the manner listed below:
PORTFOLIO MANAGEMENT
NameTitle/
ResponsibilitiesYrsExp
Yrs @Firm
Degrees/Designations
SponsoringBody/School
RESEARCH
NameTitle/
ResponsibilitiesYrsExp
Yrs @Firm
Degrees/Designations
SponsoringBody/School
TRADING
NameTitle/
ResponsibilitiesYrsExp
Yrs @Firm
Degrees/Designations
SponsoringBody/School
3. Describe your internal training procedures for portfolio managers, traders, and research analysts.
4. Describe the background of professionals directly involved in the management of the product. Are they brought in from the outside or promoted to their positions from within the
organization? Is their prior experience in portfolio management/research/trading, industry,
consulting, or other business or technical areas? What sort of ongoing education programs (for example, the CFA program) are
encouraged or required?
5. Describe the job qualifications required by your firm when hiring: portfolio managers, traders, research analysts, and system professionals.
6. What personnel or organizational improvements are planned over the next years?
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7. Provide biographies of no longer than one page on each of the persons listed in Question C.2. Please include prior employment history.
8. Provide an organizational chart that diagrams the different functions (research, trading, etc.) dedicated to the product area. Professionals should be identified over their areas of responsibility.
9. Describe the compensation and incentive program for professionals directly involved in the product. How are they evaluated and rewarded? What incentives are provided to attract and retain superior individuals? Identify the percentage of compensation which is:
Base salary Performance bonus Equity incentives Other
Do you offer direct ownership, phantom stock, profit sharing, and/or performance bonus?
Who is eligible to participate? On what basis are these incentives determined – is compensation tied to success factors
such as asset growth, performance, or other factors? Please list and indicate the weight of each in determining total compensation.
How does your compensation structure/levels compare with other firms in the industry?
10. Discuss the causes and impact of any turnover (departures or hiring/promotions) of any professionals directly involved in the product which you have experienced in the past five years. How long has the team been together? Indicate when and why any professional dedicated to the product left or joined the firm in the past three years. What were/are their job responsibilities? For personnel who have left indicate job titles and years with the firm and who replaced them.
JOINED
Date Name/Title Responsibilities
DEPARTED
Date Name/Title ResponsibilitiesYrs @ Firm Reason for
leaving
Replaced by(name/title)
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D. INVESTMENT PHILOSOPHY, POLICY AND PROCESS
1. Describe the investment process. Include a discussion on the allowed and prohibited security types and sectors, the average and maximum days to maturity of the fund, and the allowed quality ranges. Describe your investment guidelines and performance objectives.
2. Describe the decision making process with regard to:
3. How does your firm implement your philosophy (e.g. buy, sell decisions)? Under what circumstances would your firm deviate from its disciplines?
4. What changes or improvements have been made to the investment philosophy and/or process over the past five years?
5. Operationally, describe your process of interacting with the custodian in order to maintain full investment (“daily sweep”) of US cash including:
How sweep ties into trust accounting and cash forecasts Process and timing of notification of investment managers of available cash Timing requirements for notification of cash needs Treatment of unexpected receipts after investment cut-off Identification of automated procedures and manual procedures Client and investment manager electronic access to information:
Cash sweep (investment) transactions Details of the day’s cash remittances and disbursements Detail supporting calculation of day’s deposit to or withdrawal from STIF
6. Describe the risk controls which you employ in the portfolio construction process (credit risk, yield curve risk, interest rate risk, debt option risk, etc.). What limits/constraints do you establish? What software do you use in your risk control analysis process? Is it internally or externally developed/maintained?
7. Complete the following table regarding exposure to various segments and instrument types:
8. Provide a complete list of instrument types used in your process. Discuss the manner in which each is used and its pros and cons.
9. Describe the issue size, quality, and liquidity criteria that you apply in security selection.
10. Describe in detail your use and frequency of use of derivative securities. Include discussion of how the use of such securities are consistent with your approach, the advantages, potential risks, risk controls, risk measurement and your experience with these securities.
11. Describe your firm's brokerage policies relating to this fund. Is your firm or its parent or affiliate a broker/dealer? Does your firm trade for client accounts through this broker/dealer? If so, state how much trading, and the reason for trading with this related party.
12. Are you able to provide accurate, audited asset and transaction statements within 2 weeks of month's end? Explain.
13. What unique attributes does your firm or your product have which distinguish it from its competitors in the fulfillment of this assignment?
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E. COMPLIANCE/INTERNAL CONTROL STRUCTURE
1. Provide a detailed summary of your firm’s compliance regime. Identify senior or key personnel in the firm’s compliance process.
2. Does your firm maintain a code of ethics? If so, please attach.
3. During the past five years, has the firm been subject to any governmental regulatory or law enforcement agency’s investigation, examination, or other proceeding directly involving the firm, its owners, or employees other than such examination or other proceedings as are routinely conducted in the ordinary course of the firm’s business?
4. During the past five years, has the firm been subject to any litigation alleging fraud, breach of fiduciary duty, or other willful misconduct?
5. Provide a detailed summary of your firm’s internal control structure. Does the firm conduct periodic risk assessment? Provide a copy of SAS 70 if applicable, or other internal control review documentation, preferably prepared by an independent third party.
6. Provide copies of the firm’s most recent audited financial statements and auditor’s management letter.
7. Have you ever violated a client guideline? If so, please describe the violation and the resolution.
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F. PERFORMANCE (Simulated results are not acceptable.)
1. a. Provide annual performance on a total return basis GROSS OF ALL FEES AND MANAGEMENT COSTS from inception for the subject product. Indicate if returns are net or gross of custody costs. Use AIMR standards or, if different, indicate explicitly how they differ. Indicate whether the subject performance is the composite performance or that of the proposed commingled vehicle.
1 Year 3 Years 5 Years 10 YearsAnnualized Ended Ended Ended EndedReturns 12/31/02 12/31/02 12/31/02 12/31/02
Return _______% _______% _______% _______%
Index _______% _______% _______% _______%
Difference _______% _______% _______% _______%
Provide peer group rankings (if available) on an annualized and calendar year basis for the performance listed above. Please also provide a description of the peer group.
b. Provide underlying data for performance given in question F1(a), if applicable:
2002 2001 2000 1999 1998 1997 1996 1995Assets in CompositeNumber of AcctsHigh ReturnMedian ReturnLow Return
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2. Which benchmark is appropriate for the subject product? What is the expected level of outperformance?
G. CLIENT SERVICE
1. Which of your firm’s offices would service this account? What services would specifically be provided by which office?
2. Who will be the client service officer? How often could the person be available for client meetings? How often could the portfolio manager, chief investment officer and/or firm president be available for client meetings?
H. SAMPLE PORTFOLIO
Please submit a sample portfolio (preferably an actual portfolio) as of December 31, 2002, which would reflect the investment style of the product proposed for this account.
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XI. Fee Proposal
FIRM RFP
Once a manager has been selected, negotiations of the fee may become necessary in order to account for the size of funding, the increments of funding, and any clarification. In no case will the negotiations result in a fee which is higher than the fee contained in the proposal. Assume a $650 million separate account size for purposes of the below fee bid.
A. Proposed Fees
Asset-based Fee Schedule: basis points per annum.
B. Performance Fee
The PRIM Board may use a performance fee arrangement. Would your firm accept a performance fee management? If so, what is your proposed fee structure?
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XII. Representations and Warranties
All proposers are required to submit an executed copy of the following Representations and Warranties as an attachment to the cover letter described in Section V.B.2. of this RFP:
A. Proposer warrants that it meets, or will meet before the award of the Agreement, the bonding requirement provided by Section 412 of the Employment Retirement Income Security Act of 1974 (ERISA) or that it carries at least an equivalent fidelity bond that will be applicable to proposer's actions under the Agreement (unless exempt, and explanation of exemption is attached).
B. Proposer warrants that it maintains both errors and omissions insurance as well as a fiduciary liability insurance providing a prudent amount of coverage for negligent acts or omissions and that such coverage will be applicable to proposer's actions under the Agreement.
C. Proposer warrants that it will not delegate its fiduciary responsibilities assumed under the Agreement.
D. Proposer warrants that it has completed, obtained, and performed all registrations, filings, approvals, authorizations, consents or examinations required by a government or governmental authority for acts contemplated by the Agreement.
E. Proposer warrants that it will agree to the provisions of the Agreement which are set forth in Exhibit B to this RFP.
F. Proposer warrants that it meets all of the minimum qualifications applicable to the firm under the RFP as follows:
[Please list each minimum requirement and specifically describe how your firm meets the applicable minimum qualifications specified in Section VIII.]
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