/ Meketa Investment Group / Request for Proposal
Investment Grade Bond Manager

This investment grade fixed income mandate is specific to the following investment guidelines. Please certify that your firm can manage to these guidelines, and construct your responses to the following questions as they relate to the specific guidelines outlined below.

Authorized Investments:

  • U.S. Treasury Obligations: United States Treasury bills, notes, or any other obligation or security issued by or backed by the full faith and credit of the United States Treasury.
  • Federal Agency or Instrumentality Obligations: Bonds, notes, debentures, or other obligations or securities issued by U.S. agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities.
  • Repurchase Agreements
  • Arizona Municipal Obligations
  • Commercial Paper
  • Bankers’ Acceptances
  • Negotiable certificates of deposit
  • Corporate Notes

Investment Guidelines

The guidelines are non negotiable. Maximum allocations may be amended.

  • No investments in non-U.S. instruments
  • Maximum final maturity of 5 years
  • Minimum rating BBB

Maximum allocations on total holdings:

Sector / Maximum Allocation
U.S. Treasury Obligations / 100%
Federal Agency Obligations / 100%
Corporate Notes / 30%
Municipal Obligations / 20%
Short-Term Investments
Commercial paper
Collateralized certificates of deposit
Negotiable certificates of deposit
Bankers’ acceptances
Repurchase agreements / -
40%
30%
30%
10%
100%
Liquid Investments
Money market mutual funds
Bank deposits
State pool / -
100%
100%
25%

Prohibited Investments:

  • Reverse repurchase agreements
  • Futures, contractual swaps, options
  • Inverse floaters
  • Interest-only securities
  • Forward contracts
  • Interest-bearing securities that have a possibility of not accruing current income
  • Closed-end management type companies
  • Securities whose yield/market value is based on currency, commodity, or non-interest indices
  • Bearer-form securities

Unless stated otherwise, please answer each question in the field provided.

I. General Information

Firm Name:

Address:

City:

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State:

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Zip:

Contact Name:

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Phone:

Title:

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Fax:

E-mail:

Strategy under Consideration:

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Investment Grade Bonds

Projected Allocation Amount:

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$100 – 200 million

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RFP Due Date:

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06/5/2013

Notes:

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Please contact Colleen Smiley at or 760-795-3450 with any questions.

II. Firm Information

1.When was the firm’s inception date?

2.Where is the firm located (include headquarters and satellite offices)?

3.Is the Firm a Registered SEC Investment Advisor?

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Yes:

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No:

If yes, please complete the following:

  1. Name of Firm (as registered with the SEC):
  1. SEC File Number:

4.Do you qualify as an Investment Manager pursuant to ERISA Section 3(38), 29 U.S.C. Section 1002(38)?

5.What is the firm’s ownership structure? Note any recent (within the last five years) or pending changes in ownership structure.

6.Does the firm have any broker/dealer affiliations? If yes, please describe the relationship between the firm and its broker/dealer and whether the firm would utilize its services for this mandate.

7.What procedures does the firm employ to comply with ERISA’s prohibited transaction restrictions? Is the firm a Qualified Professional Asset Manager (QPAM)?

8.What is the firm’s policy regarding the use of soft dollars? Please provide the absolute level of soft dollars generated and the percentage of commissions this represented over each of the last three years.

9.List the top five brokerage firms with whom you have conducted trades in the last year. Provide the percentage of your total trading volume that each firm accounted for, along with the average commission for each.

10.Please provide a brief description of any past or pending regulatory action, litigation or other legal proceedings involving the firm or any registered employees and/or principals.

11.Who is the firm’s current auditor? Has the firm changed auditors in the past five years? If so, please explain.

12.What types of liability insurance (e.g. Errors and Omissions) and other forms of coverage does your firm carry to protect your clients? Please provide dollar amounts and proof of coverage.

13.ERISA Section 412 requires plan fiduciaries and other persons who “handle” assets of employee benefit plans to be bonded against losses to the plan from acts of fraud or dishonesty. Please provide bond dollar amounts and proof of bonding.

14.Please provide an organization chart with all investment professionals.

15.Are any investment professionals under employment contracts? If so, please discuss the nature of the contracts.

16.Please provide a list of all the investment strategies offered by the firm and include the total amount of assets managed under each strategy and whether the strategy is open or closed.

17.Please list any products the firm has completely liquidated or merged with an existing product. Include the reason(s) why the product was liquidated/merged.

18.What percentage of the firm’s assets under management are institutional (separate) accounts? Commingled funds? Mutual funds?

19.Please complete the following table:

As of:
3/31/2013 /
As of:12/31/2012
/
As of:12/31/2011
/
As of:12/31/2010
/
As of:12/31/2009
/
As of:12/31/2008

Total Firm Assets

Total No. of Clients

20.If selected as a finalist candidate to present to the client, will you provide a complete copy of your form ADV, and a statement of your financial condition?

21.What is your firm’s plan regarding the backup of computer files and systems? In the event of a disaster, how long would it take to become fully functional?

22.What systems are in place for ensuring that portfolios are in compliance with client guidelines?

23.Please state your firm’s ethics policy.

24.How do you ensure that employees follow this ethics policy?

25.How do you ensure that your clients adhere to policies set forth for the protection of the firm’s other clients (e.g., prevention of market timing)?

26.How are violations of the firm’s ethics policies handled?

27.Is your firm represented by any third party firm or individual whose purpose is marketing and/or gathering assets for the firm and are compensated as such? If so, list all relationships and their nature.

28.Will any third party or individual be compensated if your firm were to be hired for this mandate?

III. Product Information

1.Please provide an organization chart with all investment professionals involved in the Investment Grade Fixed Income strategy.

2.Where is the individual/team that runs this strategy located?

3.What is the inception date of this product?

4.Please complete the following table:

As of:
3/31/2013 /
As of:12/31/2012
/
As of:12/31/2011
/
As of:12/31/2010
/
As of:12/31/2009
/
As of:12/31/2008

Assets Managed inInvestment Grade Fixed Income

No. of Clients in
Investment Grade Fixed Income

5.Please provide the number of Investment Grade Fixed Income clients, and their portfolio value, gained and lost during the past five years. For clients lost, please state the reason.

6.For your three largest client relationships in Investment Grade Fixed Income, please provide the size of the mandate and the inception date for each account/relationship.

7.Does the firm have a policy limiting assets under management for this strategy? If so, what is the stated level? If not, what do you think is the product’s capacity?

8.Please list other products that overlap with this strategy. How much in AUM do you manage in each of these products, and what percentage of the portfolios overlap?

9.Please provide two client references for the Investment Grade Fixed Income strategy. Include name and phone number of contact person, the type and size of the account and the inception date of the account.

10.Please provide the names of the portfolio manager(s) and client service personnel who will be assigned to this account.

11.Do you offer (or sub-advise) a mutual fund for this strategy? If so, what is its name?

12.Do you offer commingled portfolios for this strategy? Separate accounts?

IV. Investment Strategy

  1. Please certify that you can manage an Investment Grade Fixed Income portfolio in accordance with the guidelines listed on Page 1.
  1. If maximum allocations (but not allowable investments) could be altered, how would you propose to change the allocations to conform to your investment approach?
  1. Please describe your investment philosophy for the Investment Grade Fixed Incomeportfolio.
  1. What is the benchmark used for the Investment Grade Fixed Incomeportfolio? Does this benchmark include all of the securities you would consider investing in?
  1. Are macroeconomic assumptions incorporated in the portfolio management process? If so, how?
  1. Are portfolios managed around a duration target? If so, what has the range been over the past five years? Does this target vary depending on forecasts? How far from the target can portfolios move? Describe this process.
  1. What role do yield curve strategies play in your fixed income management process?
  1. Are sector, industry, and geographic weightings explicitly targeted or are they the result of other strategy decisions?
  1. How are assets allocated among rating categories and between investment-grade and below-investment-grade securities? If the portfolio does not purchase below-investment-grade securities, does it hold on to bonds that are downgraded below investment-grade status? What is the limit to how much the portfolio will hold in below-investment-grade securities?
  1. Are “traditional” private placements purchased, meaning that there is no subsequent registration of the securities? Is there a limit to how much of the portfolio they may comprise?
  1. Discuss the firm’s investment strategy with respect to mortgage-backed securities and CMOs.
  1. How often are the duration calculations of mortgage-backed securities updated? How are prepayment assumptions evaluated?
  1. Discuss the investment strategy with respect to asset-backed securities.
  1. Describe the use of futures or other derivative strategies to manage duration or to achieve other portfolio objectives.
  1. Is leverage incorporated in your strategy? If so, explain.
  1. How is cash utilized in your strategy? What is the maximum amount of cash a portfolio manager may raise in a portfolio? What is the typical range of cash allocation? How long may a portion of the portfolio remain uninvested?
  1. Describe in detail any changes or refinements made to the firm’s security selection process over the past five years.
  1. What is the firm’s policy towards split ratings? Discuss the use of internal ratings, if any.
  1. Do you incorporate non-dollar and other non-U.S. bonds (including emerging market debt) in your strategy? If so, what is your policy on hedging currency exposure? Please detail currency hedging activity, including extent and frequency, over the past five years.
  1. What pricing services do you use?
  1. Are any securities in the portfolio “hand-priced,” meaning that a price other than one provided by the pricing service is used? Please discuss procedures for and frequency of hand-pricing.
  1. How many bonds are held in a typical portfolio? How many issuers? What is the maximum holding (at market value) in any one (non-U.S. government) issuer?
  1. If a holding exceeds the firm’s stated limit, what is the process for paring this holding?
  1. Detail how portfolio risks are identified, monitored, and controlled. How are event and default risks controlled?
  1. What has been the portfolio’s annual turnover rate in each of the past five years?
  1. What is the 1-day and 30-day VaR for the current portfolio? What is the highest level these VaR’s have reached?
  1. What elements of your strategy have had the greatest influence on returns relative to the benchmark?
  1. What areas of the fixed income markets do you find attractive currently? How have you modified portfolios to reflect this bias?
  1. Please explain in no more than one page what your competitive advantage is and why your firm should be hired for this mandate.

V. Portfolio Characteristics

  1. Please provide in Excel format a sample client portfolio as of 3/31/2013 detailing individual holdings (including date, ticker, security name, units, and price). The portfolio can be a core Investment Grade product.
  2. Please complete the following table:

As of
3/31/2013 / As of
12/31/2012 / As of
12/31/2011 / As of
12/31/2010
Duration & Yield:
Average Effective Duration
Average Coupon
Yield to Worst
Quality Structure:
Average Quality
AAA (includes Treasuries, Agencies, and cash)

AA

A
BBB
Below BBB

Sector Allocation:

US Treasury and Agency
Mortgage Backed Securities (includes CMOs)
Corporate
Sovereign and Supranational
Local and Provincial Government
Commercial Mortgage Backed Securities
Asset Backed

Cash Equivalents

Other (describe)
Foreign Exposure:

Non-U.S. (Developed)

Non-U.S. (Emerging Market)

Non-U.S. Dollar Denominated
Number of Holdings

VI. Investment Process

  1. Please describe your investment process for the Investment Grade Fixed Income strategy.
  1. Who is the decision-making body that has final authority for the Investment Grade Fixed Income strategy? Does it take the form of an investment policy committee, a team of portfolio managers and/or research analysts, or some other form? Who comprises this group?
  1. What are the responsibilities of the decision-making body and of individual portfolio managers? What latitude do portfolio managers have to override investment committee and/or research recommendations?
  1. Describe your research process, including the security universe covered by your research. What is distinctive about your research process relative to other investment managers?
  1. How are research ideas communicated to portfolio managers?
  1. Are portfolio managers/analysts industry specialists or are they generalists?
  1. What factors trigger a sell recommendation?
  1. How long would it take to invest a $100 – 200 million cash allocation to the Investment Grade Fixed Income strategy?

VII. Investment Resources

  1. Please list the individuals involved in portfolio management and research for this strategy. For each individual, please provide the following information:

a.Tenure at company

b.Tenure with this strategy

c.Industry experience

d.Education & credentials

e.Area(s) of specialization

  1. In addition to the proposed strategy, what other portfolio management responsibilities do the portfolio managers/research analysts have? What other products have they managed in the past? Please state product names and assets under management. Please provide performance for the products and their benchmarks for the period for which they had portfolio management responsibilities.

  1. Please list additions and departures to the management and research team(s) responsible for the Investment Grade Fixed Income strategy in the last five years, including their responsibilities. Provide a brief explanation for each departure, and list any replacement for these vacancies.
  1. Describe the compensation structure for portfolio managers and research analysts.
  1. Please list the portfolio managers and analysts responsible for this product who invest their own assets in this product. What percentage of their assets does each invest in this product? What percentage does each invest in the firm’s other products?
  1. How does the firm address staff turnover, especially in the research area?
  1. What external research sources do you use in the Investment Grade Fixed Income process? Please approximate annual expenditures for third-party research (and associated technology) in each of the past three years.

VIII. Performance

  1. Please provide monthly performance history since inception for the Investment Grade Fixed Income strategy. Include a discussion of the performance calculation methodology and whether it is GIPS compliant.

If possible, please provide information both gross and net of fees. This information should be in an Excel spreadsheet, formatted as follows:

A
/
B
/
C
1 / Investment Grade Fixed Income
Gross / Investment Grade Fixed Income
Net
2 / Jan-89 / 0.00442 / 0.00442
3 / Feb-89 / 0.02216 / 0.02216
4 / Mar-89 / 0.05762 / 0.05762
5 / Apr-89 / -0.01122 / -0.01122
6 / May-89 / 0.00762 / 0.00762
a.Cell (A1) must be empty.
b.The first row, starting with the second column (B1) must contain the firm and product name, up to 40 characters (spaces count as characters).
c.Dates in column A must be in either mmm-yy (Jan-99) or mmm-yyyy (Jan-1999) format.
d.Numbers can be in percent or decimal format.
e.Data must start from earliest and end with latest.
f.Empty cells for which there is no return should have a N/A entered, otherwise a zero will be read.

Note:Please detail the dollar amount of assets in the performance composite annually, as well as the number of accounts. Note what percentage of «Product_Name» assets managed is represented by the composite. Include all other composite footnotes.

  1. In addition, please complete the following table, using gross-of-fee performance data, as of 3/31/2013.

Investment Grade
Fixed Income / Barclays Aggregate
Composite Inception Date / n/a
Since Inception (Annualized): / - / -

Average Return

Average Standard Deviation
Tracking Error / n/a
Information Ratio / n/a
Correlation with Benchmark / 1.00
Trailing Three Years (Annualized): / - / -

Average Return

Average Standard Deviation
Tracking Error / n/a
Information Ratio / n/a
Correlation with Benchmark / 1.00
Trailing Five Years (Annualized): / - / -

Average Return

Average Standard Deviation
Tracking Error / n/a
Information Ratio / n/a
Correlation with Benchmark / 1.00
Trailing Seven Years (Annualized): / - / -

Average Return

Average Standard Deviation
Tracking Error / n/a
Information Ratio / n/a
Correlation with Benchmark / 1.00
Calendar Year Performance: / - / -
YTD 2013
2012
2011
2010
2009
2008
2007
2006
2005
  1. Please provide annual return attribution analysis information, if available. Please include attribution analysis by duration/maturity, rating, bond type (government, corporate, mortgage-backed, etc.), security, and country. Please include a discussion of methodology, including whether analysis was performed internally or by an external company. If your firm does not produce or receive return attribution analysis, please state this.

IX. FeesRelated Management Costs

  1. Please provide the fee schedule for the Investment Grade Fixed Income strategy, for a separate account, a commingled account, and mutual fund (if available). For commingled and mutual fund vehicles, please explain all additional fees (front/back-end loads, contribution/withdrawal fees, management or custody expenses, etc.).
  1. Do all clients pay the same fee? Please explain any discrepancies.
  1. What is your account minimum for a separately managed portfolio? Commingled vehicle? Mutual fund?
  1. Is there a minimum fee?

6.Do you offer a Most Favored Nations (MFN) clause? If so, would you be willing to provide this client an MFN?