State Universities Retirement System
of Illinois (SURS)
Request for Proposal
Investment Consulting Services
July 2010
Table of Contents
I. Request For Proposal Summary Statement 3
II. Background Information 3
III. Specific Services Requested from the Investment Consultant 4
IV. Minimum Qualifications 5
V. RFP Specifications 5
VI. Projected Schedule of Events 8
VII. Selection Criteria 8
VIII. Investment Consultant Questionnaire 9
IX. Fee Proposal 15
X. Appendix A 16
State Universities Retirement System of Illinois (SURS)
Request for Proposal (RFP)
July 2010
Investment Consulting Services
I. RFP Summary Statement
The State Universities Retirement System of Illinois (“SURS” or the “System”) is requesting proposals from investment consulting firms to provide general investment advice and counsel to the Board of Trustees. This search was authorized by the Board of Trustees and seeks to identify potential full-service, retainer investment consultants. The consultant will report to the Board of Trustees and will also be required to work with and provide assistance to the eight-person investment department staff.
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 208,000 active, inactive and retired participants. SURS maintains both a defined benefit and defined contribution plan.
Defined Benefit Plan Investment Program
SURS investment program, as of March 31, 2010, totaled $13.3 billion. The actual and target asset allocations, as of March 31, 2010, is as follows:
Actual Target
U.S. Equities 33.5% 33.5%
Non-U.S. Equities 17.9% 18.0%
Global Equities 9.7% 10.0%
Fixed Income 20.7% 21.0%
Private Equities 8.0% 6.0%
Real Estate 6.0% 6.0%
TIPS 3.5% 5.0%
Opportunity Fund 0.6% 0.5%
Defined Contribution Plan Investment Program
As of March 31, 2010, the defined contribution plan assets totaled approximately $747 million. Additional information regarding the System’s investment program can be found in the Investment Section of the System’s FY 2009 Annual Report.
Legislated Investment Restrictions Relating to the Republic of the Sudan and Iran
In 2007 the Illinois General Assembly passed Public Act 095-0521, restricting investment in companies domiciled in, managed or controlled by, or doing business with the Republic of the Sudan. SURS investment managers are required by law to abide by the restrictions. This Public Act can be found at http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=095-0521&GA=95.
Additionally, information pertaining to the Iran divestment law, Public Act 095-0616, approved by the Illinois General Assembly on September 11, 2007, can be found at http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=095-0616.
State Ethics Laws
On April 3, 2009, Illinois Governor Pat Quinn signed Public Act 96-0006 into law. Public Act 96-0006 amends the Illinois Governmental Ethics Act and provides guidelines for ethical practices concerning state pension plans. Investment consultants seeking to be considered for this mandate should be familiar with and must comply with the provisions of this Act. Public Act 96-0006 encourages the Board to increase the racial, ethnic, and gender diversity of its fiduciaries, to the greatest extent feasible within the bounds of financial and fiduciary prudence. In furtherance of this Act, it is the goal of the Board to use its best efforts to increase the racial, ethnic, and gender diversity of its fiduciaries, including its investment managers and consultants. The Board encourages minority-, female- and persons with a disability-owned investment consultants to submit proposals to this RFP.
A section of the Illinois Procurement Code concerning prohibitions of 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.
III. Specific Services Requested from the Investment Consultant
Enumerated below are the specific services requested from the Investment Consultant:
1. Attend all Investment Committee Meetings and Trustee Education events. There are seven investment committee meetings and one Trustee Education event per year that are each approximately four hours in length. The majority of the investment committee meetings currently are held in Chicago, Illinois.
2. Meet with the investment staff to assist in the development of the investment committee agendas.
3. Prepare a quarterly performance report package based upon returns calculated by the custodian.
4. Provide estimates of long-term risk and return estimates to facilitate strategic asset allocation.
5. Provide recommendations concerning risk management strategies.
6. Prepare summaries for each of the asset classes to coincide with the asset class review scheduled at each Investment Committee meeting.
7. Review and opine on the annual organizational and performance reviews for each of the System’s defined benefit plan investment managers, which are principally prepared by the System’s professional investment staff.
8. Provide recommendations concerning the securities lending program.
9. Review and opine on the annual organizational and performance reviews for each of the System’s defined contribution plan investment service providers and investment options, which are principally prepared by the System’s professional investment staff.
10. Conduct an independent annual review of the Manager Development Program (MDP), the internally managed program which focuses on minority-, female-, and persons with a disability-owned firms.
11. Provide written opinions or information on relevant topics or events as requested (i.e., changes within investment management organizations, new investment strategies, etc.)
12. Provide an independent alert to impending risks that may affect the fund.
13. Provide education to Trustees and staff on pertinent issues.
14. Assist the System’s professional investment staff in the conduct of investment manager searches.
15. Other non-routine matters that may arise from time to time.
IV. 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.
1. As of March 31, 2010, and for at least three (3) most recent continuous years, the firm must have a verifiable operating history with at least two (2) institutional fund clients with similar size, complexity and asset mix to SURS.
2. As of March 31, 2010, each of the key personnel dedicated to the SURS contract or the organization must have at least three (3) years experience in providing consulting services to institutional fund clients.
3. A qualified firm is an investment consulting firm registered as an investment adviser under the Investment Advisers Act of 1940. Firm will promptly advise SURS if it, at any time, is not so registered. Investment consultant also affirms that in its investment advisory capacity, it is a fiduciary with respect to SURS.
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.
V. 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 initially whether such information is exempt from disclosure under the Illinois Freedom of Information Act. However, no information will be determined to be proprietary, privileged or confidential unless it is identified and separated as indicated here.
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 shall 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, the proposal or the Board’s Consultant selection.
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.
2. Minimum Qualification Certification. The Proposer must complete the certification in Appendix A and provide all supporting documentation.
3. Questionnaire. 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 require supporting documentation, which should be submitted as attachments to the questionnaire.
4. Fee proposal. Respondent firms must submit their fee proposal in the format prescribed. The fee proposal shall include all costs and expenses for providing the services to SURS as described in this RFP and shall be guaranteed for the term of the contract.
Submission Deadline
The completed RFP must be delivered by 5:00 pm CDST Thursday, August 12, 2010. Earlier responses are welcome. Any RFP delivered after the deadline will not be considered. Please send an electronic copy as well as one complete hard copy to the following:
Mr. Daniel L. Allen
Chief Investment Officer
State Universities Retirement System
1901 Fox Drive
Champaign, IL 61820
Submission of Questions
In order to clarify any issues in this Request for Proposals, the System will respond only to questions that are presented in writing via e-mail to Mr. Daniel Allen at . All questions should be submitted to SURS by 8:00 am CDST Friday, July 30, 2010. These questions will be consolidated into a single Q&A document and responded to by the System on or about Friday, August 6, 2010. The Q&A document will be posted on the SURS web site at www.surs.org without divulging the source of the query.
Contract Terms
The initial term of the contract shall be five (5) years. Illinois Public Act 96-0006 limits the duration of a contract with a consultant to five (5) years. No contract to provide consulting services may be renewed or extended. At the end of the term of a contract, however, the consultant is eligible to compete for a new contract as part of a competitive proposal process.
SURS Quiet Period Policy
Please note the Quiet Period Policy that establishes guidelines by which the Board of Trustees and staff will communicate with prospective service providers during a search process. The SURS Board of Trustees initially adopted the Policy at the December 8, 2006, meeting. Currently in force, the Policy is available at http://www.surs.org/pdfs/invinfo/policy.pdf. Please review Section VII of the Investment Policy and be familiar with Quiet Period guidelines.
Rights Reserved
SURS reserves the right to amend any segment of the RFP prior to the announcement of a successful contractor. In such an event, all responders will be afforded the opportunity to revise their proposal to accommodate the RFP amendment.
SURS reserves the right without prejudice to reject any or all proposals submitted. There is no express or implied obligation for SURS to reimburse for any expenses incurred in preparing proposals in response to this request.
Ex-parte Communications
Public Act 93-617, which became effective December 9, 2003, brought about new Illinois ethics procedures. All “ex parte communications” concerning investment, rulemaking or quasi-adjudicatory matters pending before the State agency must be documented and some must be reported. An “ex parte communication” is any written or oral communication by any person that imparts or requests material information or makes a material argument regarding potential action concerning an investment, a rulemaking process, or a quasi-adjudicatory matter. An ex parte communication does not include statements publicly made in a public forum or communications among employees of the State agency.
An ex parte communication from an interested party or his or her official representative or attorney to an employee or the agency must be memorialized and made a part of the record. An “interested party” is a person or entity whose rights, privileges, or interests are the subject of or are directly affected by an investment, regulatory or quasi-adjudicatory matter.
An ex parte communication other than that just described must be reported by the staff member or Board Trustee immediately to the agency’s Ethics Officer. The communication must be memorialized and made a part of the record. The communication must be filed with the Executive Ethics Commission, accompanied by a memorandum from the ethics officer.
VI. Projected Schedule of Events
July 16, 2010 Dissemination of RFP
July 30, 2010 Deadline for questions to SURS
August 6, 2010 Responses to questions submitted to SURS
August 12, 2010 RFP responses due by 5:00 pm CDST
August 2010 Identify firms for further consideration
September – October 2010 Staff interviews with selected firms
November 2010 On-site visits of Finalist Candidates
December 9, 2010 Finalist presentations to SURS Board of Trustees
December 31, 2010 Contract Award Date
VII. Selection Criteria
SURS will consider all the information requested by this RFP, including the following, in making its decision:
A. Registration with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940, or otherwise qualified under the Illinois Pension Code
B. Willingness to Assume Fiduciary Role
C. Commitment and Dedication of Necessary Resources to Support SURS Board and Investment Staff