STATE UNIVERSITIES RETIREMENT SYSTEM OF ILLINOISDocument Transcript
STATE UNIVERSITIES RETIREMENT SYSTEM OF ILLINOIS
REQUEST FOR PROPOSAL
INVESTMENT CONSULTING SERVICES
RFP Summary Statement
The State Universities Retirement System of Illinois (SURS) is requesting proposals from
investment consulting firms to provide general investment advice and counsel to the
SURS is the administrator of a cost sharing, multiple employer public employee
retirement system. SURS membership includes employees of Illinois public universities,
community colleges, and other affiliated organizations. As of June 30, 2004, SURS
membership totaled more than 185,000 active, inactive and retired participants.
SURS Investment Program Structure
SURS operates both a defined benefit and defined contribution plan. As of September 30,
2004, defined benefit plan assets totaled $12.562 billion. The current asset allocation for
the defined benefit plan is as follows:
U.S. Equity 41.4% 42.0%
Non-U.S. Equity 18.6% 18.0%
Global Equity 3.8% 4.0%
Private Equity 2.8% 3.0%
Core Fixed Income 26.5% 27.0%
U.S. TIPS 3.0% 3.0%
REITs 2.6% 2.0%
Opportunity Fund 1.4% 1.0%
As of September 30, 2004, the defined contribution plan assets totaled $260 million.
Additional information regarding the System’s investment program can be found in the
Investment Section of the System’s FY 2004 Annual Report.
Role of the Investment Consultant
SURS is seeking a full-service, retainer investment consultant that will report to SURS
Board of Trustees. The consultant will also be required to work with and provide
assistance to the investment department staff. SURS investment department staff consists
of five members: Chief Investment Officer, Deputy Chief Investment Officer, Senior
Investment Officer, Investment Officer and Investment Executive Assistant.
Specific Services Required
Enumerated below are the specific services required of the Investment Consultant
1. Attend all Investment Committee Meetings. There are seven (7) investment
committee meetings per year and are approximately [ ] hours in length. Four of
the investment committee meetings are held in Champaign, Illinois and the other
three are held in Chicago.
2. Meet with the investment staff to assist in the development of the investment
3. Prepare a quarterly performance report package based upon returns calculated by
4. Provide estimates of long-term risk and return estimates to facilitate strategic
5. 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.
6. 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
7. Provide an independent alert to impending risks that may affect the fund.
8. Assist the System’s professional investment staff in the conduct of investment
9. Other non-routine matters that may arise from time to time.
Specific Items Requested from Respondent Firms
Enumerated below are the specific items requested from respondent firms.
1. Cover letter. The firm’s response must be accompanied by a cover letter signed by
a member of the firm who is able to contractually bind the firm.
2. Completed Investment Consulting Services Questionnaire. The questionnaire is
also available electronically by contacting the System’s Chief Investment Officer.
3. 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 initial term of the contract shall be three (3) years. The Board and the investment
consulting firm may extend this contract thereafter in one-year increments, subject to
their mutual agreement.
Submission Requirements and Deadlines
Firms interested in submitting a response should indicate their intention no later than [ ]
CST on [ ] via email to [ ], Chief Investment Officer, at [ ].
Six (6) bound copies and one (1) unbound copy of the response must be received by
SURS no later than [ ] Noon CST, [ ]. Submissions must be addressed and delivered to:
State Universities Retirement System
1901 Fox Drive
Champaign, Illinois 61820
Attn: [ ]
Telephone number for Express Deliveries: [ ]
One (1) electronic submission of the response is also required. This submission may be
sent via email to: [ ]. Alternatively, the electronic submission may be via a CD included
with the bound responses. Electronically submitted proposals must be received no later
than [ ], [ ]. Late responses will not be accepted or evaluated.
During the evaluation process, SURS retains the right to request additional information or
clarification from respondents to this RFP. SURS may also allow corrections of errors or
omissions by respondents. Questions from respondents should be submitted via e-mail to
[ ] at [ ] with a copy to [ ] at [ ].
Finalist Presentations & Selection Process
Firms may be asked to make formal presentations of their proposals to the investment
consultant selection team, with the date, time and location of the presentation to be
determined at a later date. Firms designated as Finalists may be required to make a
presentation to the SURS Investment Committee on [ ]. Selection of the Investment
Consultant is subject to final approval by the SURS Board of Trustees and successful
negotiation of a contract.
While there is no fixed date for the selection of a consultant, it is anticipated that the
selection of a consultant will be completed by [ ]. Following notification of the selected
firm, it is expected that contract negotiations will be completed by [ ], and the term of the
contract will begin [ ].
Important Legal Issues
There is no expressed or implied obligation for the SURS to reimburse responding firms
for any expenses incurred in preparing proposals in response to this request. SURS
reserves the right to reject any or all proposals submitted. Members of a review team
consisting of selected board and staff members will evaluate all responses submitted.
Information contained in the response will be treated as public information and is
available for public inspection unless it is clearly marked as being Confidential. Please
note that fee information included in the response is never considered to be confidential.
SURS reserves the right to retain all proposals submitted and to use any ideas in a
proposal regardless of whether that proposal is selected. Submission of a proposal
indicates acceptance of the conditions contained in this request, unless clearly and
specifically noted in the proposal submitted and confirmed in the contract between SURS
and the selected firm.
Respondent firms must abide by the Ex Parte Communication Rules that have been
passed by the Illinois General Assembly and the Quiet Period Policy that has been
approved by SURS Board of Trustees, which have been summarized by SURS
General Counsel and are noted below.
Ex parte communications will be documented and reported
All “ex parte communications” concerning this RFP and the selection and retention of an
investment consultant will be documented. 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 this matter.
An ex parte communication from an interested party or its official representative or
attorney to SURS will 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 the selection and retention of an investment consultant.
An ex parte communication from anyone other than an interested party or its
representative relating to the selection and retention of an investment consultant will be
reported immediately to SURS’ Ethics Officer. The communication will be
memorialized and made a part of the record. The communication will be filed with the
Executive Ethics Commission, accompanied by a memorandum from the ethics officer.
Quiet Period Policy
The Quiet Period Policy is intended to establish guidelines by which Board Members and
Staff will communicate with prospective service providers during the search process.
The objectives of the policy are to ensure that:
Prospective service providers competing to become employed by SURS have
equal access to information regarding the search parameters;
Communications related to the selection are consistent and accurate; and
The process of selecting service providers is efficient, diligent, and fair.
The following guidelines will be instituted during a search process for a service provider:
A quiet period will commence upon Committee action (or Board action if the
selection is not initiated through a Committee) to authorize a search for a service
provider and end once a selection has been made by the Board and accepted by
the service provider;
Initiation, continuation and conclusion of the quiet period shall be publicly
communicated to prevent inadvertent violations;
All Board members, and Staff not directly involved in the search process, shall
refrain from communicating with service provider candidates regarding any
product or service related to the search offered by the candidate throughout the
quiet period and shall refrain from accepting meals, travel, hotel, or other value
from the candidates;
Throughout the quiet period, if any Board member is contacted by a candidate,
the Board member shall refer the candidate to SURS Staff directly involved in the
All authority related to the search process shall be exercised solely by the relevant
Committee or Board as a whole, and not by individual Board Members;
All information related to the search process shall be communicated by the SURS
Staff to the relevant Committee or Board as a whole, and not to individual Board
The quiet period does not prevent Board approved due diligence, client
conference attendance or communications with an existing service provider that
happens to be a candidate in the ordinary course of services provided by such
service provider; however, discussions related to the pending selection shall be
avoided during those activities.
The provisions of this policy will apply to service provider candidates throughout
the quiet period and shall be communicated to candidates in conjunction with any
competitive proposal process;
A service provider may be disqualified from a search process for a knowing
violation of this policy.
Investment Consulting Services Questionnaire
1. General Information
a. Provide the name, address, telephone number, fax number, and email address of
the person designated to answer questions regarding the RFP responses.
b. Identify the location of the main office, and, if different, the office from which
services would be provided to SURS.
c. State the firm’s mission statement.
d. Provide a brief history of your firm and its operations. Include the year formed,
ownership structure, and any ownership changes that occurred during the past five
e. List your firm’s lines of business and the approximate contributions of each
business to your organization’s total revenue. If you are an affiliate or subsidiary
of an organization, what percentage of the parent firm’s total revenue does your
subsidiary or affiliate generate?
f. Please provide details on the financial condition of your firm. The most recent
annual report filed with the SEC are acceptable, but any recent material changes
should be included. Please also include a copy of your most recent ADV Parts I &
g. Does your firm have a business continuation and disaster recovery plan? Please
describe the key features of the plan.
h. Is your firm, its parent or affiliate a broker/dealer? Does your firm trade for client
accounts through this broker/dealer? If so, to what extent?
i. Does your firm provide investment management services to U.S. tax-exempt
investors? If so, to what extent?
j. Does your firm accept investment managers as clients? If so, for what products?
Please disclose the investment management firms that are clients and the revenue
received from these firms during the past five years.
k. Identify the total number of consulting clients, by type (corporate plan, public
plan, etc). What is the average client to consultant ratio? What is the maximum
number of clients assigned to a consultant? Identify the different classification of
employees within the firm and the totals for each classification
l. Identify and provide biographies of the primary and backup consultant who would
be assigned to this engagement. How many clients do these consultants currently
serve? Who are the clients these consultants currently serve? Which of these
consultants would attend the SURS investment committee meetings?
m. Describe your firm’s efforts in diversity as they relate to staff.
n. Provide a listing of clients lost or gained during the past three years. Indicate if
the primary and backup consultant identified in 1.l. (above) was the primary
consultant for either the clients gained or lost.
o. Provide a listing of all public fund clients. Include the size of the fund and the
length of service to them.
p. Describe your firm’s commitment to research and system enhancements.
q. Has there been any litigation against the firm or its principals/owners/officers
within the past three years?
r. Has there been any SEC or other regulatory action against the firm or its
principals/owners/officers within the past three years?
2. Performance Measurement and Portfolio Analytics
a. Describe the content and format of your firm’s quarterly performance reports for
the total fund, major asset classes, and individual investment managers. Provide a
sample report for one of your firm’s clients that are structured similarly to SURS.
b. Can these reports be customized to accommodate SURS information needs? Are
there charges for these additional information requests? Within what time frames
can these requested changes be implemented?
c. What is the anticipated availability dates for each report in terms of the number of
calendar days after SURS submits individual and consolidated returns to your
firm (turnaround time)?
d. Describe your firm’s source, if any, to determine comparable plan sponsor
returns. Indicate the size (#’s and $’s), composition (#’s and $’s), and data
e. Describe your firm’s view on the most relevant methods of evaluating
f. Describe your firm’s performance attribution capabilities. Include a breakdown of
domestic and international performance attribution capabilities.
g. Are your performance reports and attribution analysis tools available on-line?
3. Asset Allocation Model / Issues
a. Describe your firm’s capabilities in providing asset allocation consulting services
b. How often does your firm recommend a formal review of asset allocation studies?
c. Describe your firm’s capital markets model. Is the model proprietary, or does
your firm rely on an outside vendor’s model? If your firm relies on an outside
vendor, indicate the name of the vendor, name of the model, etc.
d. How does your firm develop inputs to the model?
e. Does your firm develop standard inputs to the model for all clients? Can these
inputs be customized based upon individual client views, needs or requirements?
f. Provide your firm’s current inputs to the asset allocation model. Include at a
minimum expected returns, standard deviations and correlation coefficients for
U.S. equities (large caps, small caps, total market), international equities
(developed and emerging markets), global equities, U.S. bonds, U.S. TIPS,
international bonds, treasury bills, real estate and any other significant asset
classes that your firm has developed inputs for.
g. Describe your firm’s view on risk budgeting? Have you created a risk budget
model that is utilized by your clients?
h. Describe your firm’s view of market timing? Do any of your clients employ
tactical asset allocation (TAA)?
4. Manager Evaluations
a. Describe your firm’s philosophy with respect to manager evaluations (formal
review, ad hoc, etc).
b. Provide a copy of a recently completed external investment manager’s
c. How often are on-site due diligence visits conducted with your client’s managers?
d. Describe your firm’s experience with evaluating your client’s internally managed
e. Provide a copy of a recently completed internally managed portfolio performance
5. Manager Searches
a. Describe in detail your manager database and search process.
b. Does your firm have a database of minority and female-owned investment
c. Describe how firms get into your database?
d. Describe your firm’s experience with smaller or emerging managers.
e. Has your most recent manager searches resulted in the same manager being
selected for multiple clients. Provide the results (table format) for the three most
recent manager searches for U.S. equities, non-U.S. equities, fixed income and
real estate managers. At a minimum identify the finalist candidates and indicate
which firm was selected. Identify by name the clients for which these searches
f. How many managers should a $13 billion pension fund employ?
g. Describe your firm’s experience in retaining alternative investment managers
(direct real estate, private equity, hedge funds, etc.)
6. Alternative Assets / Passive Management
a. Discuss the role of alternative assets (including real estate) within a pension fund
b. Identify your firm’s view of appropriate and inappropriate alternative investments
for a public fund.
c. Discuss your firm’s expertise with respect to each of the items enumerated in 6.b.
d. Describe your firm’s view of the role of passive management (by asset class) in
your client’s portfolio.
e. Indicate the active/passive allocation in your typical public pension fund clients.
7. Other Issues
a. Describe your firm’s view on performance-based fees. What percentages of your
firm’s clients utilize these types of arrangements?
b. Describe your firm’s capabilities in providing educational opportunities for
trustees and staff? Does your firm hold an annual investment conference for its
SURS will be evaluating fee proposals for full retainer services as well as project-based
services. SURS preference is to pay for recurring services on a fixed fee basis, well-
defined projects (asset allocation studies) on a separate fixed fee basis, and non-recurring
ad hoc projects (manager searches) on an hourly rate basis. The retainer fees quoted in
this proposal must be in force for the entire three-year contract period. Additionally, the
hourly-based rates shall be based upon a defined set of positions (i.e. senior consultant,
consultant, data analyst, etc.) and must remain in effect for the duration of the contract
Please refer to the list of services required on page two of the RFP. Items 1 through 7
should be included in the annual retainer amount. Item 8 should not be included in the
annual retainer amount.
1. Annual retainer for the consulting relationship $__________
2. Project based services
a. Asset allocation studies $__________
b. Other “standard” items not included in items
1 through 7 in the RFP $__________
3. Include a listing of hourly rates for members of the firm that would be effective [ ], and
be valid for the contract period. These rates would be used for items contemplated in
Items 8 and 9 in the description of requested services.
4. Attest that your firm agrees that neither the firm nor any employee or owner of the firm
will receive any commission or fee, directly or indirectly, arising from securities in which
5. Attest that your firm has not paid any “finders fees” or commissions to any individuals
not employed by the firm as it relates to this investment consultant search.
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 the RFP
response and provided separately from the RFP 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.