Part I

339 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
339
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Part I

  1. 1. WILSHIRE ASSOCIATES HIGH YIELD FIXED INCOME INVESTMENT MANAGER RFP Date of Response: Name of Firm: Contact: Title: Address: Telephone: Facsimile: E-Mail: Asset Class: High Yield Bonds RFP# INV 01-04 Product Name: Page 1
  2. 2. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 Part I PURPOSE, MINIMUM REQUIREMENTS, AND SCOPE OF SERVICES A. PURPOSE 1. This Request for Proposal (“RFP”) is issued by Wilshire Associates on behalf of the New Mexico Educational Retirement Board (“NMERB”) for the purpose of hiring one (1) investment management firm (“Manager”) to provide investment management services for an active High Yield Fixed Income mandate. The expected total mandate value will be three hundred million dollars ($300,000,000). However, based upon the quality and quantity of candidate responses that meet the minimum requirements, the NMERB may issue two awards to separate managers for this mandate. The Manager will have full discretion to manage the portfolio consistent with NMERB’s Investment Policy & Goal Statement and the terms of the contract between the NMERB and the Manager. The Manager’s performance objective will be to exceed the return of the Citigroup High Yield Market Cash Pay Index. At least 90% of the portfolio must be rated Caa3 Moody’s or CCC- S&P, or higher. 2. Proposals are being solicited from a select group of high yield investment management firms that were screened for appropriateness using Wilshire Associates’ database. Wilshire Associates is NMERB’s general investment consultant. In addition, the RFP will be available electronically on the Wilshire Associates website www.wilshire.com/Manager/Consulting/Research/ManagerSearch. B. MINIMUM REQUIREMENTS To be considered as a Manager for the purpose stated above, Manager must meet the following minimum requirements as of September 30, 2003: 1. be a professional fixed income investment firm with specific expertise in high yield U.S. fixed income products and willing to serve as an investment manager for the NMERB. 2. be registered as an investment adviser under the Investment Advisers Act of 1940, or provide proof of bank exemption; 3. have a minimum of six (6) years of high yield U.S. fixed income investment management experience; 4. have a proven and verifiable 6-year record of outperforming the Citigroup High Yield Market Cash Pay Index on a cumulative annualized basis using returns that fully comply with AIMR performance reporting standards (note: simulated or backtested results for any or all of this period are not acceptable); 5. the firm’s Subject Product must have an AIMR compliant (include AIMR Level I verification letter with response) performance composite, and/or SEC-registered mutual fund product, that has a widely recognized high yield market index as its benchmark and: a. has a minimum of $0.8 Billion of assets under management Page 2
  3. 3. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 b. has an average annualized rolling five-year information ratio (gross of fee alpha/tracking error) of at least 0.30, since inception. 4. have proof that at least two-thirds (2/3) of the key high yield product investment management team (i.e., portfolio managers and analysts) has worked together continuously for at least five years; C. SCOPE OF SERVICES The Manager will be required to provide the following scope of services to NMERB: 1. Invest allocated funds in conformity with the investment policy and guidelines of the NMERB, as defined in the contract established between NMERB and the firm. Provide discretionary management of the funds under the contract. 2. Provide periodic reports and information relating to the firm’s investment strategy and other pertinent information pertaining to the investment of the NMERB’s funds, as requested by NMERB. Provide monthly reports on portfolio appraisals, performance evaluation and attribution, and trading activities. 3. Participate in public meetings on a periodic basis to provide information to the NMERB concerning the investment performance of NMERB’s portfolio and the firm’s investment outlook and strategy for NMERB’s portfolio. The scope of services defined in the final contract between NMERB and the Manager will be binding and will supersede this section of the RFP if different from the scope of services defined here. Page 3
  4. 4. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 Part II ADMINISTRATIVE INFORMATION A. INSTRUCTIONS FOR SUBMITTING PROPOSALS 1. Managers responding to this RFP must provide answers to the questions posed in Part III of this RFP. All proposals must be complete in every respect and must answer concisely and clearly all questions proposed by the RFP. Late proposals will not be accepted, and will be returned unopened to the Manager. 2. Proposals shall be submitted with a cover letter stating that the firm meets all of the minimum requirements listed in Part I.B of this RFP, and that the firm is able and willing to provide the type and level of services required to fulfill the mandate proposed in this RFP. The cover letter and the offer made by the proposal, and any clarifications to that proposal, shall be signed by an officer of the offering firm or a designated agent empowered to bind the firm in a contract. The cover letter must also identify any sections of their proposal that the firm is identifying as confidential. (See Disclosure of Proposal Content below.) 3. Proposals should follow the order of questions as they are asked in Part III of this RFP. In response to each question asked in Part III, restate the main question (denoted by a number or a letter) in bold font followed by your answers stated in regular font. Responses should be thorough and answer the specific question asked, (including the issues addressed in the bullet points following a question). 4. Supporting material must be clearly referenced to the appropriate question. Information and materials which are strictly promotional in nature should not be used. The submission of such material may serve to disqualify the firm from further consideration. 5. Verbal communication with NMERB staff during the selection process is greatly discouraged. Firms will be given the opportunity to submit written requests to Wilshire Associates for clarification of questions or terms contained in the RFP. In all cases, verbal communications will not override written communications. 6. Proposals must be submitted no later than 4:00 p.m. MST, October 30, 2003. Page 4
  5. 5. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 7. A firm must submit one electronic version of the proposal response, including all appendices, and six (6) hardcopies of their proposal to NMERB and two (2) hardcopies to Wilshire Associates, at the following addresses: Six copies to: Two copies to: New Mexico Educational Retirement Board Wilshire Associates 701 Camino de los Marquez 1299 Ocean Avenue, Suite 700 Santa Fe, NM 87501 Santa Monica, Ca. 90401-1085 Attn: Frank C. Foy, Chief Investment Officer Attn: Eileen L. Neill, Managing ffoy@state.nm.us Director eneill@wilshire.com 310-260-6650 In addition, the firm must e-mail a complete electronic version of its proposal to Wilshire Associates at mgrsearch.neill@wilshire.com. The firm’s name must appear in the response document’s e-mail title (i.e., XYZ Asset. Mgmt. Response to NMERB U.S. High Yield Fixed Income RFP.doc) B. REJECTION OF PROPOSALS 1. Firms responding to this RFP must restrict their proposed investment structure to that specified in this RFP. Alternate or substitute structures will be rejected. 2. NMERB reserves the right to reject any or all proposals in whole or in part received by this request, due to noncompliance with the requirements of this RFP or for any other reason. NMERB will not pay for any information herein requested, nor is it liable for any costs incurred by the submitting Managers. 3. Managers whose proposals do not meet the mandatory requirements will be so notified. After evaluation of the proposals, selection, and approval by NMERB, all Managers will be notified of the successful firm. 4. NMERB reserves the right to not hire or to defer the hiring of a firm for these management services. C. DISCLOSURE OF PROPOSAL CONTENT The laws of New Mexico require that at the conclusion of the selection process the contents of all proposals be placed in the public domain and be open to inspection by interested parties. Trade secrets or proprietary information that are recognized as such and protected by law may be withheld, but only if designation of such sections is stated in proposing firms’ cover letters and confidential information is clearly identified as such on each of the applicable pages within the body of the proposal. D. PROPOSAL OBLIGATIONS The contents of the proposal and any clarifications thereto submitted by the successful Manager shall become part of the contractual obligation and will be incorporated by reference into the ensuing contract. E. DISPOSITION OF PROPOSALS All proposals become the property of NMERB and will not be returned to the Manager. Late proposals will be returned to the Manager unopened. F. GRATUITIES Page 5
  6. 6. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 1. The laws of New Mexico provide that it is a felony to offer or promise to give anything of value or benefit to a state employee with the intent to influence that employee's duties. Evidence of violations of this statute will be turned over to the proper prosecuting attorney. 2. NMERB provides reimbursement for transportation, lodging, meals and miscellaneous expenses for its employees. G. NEW MEXICO STATUTES The terms and conditions of this RFP and the resulting contract of activities based upon this RFP shall be construed in accordance with the laws of New Mexico (see attached relevant statutes). Whenever differences exist between federal and state statutes or regulations affecting this procurement, interpretation shall be in the direction of that which is most beneficial to the interests of the State of New Mexico. H. SIGNATURE OF MANAGER'S AGENT The offer made by the proposal, and any clarifications to that proposal, shall be signed by an officer of the offering firm or a designated agent empowered to bind the firm in a contract. I. NMERB CONTRACT SIGNATORY Danny Joe Lyle, Executive Director. J. AWARD OF MANDATE NMERB reserves the right to award this contract not necessarily to the firm with the lowest fee and cost proposal, but to the firm which will provide the best match to the requirements of the RFP. The successful Manager will be determined in accordance with the evaluation criteria defined by NMERB. K. EVALUATION OF PROPOSALS An Evaluation Committee will meet to evaluate and score the proposals. Upon completion of the Evaluation Committee's evaluation, finalist interviews will be, and office visits may be, conducted with some candidate firms. Determination of whether to conduct interviews and which firms to interview is at the sole discretion of the Evaluation Committee. A determination to execute a contract may be made by the NMERB Investment Committee without an interview, upon recommendation of the Evaluation Committee. NMERB’s Investment Committee will make the recommendation for final Manager selection to the NMERB Board. L. EVALUATION CRITERIA Proposals will be evaluated using the following criteria: I. The Firm’s Organization and Staff Qualifications 25% II. The Firm’s Investment Style and Process 25% III. The Firm’s Relevant Experience and Investment Performance 20% IV. The Firm’s Resources 10% V. The Firm’s Fee Proposal 20% M. THE RESULTING CONTRACT The contract between NMERB and the Manager shall be a combination of the specifications, terms and conditions of the RFP, any written clarifications or changes made to this RFP, the offer contained in the successful proposal, and any additional contractual terms and conditions agreed to mutually and in writing by the parties. NMERB’s proposed draft contract will be included as Part IV of this RFP at a later date. Page 6
  7. 7. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 N. TERM OF CONTRACT The initial contract shall be for a four-year period from the date of its execution. The resulting contract may be terminated at NMERB's discretion, with or without cause, after thirty (30) days written notice to the Manager. O. INVESTMENT CONTRACT REQUIREMENTS 1. Contract: Any contract between NMERB and the successful Offeror will follow format specified by NMERB and will contain the Department of Finance and Administration's (DFA) standard terms and conditions for professional services contracts. The contents of the RFP as revised and/or supplemented and the successful Offeror's proposal will be incorporated into the contract. 2. Contract Deviation: Any additional terms and conditions which may be the subject of negotiation will be discussed only between NMERB and the successful contractor and shall not be deemed an opportunity to amend the Offeror's proposal. 3. Penalties: The New Mexico Procurement Code Sections 13-1-21 et seq. through 13-1-199 NMSA 1978, as amended, imposes civil and criminal penalties for its violation. In addition the New Mexico Criminal Statutes impose felony penalties for illegal bribes, gratuities and kickbacks. 4. Duration of Contract Term: The term of the contract is expected to be for a period of four years, with annual evaluations. 5. Termination: The contract may be terminated by either of the parties thereto upon written notice delivered to the other party at least 30 days prior to the intended date of termination. 6. Status of the Contractor: The contractor, his agents and employees, are independent contractors performing professional services for the NMERB and are not employees of the NMERB. The contractor and its agents and employees shall not, as a result of this contract, accrue leave, retirement, insurance, bonding, use of state vehicles, or any other benefits afforded to employees of the State of New Mexico. 7. Assignment: The contractor shall not assign or transfer any interest in the contract or assign any claims for money due or to become due under the contract. 8. Subcontracting: The contractor shall not subcontract any portion of the services to be performed under the contract without the prior written approval of the NMERB. 9. Records and Audit: The contractor shall maintain records in sufficient detail to fully describe the services rendered during the term of the contract. These records shall be subject to inspection by the NMERB, DFA, and the State Auditor. The ERB shall have the right to audit billings both before and after payments; payment under the contract shall not foreclose the right of the NMERB to recover excessive or illegal payments. 10. Release: The contractor, upon termination of the contract, shall release the NMERB from all liabilities, claims and obligations whatsoever arising from or under the contract. The contractor agrees not to purport to bind the State of New Mexico, unless the contractor has express written authority to do so, and then only within the strict limits of that authority. Page 7
  8. 8. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 11. Confidentiality: Any information provided to or developed by the contractor under this contract shall be kept confidential and shall not be available to any individual or organization without the prior written approval of the NMERB, unless otherwise required by law. 12. Product of Services; Copyright: All written materials developed or acquired by the contractor under this contract shall become the property of the NMERB and shall be delivered to the NMERB no later than the final termination date of this contract. Nothing produced in whole or in part by the contractor under this contract shall be the subject of any application for a copyright by or on behalf of the contractor without the prior written approval of the NMERB. 13. Conflict of Interest: The contractor warrants that he presently has no interest, and shall not acquire any interest, directly or indirectly, which would conflict in any manner or degree with the performance of services required under this contract. 14. Amendment: The contract shall not be altered, changed or amended except by an instrument in writing executed by the parties. 15. Merger: The contract shall incorporate all of the agreements, covenants, and understandings between the parties thereto concerning the subject matter thereof. No prior agreement or understanding, verbal or otherwise, of the parties or their agents shall be valid or enforceable unless embodied in the contract. 16. Applicable Law: The contract shall be governed by the Laws of the State of New Mexico. 17. Waiver: No waiver of any breach of this contract or any of the terms or conditions thereof shall be held to be a waiver of any other subsequent breach; nor shall any waiver be valid or alleged or binding unless the same shall be in writing and signed by the party alleged to have granted the waiver. 18. Equal Opportunity Compliance: The contractor agrees to abide by all Federal and State laws and rules and regulations, and executive orders of the Governor of the State of New Mexico pertaining to equal employment opportunity. In accordance with all such laws, rules, regulations, and executive orders of the Governor of the State of New Mexico, the contractor agrees to assure that no person in the United States shall, on the grounds of race, color, national origin, religion, sex, sexual preference, age or handicap, be excluded from employment with or participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity performed under the contract. If the contractor is found to be not in compliance with these requirements during the term of the contract, the contractor agrees to take appropriate steps to correct these deficiencies. 19. Standard of Care/Indemnification: The contractor holds itself out as an expert in the investment of large trust or investment funds. The contractor represents itself as being possessed of greater knowledge and skill than the average man. Accordingly, the contractor is under a duty to exercise a skill greater than that of an ordinary man and the manner in which the contractor carries out its duties under the contract will be evaluated in light of the contractor's superior skill. The contractor shall wholly indemnify the state of New Mexico against any and all losses, damages, costs, expenses, legal fees, and liability resulting from investment advice and other services provided under the contract Page 8
  9. 9. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 that are not made in accordance with the provisions contained in this contract, investment advice not made in accordance with the law applicable to the Funds for which investment advice is rendered, and advice not made in accordance with the standard of care set forth in this paragraph. SCHEDULE OF EVENTS 1. September 24, 2003 - RFP IS ISSUED 2. October 8, 2003 - INQUIRIES - Inquiries and requests for interpretation or clarification of the RFP from potential bidders will be accepted only in writing, as e-mailed, and only if received no later than 4:00 p.m. PDT, October 8, 2003. E-Mail requests to: Wilshire Associates Incorporated Attn: Eileen L. Neill E-Mail: mgrsearch.neill@wilshire.com 3. October 20, 2003 – RESPONSE TO INQUIRIES - Responses to, and addenda resulting from, requests for interpretation shall be posted on the Wilshire Associates website, www.wilshire.com/Manager/Consulting/Research/ManagerSearch, no later than 4:30 p.m. PDT, October 20, 2003. 4. October 30, 2003 – PROPOSALS DUE - Proposals must be received by 4:00 p.m. MST, October 30, 2003. 5. December 11, 2003 – FINALIST INTERVIEWS - Members of the Evaluation Committee, and possibly members of the NMERB Investment Committee, will interview finalist firms in Albuquerque, New Mexico. 6. December 12, 2003 (Tentative) – ANNOUNCEMENT OF SELECTION – The NMERB will notify all firms that submitted a proposal of its selection, which shall be subject to successful negotiation of a contract with the selected firm. 7. March 1, 2004 (Tentative) – INITIAL FUNDING – The NMERB will provide the successful candidate manager with initial funding of approximately $300 million. If two managers are selected, the award is expected to be split evenly between the two managers. Part III QUESTIONNAIRE A. Organization/People (max 1 page) 1. Describe the structure of the group which manages the product. a) Describe the role of economists, portfolio managers, credit/research analysts, traders, etc. b) Who is responsible for investment strategy, asset allocation, country selection, portfolio construction, research, security selection, trading, etc.? Page 9
  10. 10. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 c) Describe the communication links between the groups within the product area, and across product areas. ALSO COMPLETE APPENDIX I 2. 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? a) Identify the percentage of compensation which is: i. base salary ii. performance bonus iii. equity incentives iv. other b) Do you offer direct ownership, phantom stock, profit sharing, and/or performance bonus? c) Who is eligible to participate? d) 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. e) How does your compensation structure/levels compare with other firms in the industry? 3. Describe the background of professionals directly involved in the asset class. a) Are they brought in from the outside or promoted to their positions from within the organization? b) Is their prior experience in portfolio management/research/trading, industry, consulting, or other business or technical areas? c) What sort of ongoing education programs (for example, the CFA program) are encouraged or required? ALSO COMPLETE APPENDIX II and III 4. Discuss the causes and impact of any turnover (departures or hiring/promotions) of any professionals directly involved in the product you have experienced in the past five years. How long has the team been together? ALSO COMPLETE APPENDIX IV 5. Describe the objectives of your firm with respect to future growth in the product, commenting on: a) Additional resources for portfolio management, research, trading, client service and tools/models to enhance the investment process or manage growth; and b) Size limitations with respect to assets under management in the product. How did you arrive at those asset limits? Are companion retail mutual fund assets and assets in this category from broader mandates included in these limits? c) Describe your firm’s involvement in the management of Collateralized Bond Obligations (CBOs). What are your future plans regarding CBO management? How would you expect this to impact the management of your other assets? d) 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 or legal proceedings related to your high yield investment activities? If so, please provide a brief explanation for each item and indicate the current status. Page 10
  11. 11. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 e) Over the past five years, has any high yield team member been censured, warned of otherwise formally reprimanded by a professional association or society for matters related to investment activities? f) List your five largest institutional clients for this product and state the assets under management for each. g) Provide a list of the following references: i. The client name, address, contact name, title and telephone number for three current large public fund clients (i.e., assets > $1 billion) that have been invested in this product for at least two years or since the product’s inception. ii. The client name, address, contact name, title and telephone number for three clients that have terminated their investment in this product within the past three years. If possible, please do not include in this list any terminations that occurred due to legislative, investment policy or plan sponsor/structure changes. ALSO COMPLETE APPENDIX VI B. Philosophy/Process (max 2 ½ pages) 1. Describe your firm’s investment philosophy for the product. a) What market anomaly or inefficiency are you trying to capture? b) Why do you believe this philosophy will be successful in the future? Provide any evidence or research which supports this belief. c) How has this philosophy changed over time? d) Is your strategy based on current income generation, capital appreciation or both? 2. Duration: a) Summarize your duration policy for this product. b) What are the minimum and maximum duration for this product (expressed as an index relative)? 3. Describe your buy/sell disciplines. a) What size, quality and liquidity criteria meet the requirements of your buy/sell discipline? b) What valuation approaches are used in evaluating securities? c) What factors dictate your sell decision? d) Under what circumstances would your firm deviate from these disciplines? Have you ever deviated? If so, please describe. 4. Describe the credit analysis process as it pertains to the high yield fixed income strategy. a) Are analysts assigned coverage by industry or are they responsible for covering several industries? b) What analytical tools and models do you use? c) What are the unique aspects of your research process for high yield fixed income? 5. Describe your portfolio construction process. a) What specific factors are integral to the portfolio construction process? What is the relative importance of these factors? b) What universe are securities selected from? c) What types of securities are used (e.g. PIKs, interest reset bonds, zero coupon bonds, convertibles, warrants, private placements, Rule 144 As, Brady bonds, emerging market debt, etc.)? In what manner is each used? d) What percentage of the portfolio is invested in IPO’s and new issues? e) What types of derivative instruments do you use? What are they used for? Page 11
  12. 12. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 i. Do you use derivatives with non-linear market exposure (i.e., direct or implied leverage, structured notes, etc.) What are your guidelines for the use of these instruments? a. Describe your scenario testing process. b. How many issues are typically contained in a portfolio? c. How are individual security weightings determined? f) Sector/industry selection: i. Describe your investment guidelines for this product regarding sector and industry allocation. Maximum exposure permitted: a. To a single issue b. To a single issuer c. To a single sector or industry Page 12
  13. 13. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 g) Show the average 3-years distribution of holdings for this product as indicated below: % of Portfolio Minimum Maximum Policy Policy Cash & Equivalents U.S. Treasury/Agency Issues U.S. Corporate Investment Grade U.S. Corporate BB/Ba U.S. Corporate B U.S. Corporate CCC/Caa and below U.S. Corporate Not Rated U.S. Corporate Common Stock U.S. Corporate Preferred Stock Private Placements $ denom. Non-U.S. Issued by Govts/Agencies $ denom. Non-U.S. Issued by Corps Brady Bonds Bonds Denominated in Non-US Currency Other h) Discuss the quantitative and qualitative processes utilized in constructing the portfolio. i) What controls do you have in place to assure that your reported prices are “accurate” by current industry standards? j) What latitude is given to portfolio managers within the product team? Who has ultimate decision making authority and accountability? ALSO COMPLETE APPENDIX V 6. How important is benchmark tracking error in the portfolio construction? Is it measured and managed? If so, how? a) How is portfolio risk managed and monitored? Describe all risk management functions and tools utilized. b) What is your firm’s definition of risk with respect to this product? If more than one, specify each with its percentage of importance. c) Describe how you evaluate and monitor liquidity risk, specifically commenting on how you would handle an “iliquidity event”. d) Do you actively monitor the portfolio’s duration or is it a residual to the portfolio construction process? e) Describe your risk controls as they pertain to credit quality, callability, interest rate volatility, default losses, etc. f) Do you use cash as a method of risk control? Indicate how much cash is generally held in the portfolio. g) Describe any risk measurement models (such as Wilshire Axiom, BARRA, etc.) used and how this analysis is incorporated in the portfolio management process. 7. The risk that trading volume can effectively disappear for extended periods is clearly much high for the high yield market than it is for the investment grade market. Please list three reasons why this product is well suited to survive an “iliquidity event”. Page 13
  14. 14. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 8. Do you use emerging markets debt in your high yield bond strategies? If yes, describe how the emerging markets debt is used. a) Describe the factors that lead to an allocation to emerging markets debt. b) Describe how the countries and securities are analyzed, including country economic and political analysis, valuation process, selection criteria and risk analysis. Is this different from the analysis in developed markets? c) Describe the issue size, quality and liquidity criteria you require. 9. How do you monitor the product’s adherence to its investment style and process? Specify who is responsible. C. Resources (max 1½ pages) 1. If you have research capability that is dedicated to the product, describe the research process. a) What percentage of the research effort is conducted internally? What percentage of the research effort is conducted externally? b) Where is research carried out? c) What are the sources of research? d) What specific research is conducted? e) What are the outputs of the research? f) How is this information incorporated in bond selection and portfolio construction? 2. Describe the quantitative models and tools you utilize for research, portfolio construction and trading. What enhancements are being contemplated? 3. If you have a trading function that is exclusive for the product, describe the trading capabilities for the product. a) What has been the product’s level of turnover? b) How many traders are there and what is their experience? c) Describe the trading systems and strategies you use, and indicate any enhancements your firm is contemplating. d) Describe how you measure trading costs (market impact). e) Describe how you use soft dollars. 5. What resource constraints exist? What is the basis for obtaining additional resources to support each function for this particular product? D. Performance (max 1/2 page) 1. a) What is the most appropriate benchmark for your product? Why? b) What is the most appropriate excess return for your product? How is this determined? 2. Describe how you analyze and evaluate the performance of the product. Include a discussion of your performance attribution analysis. a) Describe how you conduct performance attribution analysis, indicating any models or tools used. Page 14
  15. 15. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 b) How do you incorporate the results of the performance attribution analysis in the management of the product? c) Describe the causes for portfolio return deviation (both positive and negative) from the stated benchmark return in each of the past five years. 3. Describe the causes of return differences between portfolios managed in the strategy for different clients but with similar guidelines and objectives. How much is attributable to individual portfolio manager’s decisions? ALSO COMPLETE APPENDIX VII E. Fees (max 1/4 page) Describe how fees are determined for this product. Please provide your proposed fee for separate accounts of approximately $300 million and 150 million. ALSO COMPLETE APPENDIX VIII Page 15
  16. 16. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 APPENDIX I. Organizational Chart – Product Structure & Key Professionals 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. II. Key Professionals PORTFOLIO MANAGEMENT Title/ Yrs Yrs @ Degrees/ Sponsoring Name Responsibilities Exp Firm Designations Body/School RESEARCH Title/ Yrs Yrs @ Degrees/ Sponsoring Name Responsibilities Exp Firm Designations Body/School TRADING Title/ Yrs Yrs @ Degrees/ Sponsoring Name Responsibilities Exp Firm Designations Body/School Provide here biographies, no longer than ½ page, on each of the persons listed in above. III. Responsibilities Indicate in the table below the percent of time spent by each professional involved in the product on the activities identified in the table. Management Marketing Client Investment Investment – Investment Compliance Other Name % % Service – Research Portfolio – Trading % % % % Management % % Page 16
  17. 17. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 IV. Turnover 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 Yrs @ Replaced by Date Name/Title Responsibilities Firm Reason for leaving (name/title) SUMMARY Total # Professionals # Joined # Departed % Turnover V. Investment Process Flow Chart Illustrate the investment process in a flow chart identifying the decision making steps, decision makers and outcomes. VI. ASSETS UNDER MANAGEMENT. Please provide the following information in the prescribed format presented below: 1996 1997 1998 1999 2000 2001 2002 2003 Total Assets Under Mgmt. (all Products) $ in mils. Total High Yield Bond Assets Under Mgmt. $ in mils. Total # High Yield Bond Accounts # High Yield Accounts Gained High Yield Bond $ Gained in mils. # High Yield Bond Accounts Lost High Yield Bond $ Lost in $mils VII. Investment Performance Results Page 17
  18. 18. Wilshire Associates NMERB High Yield Bond RFP RFP# INV 01-04 Submit historical quarterly performance results, gross and net of fees, including any cash or other non-equity holdings, since product inception through September 30, 2003. Describe the composite presented and whether it was calculated in compliance with AIMR PPS. Include number of accounts within, how individual account performance is weighted, and the rules governing entry and exit of client accounts within composite. Also, provide annual high and low returns for each year since product inception for composite along with a description for variances between the high and low greater than 50 basis points. VIII. Fee Schedule Provide your firm’s published fee schedule for this product. Page 18

×