REQUEST FOR PROPOSAL
GENERAL INVESTMENT CONSULTANT SERVICES
INTRODUCTION
The Los Angeles County Employees Retirement Association (LACERA) is soliciting proposals
from qualified firms to provide general investment consulting services for the fund's $33 billion
investment portfolio.
A nine member Board of Investments is responsible for establishing LACERA's investment
policy. The Board of Investments is composed of four elected members, four County-appointed
members and the County Treasurer-Tax Collector as an ex-officio member.
LACERA employs three investment consultants: 1) Russell Investment Group is the general
consultant, 2) The Townsend Group is the real estate consultant, and 3) Pathway Capital
Management is the private equity advisor. The consultant selected for this assignment will
provide general consulting services on a retainer basis.
The fund's target asset allocation is:
Domestic Equities
International Equities
Fixed Income
Real Estate
Private Equity
32%
21%
30%
10%
7%
All assets are externally managed. Attached is a list of LACERA’s equity and fixed income
managers.
MINIMUM QUALIFICATIONS
1. The consulting firm must have one public fund client with at least $25 billion in
assets.
2. The proposed lead consultant must have experience working with a public fund
client with at least $10 billion in assets within the last two years.
3. The lead consultant assigned to this account must have a minimum of ten years relevant
investment experience, the majority of which must be either as a consultant or as a plan
sponsor.
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SCOPE OF WORK
The consulting services required by LACERA fall primarily into the following areas:
1. Conducting an asset-liability study. The Consultant will work closely with
LACERA’s actuaries and senior investment staff to prepare a comprehensive
asset-liability study that requires an analysis of the plan’s funded status and
projected contributions under various return environments and different asset mix
scenarios.
LACERA’s latest asset-liability study was completed in September 2005.
Historically, LACERA has conducted asset-liability studies every five years.
Staff and consultant will work together to provide both educational information
and to report the asset-liability results to the Board.
Please quote the cost of the asset-liability study separately from your general
consulting service fees.
2. Assisting LACERA’s senior staff with strategic investment decisions. The
focus should be on “big-picture” total fund investment policy and structure issues.
This would include topics such as analyzing new investment strategies and asset
classes, as well as identifying industry trends.
3. Providing independent reviews. LACERA staff bears primary responsibility for
analyzing issues and making recommendations to the Board. LACERA staff also
independently monitors manager performance and does not require the consultant
to prepare quarterly or annual performance reviews of investment managers, asset
classes, or the overall fund. However, the consultant will be requested to provide
independent reviews via brief (1 to 2 pages) summary reports to the Board on
projects that staff has completed in the following areas:

Investment Policy and Guidelines
LACERA staff periodically reviews the Investment Policy Statement and
investment guidelines.

Asset Class Structures and Strategies
LACERA staff develops and implements strategies pertaining to portfolio
structure. Staff will evaluate various issues, such as active versus passive
management for public markets, investment styles, benchmark risk,
manager allocations, and rebalancing strategies. The consultant will assist
staff in reviewing the merits of the current strategies or evaluating new
investment strategies.
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
Investment Manager Searches
LACERA staff conducts investment manager searches independently.
Staff sets minimum qualifications, issues RFP’s, interviews candidates,
and recommends finalists to the Board. However, staff may on
occasion seek the consultant’s opinion on any aspect of the search.
4. Researching investment ideas. This area pertains to a consulting firm’s depth of
research and its ability to provide LACERA with research on a broad range of
pension and investment topics. The consultant will be expected to provide
LACERA with independent, thorough research on current industry issues, such as
risk budgeting, portable alpha, hedge funds, commodities, liability matching, and
tactical asset allocation.
5. Educating LACERA’s Investment Board. The consultant may be required to
periodically provide educational presentations to the Board on specific issues.
Education will range from informational items to critical investment policy issues
facing the Trust.
COMMITMENT OF RESOURCES
LACERA anticipates that the consultant’s services will be required for an average of not more
than 10 hours per month. In addition, the consultant should attend 4 to 6 Board of Investment
meetings per year. (Board meetings are held on the second and fourth Wednesdays of every
month, and there is one annual off-site meeting).
FEE PROPOSAL
Please submit a one-page fee proposal for a general consulting relationship based on the services
outlined in the “Scope of Work” and the resource commitment described in the “Commitment of
Resources.” Please itemize two separate fees: one for the asset-liability study, and one for the
remaining services. In summary, LACERA anticipates the following service requirements from
its general investment consultant:





An asset-liability study once every 3 to 5 years.
Strategic advice averaging no more than 10 hours per month.
Independent reviews via brief memos.
Attend 4 to 6 Board of Investment meetings, which includes the Board’s annual
off-site meeting.
Periodic research reports and presentations
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SUBMISSION OF PROPOSALS
Your complete proposal (fee quotes and questionnaire responses) must be received by LACERA
no later than 5 p.m. (Pacific time) on Thursday, April 27, 2006. Proposals received after the
submission deadline will be considered for evaluation solely at the discretion of LACERA if
consideration is determined to be in the best interests of LACERA. Proposals must be enclosed
in a sealed envelope, bearing the name and address of the firm submitting the proposal, and
clearly marked with the words: "PROPOSAL – GENERAL INVESTMENT CONSULTANT".
Please submit the original and five (5) spiral-bound copies of the proposal - maximum 45
pages (font size 12) - and one (1) electronic copy in Microsoft Word on a compact disk to:
Lisa Mazzocco
Chief Investment Officer
Los Angeles County Employees Retirement Association
300 North Lake Avenue, Suite 850
Pasadena, CA 91101
Any request for clarification or additional information relating to this RFP must be in writing and
delivered either (1) by facsimile to 626.564.6130, attention Lisa Mazzocco, or (2) by e-mail to
[email protected].
NOTICE REGARDING THE CALIFORNIA PUBLIC RECORDS ACT
The information you submit in response to this RFP will be subject to public disclosure pursuant
to the California Public Records Act (Cal. Gov. Code Sections 6250 et. seq., the “Act”). The Act
provides generally that all records relating to a public agency's business are open to public
inspection and copying, unless specifically exempted under one of several exemptions set forth
in the Act. In addition, if LACERA staff chooses to recommend your firm to the Board of
Investments for hiring, such recommendation and the relevant proposal(s) will appear on a
publicly posted agenda for a public meeting of the Board of Investments.
If you believe that any portion of your proposal is exempt from public disclosure under the Act,
you must mark such portion “TRADE SECRETS,” "CONFIDENTIAL," or “PROPRIETARY,”
and make it readily separable from the balance of your response. Proposals marked “TRADE
SECRET,” “CONFIDENTIAL,” OR “PROPRIETARY” in their entirely will not be honored,
and LACERA will not deny public disclosure of all or any portion of proposals so marked. By
submitting a proposal with material marked “TRADE SECRET,” “CONFIDENTIAL,” or
“PROPRIETARY” you represent you have a good faith belief that the material is exempt from
disclosure under the Act; however, such designations will not necessarily be conclusive, and you
may be required to justify in writing why such material should not, upon request, be disclosed by
LACERA under the Act.
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If LACERA denies public disclosure of any portions so designated, you agree to reimburse
LACERA for, and to indemnify, defend and hold harmless LACERA, its officers, fiduciaries,
employees and agents from and against: (a) any and all claims, damages, losses, liabilities, suits,
judgments, fines, penalties, costs and expenses including, without limitation, attorneys' fees,
expenses and court costs of any nature whatsoever (collectively, "Claims") arising from or
relating to LACERA's non-disclosure of any such designated portions of your proposal; and (b)
any and all Claims arising from or relating to LACERA's public disclosure of any such
designated portions of your proposal if LACERA reasonably determines disclosure is deemed
required by law, or if disclosure is ordered by a court of competent jurisdiction.
PROPOSALS BECOME LACERA PROPERTY
The information you submit in response to this RFP will become the exclusive property of
LACERA. It will not be returned to you. LACERA will not reimburse you for proposal
preparation expenses.
CONTRACT NEGOTIATIONS
If LACERA’s Board of Investments so authorizes staff, staff will enter into negotiations with the
approved firm(s) to enter into a consulting services agreement. LACERA may terminate
negotiations, at its sole discretion, if it believes a satisfactory agreement cannot be negotiated.
LACERA reserves the right to award a contract based upon proposals received; you should not
rely upon the opportunity to alter your proposal (e.g., fees, services to be provided) during
contract negotiations.
The contract negotiated, if any, must allow LACERA to terminate (a) for its convenience upon
not more than 30 days notice, (b) if funds are not appropriated for the services to be provided,
and (c) for default.
RESERVATIONS BY LACERA
LACERA reserves the right to cancel this RFP, in whole or in part, any time before the closing
date.
LACERA will not be liable for any costs your firm incurs in connection with the preparation or
submission of any proposal.
If you submit a proposal, LACERA reserves the right to make such investigations as it deems
necessary to determine your ability to furnish the required services, and you agree to furnish all
such information for this purpose as LACERA may request.
LACERA also reserves the right to reject the proposal of anyone who is not currently in a
position to perform the contract, or who has previously failed to perform similar contracts
properly, or in a timely manner.
LACERA reserves the right to reject, in whole or in part, any and all proposals received; to
waive minor irregularities; to negotiate in any manner necessary to best serve the public interest,
and to make a whole award, multiple awards, a partial award, or no award.
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LACERA reserves the right to award a contract, if at all, to the firm which will provide the best
match to the requirements of the RFP and the consulting services needs of LACERA, which may
not be the proposal offering the lowest fees.
LACERA does not guarantee any specific number of projects to be contracted during the life of
this agreement.
LACERA’s INVESTMENT MANAGERS – PUBLIC MARKETS
EQUITY - DOMESTIC
American Century
Barclays Global Investors
Delta Asset Management
Eagle Asset Management
FIS Funds Management
Frontier Capital Management Company
ICM Asset Management
Mazama Capital Management
Northern Trust Global Advisors
Oak Associates
EQUITY - INTERNATIONAL
Barclays Global Investors
Capital Guardian Trust Company
Fidelity Management Trust Company
Global Asset Management
Schroder Investment Management
FIXED INCOME
Barclays Global Investors
BlackRock
Dodge & Cox
Dolan Mceniry Capital
GW Capital
LM Capital Management
Loomis, Sayles & Company
Oaktree Capital Management
Pacific Investment Management Company
Penn Capital
Post Advisory Group
Pugh Capital Management
Wells Capital Management
Western Asset Management Company
W.R. Huff Asset
CASH and SHORT-TERM
Western Asset Management Company
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QUESTIONNAIRE
FIRM NAME:
ADDRESS:
TELEPHONE #:
FACSIMILE #:
E-MAIL:
_________________________________________________________
CLIENT CONTACT:
SIGNED1:
NAME (PRINT):
TITLE:
DATE:
Organization
1.
Provide your company's name and address, and the primary RFP contact's name, phone
number, e-mail address and fax number. Provide the address of the local office that will
service this account.
2.
Give a brief history of your firm’s involvement in the consulting business, including the
year of organization, current ownership, and affiliations. Are ownership changes planned
or anticipated at this time?
3.
If your firm is registered as an investment adviser with the SEC or a state securities
regulator, please attach your firm’s current Form ADV Part I and II. If your firm is not
registered with the SEC, what is your fiduciary classification?
4.
How many years has your firm provided pension fund consulting services to public
Your signature indicates your authority to act on your firm’s behalf and that your firm meets the minimum
qualifications. All of the information your firm has provided in response to this RFP is true and correct to the best
of your knowledge. Failure to disclose accurate information may result in immediate disqualification from the
evaluation process.
1
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pension plans?
5.
What do you consider to be your firm's consulting specialties, strengths, and
limitations?
6.
(A) What services, if any, does your firm (including any affiliate, subsidiary or
parent company) offer in addition to pension fund consulting services?
(B) Please provide a breakdown of revenue by line of business for your firm and also any
entity listed in the response to question 5 (A).
7.
Indicate the total assets of your pension fund consulting clients at the end of each calendar
year from 2000 to 2005.
8.
Describe your investment consulting philosophy. Is there anything unique in this
philosophy that causes you to approach investment consulting in a manner different
than the rest of the industry?
9.
Describe your plans for managing the future growth of your firm. Do you have a
limitation on the number of clients you intend to accept?
10. Provide an organization chart of your firm and describe the relationship between each
component and your consulting group.
11. Within the past three years, have there been any significant developments in your
organization such as changes in ownership, restructuring, or personnel reorganization? Do
you anticipate future significant changes in your organization?
12. Does your firm provide its employees with a defined benefit pension plan? Please list the
retirement benefits your firm offers employees.
13. During the last five years, has any officer or principal of your organization been
involved in litigation relating to consulting activities? If so, provide a brief explanation and
indicate the current status of the proceedings
Conflicts of Interest
14. Based on the list of investment managers currently managing assets for LACERA, please
disclose any business your firm, affiliates, or parent company does with any of the investment
managers.
15. Does your firm hold or sponsor money manager or client conferences? Please describe all
conferences your firm has held or sponsored in the past two years.
16. List and describe any professional relationships you have had with LACERA’s plan sponsor (Los
Angeles County) or legislative oversight bodies during the past three years.
17. Are there any circumstances under which your firm or any individual in your firm receives
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compensation, finder’s fees, or any other benefit from investment managers or third parties? If yes,
please describe in detail.
18. Does your firm provide any broker/dealer, money management or fund-of-fund services?
19. If the answer to the previous question is “yes”, how does your firm manage these businesses
to avoid conflicts of interest with the consulting business?
20. Explain any other potential conflict your firm may have in servicing the LACERA account.
(“Conflict” may include brokerage relationships, money management activities, fee relationships
with investment managers, soft dollars, etc.) What procedures are in place that would mitigate or
eliminate such potential conflicts of interest?
Clients
21. Provide a list of representative clients. Please include your five largest public pension
clients and their approximate asset size.
22. Distribution of client assets (millions of dollars and number of clients):
SIZE
Up to $1 Billion
PUBLIC FUNDS
PRIVATE FUNDS
ENDOWMENTS,
FOUNDATION, ETC.
$1 B - $5 B
$5 B - $10 B
$10 B - $25 B
$25 B - $75 B
Greater than $75 B
23. Length of client service (by years with your firm):
YEARS
NUMBER OF CLIENTS
0–1
1–3
3–5
5 – 10
10 + Years
24. Please provide as references three clients for whom work similar to that requested in this RFP has
been performed.
(A) For each reference listed, please provide a contact person as follows:
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CLIENT NAME CONTACT PERSON TITLE ADDRESS PHONE NUMBER
(B) In addition, for each client referenced, include the number of managers being monitored,
fund diversification by asset class, and total number of dollars under management.
25. How many clients does your firm provide with full service pension fund consulting
management?
26. Please give details on the number, name and asset values of any terminated client relationship in
the last three years, with reason for the termination. Please provide a contact person
as follows:
CLIENT NAME CONTACT PERSON TITLE ADDRESS PHONE NUMBER
Professional Staff
27. How many investment consultants does your firm have? Please provide an organization chart
showing functions and titles of all pension consulting personnel. If consultants are organized
into teams, please identify teams in the organization chart.
28. Please list the number of your firm's employees in the consulting portion of your firm's
business involved in the following areas:
a. Marketing
b. Research
c. Actuarial
d. Technology Information/Systems
e. Support Services
29. List the name and location of primary individual(s) who would be responsible for our
account and provide brief biographies including titles, functions, academic credentials, and
relevant experience.
NAME TITLE LOCATION RELEVANT EXPERIENCE AND EDUCATION
(A) Please describe the role of each consultant for this assignment.
(B) Identify and explain the role of back-up personnel.
(C) How many clients are assigned to each person named above?
NAME
CLIENT RESPONSIBILITIES
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30. What policies are in effect to control the workload as it relates to the number of clients
served by the consultant? Is there a limit on the number of accounts that a consultant may
handle?
31. Please describe your team’s experience with similar work performed for other public
retirement funds, corporations, pension funds, or similar institutional investors.
32. Please indicate the turnover of professional staff (senior management and key
professionals) over the past five years as follows:
PERSON POSITION DATE LEFT REASON FOR LEAVING REPLACED BY
33. Give a brief description of your firm's compensation arrangements for professional staff,
including incentives, profit sharing, or equity ownership.
34. Describe your firm’s back up procedures in the event that key personnel for this
assignment should leave the firm.
Investment Policy and Portfolio Structure
35. Describe your public pension fund experience and approach in developing investment
policy and objectives for a diversified pension fund. Please provide a sample Policy
Statement.
36. What are the most crucial issues to consider in formulating investment policy for a
public pension plan?
37. Outline your process for analyzing a client's investment portfolio structure. Describe
your process for recommending modifications to the portfolio structure as warranted by
changes in the market place or benefit obligations/assumptions.
Asset / Liability Study
38. Describe the theory and methodology of the asset allocation models you employ.
39. Describe your methodology for incorporating liabilities into asset/liability studies.
40. Describe your firm's experience in customizing asset-liability studies for individual
clients.
(A) How often should clients update their asset liability study?
(B) How often should clients rebalance to their target allocation?
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41. What systems do you have that are accessible to clients so they can evaluate the impact of
different scenarios (“what if?”) on their funded status?
42. How are risk/return assumptions determined for your asset allocation model?
discuss for each asset class included in the model.
Please
(A) How often are these numbers revised?
(B) What time periods do these numbers cover?
43. How should non-traditional asset classes (e.g. commodities) and investment structures (e.g.
hedge funds) be incorporated into the asset allocation?
44. What methodology is used to determine the quantitative and qualitative inputs for the asset
allocation model? What percentage of the inputs are qualitative versus quantitative?
45. What distinguishes your quantitative and qualitative inputs for your asset allocation model from
your competitors?
46. Provide a biography of the individuals responsible for the asset-liability model.
Research and Education
47. Describe the internal structure, organization and capabilities of your research
department. (If no separate department exists, describe how this function is
performed.) Provide the titles of any research reports provided to your clients.
48. Describe the manner in which external resources and sources of information are used
in the research process. How does your firm integrate internal and external research?
49. What is your firm’s view on how to best manage currency exposure?
50. What are the pros and cons of in-house management for a fund of LACERA's size?
51. Describe in detail the type and frequency of research that would be provided to LACERA.
Through which media will it be provided?
52. Provide three sample research reports on special topics generated by your firm.
53. Outline your process for monitoring and reporting on market trends and pension
legislation.
54. Describe the investment-related education provided to your clients. Please provide a
sample presentation.
55. How would you keep the plan advised of developments on emerging issues, new asset classes,
regulatory controls, fiduciary responsibility, etc.?
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Manager Search
56. Describe your experience and capabilities in conducting searches for investment managers and
other investment services.
(A) How many searches have been conducted for clients with over $25 billion in assets?
(B) How many different managers were recommended by the consultant proposed for LACERA
in each of the last two (2) years in each asset category?
(C) Describe your capabilities to do international searches.
57. How many managers do you maintain on your manager search database?
(A) If you have an in-house database, do you sell it to third parties? How do you receive
compensation for selling it?
(B) What criteria do you use in evaluating managers?
(C) Describe how your firm gathers, verifies, updates, and maintains the data collected on
managers for the database? Do you use surveys or meetings?
58. What fees or other consideration, if any, do you receive from managers who wish to be
maintained in your database?
59. Describe any advantage that you perceive your database has over your competitors. If you
meet with managers, how often do you do so? What is the nature of those visits?
Related Services
60. List all standard services provided in a typical pension plan full service consulting
relationship. List the specialized services that you have provided to meet other needs of
your clients.
61. Briefly summarize your philosophy regarding the consultant's relationship with Boards,
staff, and money managers.
62. Describe the services of your organization that may not be offered by other consultants.
Insurance and Liability
63. What limitation on liability, if any, do you impose through your contract?
64. Please describe the levels of coverage for errors and omissions insurance and any fiduciary or
professional liability insurance your firm carries. Is the coverage on a per client basis, or is the
dollar figure applied to the firm as a whole? List the insurance carriers.
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Other
65. Describe other services or products, current or under development, that you believe would be of
interest to us.
66. Describe your computer capabilities and explain how they support your consulting
services or products. Do you provide any customized computer-based analytical tools to
your clients?
67. Describe your disaster recovery plan and facilities.
Subcontracting
68. If your firm uses the services of a subcontractor, please identify the subcontractor and
describe the skills and qualifications of the subcontractor and its individual employees.
(A) Describe what portions of the project will be assigned to the subcontractor.
(B) Identify the cost associated with the portions of the project assigned to the subcontractor.
(C) Describe the inclusive periods and percentage of time the subcontractor will devote to the
project.
(D) Describe the contractual arrangement contemplated with each subcontractor and describe
generally the control/delegation of responsibilities anticipated in that arrangement
Appendices
69. Appendix A – Response to SEC/DOL Questions
Respond to the questions developed by the SEC and the Department of Labor to assist
plan fiduciaries in selecting and monitoring pension consultants. The questions are
attached at the end of this document, and may also be found at the following web sites:
http://www.sec.gov/investor/pubs/sponsortips.htm and
http://www.dol.gov/ebsa/newsroom/fs053105.html
70. Appendix B – Biographies
Include biographies for all consultants listed in your proposal. Indicate what year each consultant
joined your firm and describe his or her position, current responsibilities, areas of expertise,
experience, education, professional designations and memberships, and relevant publications and
presentations.
71. Appendix D – Annual Financial Report
Attach your firm’s current Annual Financial Report.
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SEC/DOL Questions
1.
Are you registered with the SEC or a state securities regulator as an
investment adviser? If so, have you provided me with all the disclosures
required under those laws (including Part II of Form ADV)?
2.
Do you or a related company have relationships with money managers that
you recommend, consider for recommendation, or otherwise mention to the
plan? If so, describe those relationships.
3.
Do you or a related company receive any payments from money managers
you recommend, consider for recommendation, or otherwise mention to the
plan for our consideration? If so, what is the extent of these payments in
relation to your other income (revenue)?
4.
Do you have any policies or procedures to address conflicts of interest or to
prevent these payments or relationships from being a factor when you
provide advice to your clients?
5.
If you allow plans to pay your consulting fees using the plan’s brokerage
commissions, do you monitor the amount of commissions paid and alert
plans when consulting fees have been paid in full? If not, how can a plan
make sure it does not over-pay its consulting fees?
6.
If you allow plans to pay your consulting fees using the plan’s brokerage
commissions, what steps do you take to ensure that the plan receives best
execution for its securities trades?
7.
Do you have any arrangements with broker-dealers under which you or a
related company will benefit if money managers place trades for their
clients with such broker-dealers?
8.
If you are hired, will you acknowledge in writing that you have a fiduciary
obligation as an investment adviser to the plan while providing the
consulting services we are seeking?
9.
Do you consider yourself a fiduciary under ERISA with respect to the
recommendations you provide the plan?
10.
What percentage of your plan clients utilize money managers, investment
funds, brokerage services or other service providers from whom you receive
fees?
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