Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
Question 1:
Our firm has a 10-year (plus) track record of managing Emerging Market equities
using the investment process that is being applied today. While the current Sr.
Portfolio Manager has been involved in the strategy since its inception, as well
as two additional Portfolio Managers who each have been involved for greater
than 5 years, we have experienced some team turnover over the last three years.
Given your stated minimum criteria regarding Investment Professionals, will our
firm/strategy be considered for appointment as an investment manager for this
mandate?
Answer:
If the investment professionals currently involved in the strategy were largely
responsible for the last three years of performance history your firm/strategy would be
considered a qualified candidate for this mandate.
Question 2:
The following question is in regards to the Minimum Qualifications for the EM
equity mandate. For the following qualification, what if the current PM of the
Emerging Markets Equity strategy began his career with the team in a
product specialist capacity 3 years ago but has only been running the
strategy for 2.5 years? Is it possible for us to still respond to this mandate?
Answer:
The lead PM(s) of the Emerging Markets (EM) strategy your firm is proposing in
response to this Request must have 3 years of experience managing EM
strategies. Further, investment professionals considered to be largely
accountable for your firm’s 3 year performance history in this strategy must be on
the team responsible for this account. Managing a similar strategy at a different
firm does not meet the 3-year requirement.
Question 3:
As of September 30, 2013, our firm does not meet the minimum requirement of
$250 million in EM AUM. We recently received a sizeable mandate and will have
significantly exceeded the minimum requirement by October 30, 2013. Will our
firm be considered for this mandate?
Answer:
Candidates must have no less that $250 million in assets under management as of
September 30, 2013 in the specific strategy being recommended. Any amount less
than the $250 million minimum excludes an interested firm from submitting a Response.
Question 4:
Two of the three current portfolio managers have been managing the strategy
since inception. The third portfolio manager has been with the firm since
2000 but joined this particular strategy in April, 2011. Can you please
confirm that this manager’s addition to the team does not violate the
minimum qualification requiring “three years in emerging markets
strategies”?
Answer:
If the two investment professionals currently involved in the strategy were largely
responsible for the last three years of performance history and remain in those
positions, your strategy would be considered for appointment as an investment
manager for this mandate.
Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
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Question 5:
Submitted responses – please can you confirm what happens to responses from
unsuccessful managers – will they be public record and open to public
inspection?
Answer:
All Reponses are held for one year and are subject to public records requests. If an RFP
Response is subject to a public records request, SERS would release the original
Response, regardless of whether the Response was successful, unless the manager
submits a redacted copy of the Response as noted in Section IV.D. of the RFP, in which
case SERS would release the redacted copy.
Question 6:
We have missed the first two deadlines, Notice of Intent to respond and RFP
Question deadline. Are we able to move forward with the process and submit
before response deadline of December 13?
Answer:
School Employees Retirement System of Ohio (SERS) will not preclude a
qualified investment manager from responding to the RFP due to a late notice of
intent. An email indicating your intent to respond satisfies the requirement. There
is no additional form that your firm needs to complete indicating your intent to
respond. Please note however, that SERS will not accept Responses after the
December 13, 2013 deadline.
Question 7:
With regard to a question in the RFP, Has your firm ever received a Qualified
Audit? If yes, please describe. Can you add any additional detail such as would
this be for the strategy/fund or for the firm level?
Answer:
If your firm has received a Qualified Audit Report of any kind, whether at a product level
or a firm level, you must answer as such and describe the nature of the report and/or
the reason a Qualified Audit Report was issued.
Question 8:
Will you please provide example or simple explanation of the
question/answer format requested (i.e., Responses to the following questions
should repeat the question and be answered in order)?
Answer:
In the same format with which these questions were answered. Using the RFP
Questionnaire (Appendix B – page 9)
Example:
A. Firm
1. Give a brief history and description of your firm including:
a. Firm name: ABC Investment Manager
b. Firm address: 111 Main Street, Anytown, Ohio, 43215-0080
Question 9:
Is there a performance objective for this mandate?
Answer:
No performance objective has been established at this time.
Question 10:
RFP shows 55 pages, however the last page shown is Page 52 of 55:
Schedule D. Is this the last page of the document or are there additional
pages that require review?
Answer:
Consider Page 52 the last page of the RFP. There are no additional pages that
require review at this time.
Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
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Question 11:
Page 1, Section III: Is there a minimum consumer sector exposure?
Answer:
There is no minimum consumer sector exposure.
Question 12:
Given the RFP says “special consideration may be given to consumer oriented
strategies that incorporate fundamental, bottom-up analysis as part of its
investment process,” does that mean that quantitative strategies are not
preferred for this search? Will a growth oriented/all cap/core only product be
considered for this mandate?
Answer:
Noted language does not prohibit an investment manager from submitting a Proposal.
As long as the minimum qualifications as outlined in Section VII of the RFP are met,
SERS will consider all Responses for this mandate.
Question 13:
Understanding the RFP is asking for multiple hardcopies (an un-bound
original and 4 copies), and given some of our documents are quite large
(including our Form ADVs, SAS 70, etc.), would it be okay if we only submit
these documents electronically, or if we only produce one hardcopy as part
of the unbound original.
Answer:
You may submit only one hardcopy of the noted reports as part of the unbound
original.
Question 14:
Do all sections of the Wilshire Compass database need to be completed in order
to be considered for OHSERS’s EME search; i.e. Firm, Asset Class, Product and
Holdings?
Answer:
SERS will be using Wilshire Compass for both qualitative and quantitative analysis. It
would be in the best interest of respondents to have the database completely updated.
Question 15:
My firm has a question regarding Appendix D, the Ohio-Qualified Manager
Certification. Is this form required for submitting the RFP? If yes, will a firm
that does not meet one of the items listed below be considered for this
mandate? These requirements are not listed under “Minimum Qualifications”
in Section VII.
Answer:
Completion of The Ohio Retirement Systems Ohio-Qualified Manager Certification
is only required as part of the RFP if the responding firm meets the criteria
outlined in the Certification. Certification as an Ohio-Qualified manager is not a
requirement to participate in this search and no firm will be disqualified if it does
not meet any of the items outlined in the form. If your firm does not meet the
criteria for an Ohio-qualified manager, enter “do not meet qualifications”, sign and
date the document and return it with your Response.
Question 16:
A. Do you have a preference for either a commingled fund or a separate
account? Would you be prepared to invest in our ERISA compliant commingled
fund, or do you require a segregated fund? Given that we would be participating
on the basis that we can offer an investment in our co-mingled fund we would
require SERS to complete a subscription form and be governed by the terms of
its prospectus, rather than SERS’ IMA. Can a side letter be used (over the IMA)
to address outstanding issues?
B. Assuming SERS invest through a commingled vehicle, we understand that
the Iran and Sudan Investment Policy per Schedule A-1 only applies to
Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
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segregated mandates, and direct ownership, and does not apply to commingled
finds, could you confirm that this understanding is correct?
C. Schedule A (pg. 39) indicates commingled funds would be subject to
additional provisions, what sort of provisions and can you provide a sample?
Answer:
A. Both commingled vehicles and separate accounts will be considered for this
mandate. SERS is not governed by the rules of ERISA, but is governed by the Statutes
under Chapter 3309 of the Ohio Revised Code. In the case of a commingled account,
SERS would complete the Fund’s subscription agreement and its prospectus would be
the account’s governing document. A side letter would be included in a commingled
arrangement.
B. You are correct. The Iran and Sudan Investment Policy only applies to segregated
accounts. Commingled vehicles are exempt from the requirements contained in the Iran
and Sudan Investment Policy.
C. Specific performance attribution, if not already part of the firm’s reporting package,
and proxy information are samples of these sorts of provisions
Question 17:
Our strategy is currently managed in the form of a ’40 Act mutual fund
vehicle. Though we welcome the opportunity to offer this strategy in the
form of a separately managed account, there has not yet been a GIPS
composite created for it. Can you please confirm that historical performance
returns for the mutual fund vehicle will be admissible?
Answer:
So long as all other criteria are met, the strategy noted above is admissible.
Question 18:
Is the language in the Investment Manager Agreement (IMA) negotiable?
Answer:
SERS’ IMA is the standard Agreement between SERS and its separate account
managers. The IMA is included as part of the RFP package to provide candidates with
an awareness of SERS expectations of the investment relationship. The language in the
Investment Manager Agreement is typically non-negotiable; however, a side letter may
be used to resolve matters of concern.
Question 19:
With regards to the Investment Management Agreement (IMA) attached as
Appendix E, at what stage in this process do you need to receive our
comments on the IMA?
Answer:
General questions/comments regarding the IMA bear significance at the time of
engagement between SERS and the firm selected to fill the mandate
Question 20:
Can you provide the latest list of companies with active business operations in
Iran and Sudan to ensure compliance with your policy?
Answer:
SERS’ Iran and Sudan Investment Policy is implemented through a special reporting
process. SERS uses an independent research provider (Institutional Shareholder
Services) to provide a list of companies determined to have scrutinized business activity
in Iran and/or Sudan with respect to SERS’ Iran and Sudan Investment Policy. The list
of “scrutinized companies” normally contains approximately 50 names, and is updated
on a monthly basis. Typically SERS’ exposure represents ~20% of the listed
companies. Companies are identified by name only. Investment managers that
purchase securities of companies on the scrutinized list are subject to additional
reporting requirements. The reporting procedure is managed by SERS in which the
investment manager provides the name of security purchased, the number of shares,
Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
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and the rationale for the purchase, explaining that no other security with comparable
quality, return, and safety exists. SERS is unable to provide the current list of
scrutinized companies. Please note however, named companies on the list generally
fluctuate only slightly from one month to the next.
Question 21:
Would the Iran/Sudan policy create a preference for implementation in a
separate account where the restrictions may be easily implemented? Or is a
commingled vehicle satisfactory assuming investments in companies
violating the policy is immaterial?
Answer:
There is no preference between a commingled vehicle and a separate account
with regard to the Iran and Sudan Investment Policy
Question 22:
The Submittal Form in Appendix A is to be signed to bind Responders
contractually – please can you confirm what the declaration means in practice?
The declaration states that the RFP is a ‘firm and irrevocable offer’. Does this tie
Responders to the IMA terms (Appendix E) and other Appendix items as they
stand at this stage or can they be reviewed and discussed further into the
process?
Answer:
Documentation submitted by an investment manager in response to the RFP, and any
terms contained therein, constitute an irrevocable offer. Additional documentation
included in the RFP, such as the sample IMA, would not constitute part of the offer. As
indicated in response to Question 19, the sample IMA is included as part of the RFP to
provide interested managers with an awareness of SERS’ expectations. Any
questions/comments concerning the IMA can be discussed at the time of engagement
between SERS and the firm selected to fill the mandate.
Question 23:
If Responders are bound by the IMA and other appendix documents at this
stage please can you also help with the following queries –
a) Transaction procedures - can these policies be supplied for review
and comment at this stage or prior to signing the IMA?
b) Transaction procedures – as an FCA regulated investment manager
we have standardized dealing and execution policies etc. and would
typically insert these into the client IMA – will this be possible or at
least open to discussion?
c) Transaction procedures – please can you advise if there is a minimum
amount of compensation that you wish to be paid back?
d) Allocation of brokerage – Investment manager shall give equal
consideration to minority owned and controlled brokers and dealers
and brokers and dealers owned and controlled by women – how does
this work in practice?
e) Indemnification – Does Ohio consider ‘agents’ to include brokers?
f)
Tax withholding – Please confirm that this is not intended to cover
taxes and levies during trading on the account?
g) Tax withholding – Please confirm you will not be seeking tax advice
from the investment manager?
Request for Proposal - Emerging Markets Manager
Questions Submitted to SERS
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Answer:
a) Proposal respondents are free to include Policies and Procedures in their
Responses. The firm selected to fill this mandate will be able to review
and comment on transaction procedures prior to signing the IMA.
b) Transaction procedures could be noted in a side letter if necessary.
c) SERS does not direct brokerage but requires best execution with regards
to trading. No compensation is expected to be received with respect to
trading.
d) Holding all costs constant, Investment manager is expected to give equal
consideration to the groups noted and use of such groups is implied
within the Agreement.
e) Brokers engaged by the Investment Manager would be considered agents
to the manager, not to SERS
f)
Taxes and levies resulting from transaction activity are included in the
trade instructions that Investment Managers report to our Master Record
Keeper as the official holder of our books and records. This particular
section applies to special situations and is not intended to cover normal
trading activities.
g) I confirm that SERS will not be seeking tax advice from the investment
manager
Question 24:
Schedule B – Fee schedule – please can you provide a working fee example
calculation?
Answer:
Assuming a $75 million mandate, the responding investment management firm
provides this example based on the fees it charges.
Question 25:
Can investment managers use access products/p-notes to gain access to
markets where direct access is not available or harder to come by?
Answer:
Permissible investments will be based on the expertise of the investment manager
selected to fill this mandate.
Question 26:
Does Ohio’s custodian have local market access for all emerging markets
countries?
Answer:
SERS has local market access for all emerging market countries currently
included in the MSCI Emerging Markets Index.
Question 27:
Appendix C – please can you confirm if any international investment
managers have previously been asked to register.
Answer:
It is likely that international investment managers have previously been asked to
register; however, SERS does not monitor firms that are registered with those
entities listed in Appendix C of the RFP.