Instructions for RFP

Company Questionnaire (required in addition to hard copy proposal) Instructions for completing this questionnaire in the EXCEL format 1 > Please save this file using the name format as follows: AIDFI_RFP2004_YOURFIRM.XLS ( "YOURFIRM" is your company name stated in eight letters/numbers or less). > Complete Tabs A and B and return to LACERS with your RFP proposals on CD or diskette. Also, e-mail this spreadsheet to: lacers1@mindspring.com 2 Please direct questions pertaining to this spreadsheet to Josie Enriquez at LACERS, (213) 4737124 or at josie_e_enriquez@yahoo.com. Please include your phone number when inquiries are e-mailed. 3 > Where $ values are requested, respond in U.S. Dollars only; > Please note questions seeking numerical reponses in $millions AND exact dollar figures and respond appropriately. > If a question does not apply to your firm, indicate "does not apply" as your answer. > Examples provided in column "G" are not to be construed as an answer or a typical response that LACERS necessarily seeks or desires. > Answers provided on this spreadsheet must briefly summarize the answer provided in the hard copy of your proposal. Lengthy answers that exceed the maximum word limitations may be truncated. Please make your answers as brief as possible. > You may enter very short clarification notation(s) of no more than 20 words in column "F" to clarify answers in column "D". > Notations in column "F" will not become part of your firm's answer. Using the format in Tab B for question 35, provide your AIMR compliant, actual monthly rates of return (net of fees) for the last 5 years, ending June 30, 2004 with respect to a composite portfolio containing all representative accounts in the mandate’s strategy. 4 5 Company Questionnaire RFP - Active Intermediate-Duration Fixed-Income Management Services Los Angeles City Employees' Retirement System July 13, 2004 Please read the tab "Instructions for RFP" before completing this sheet "RFP Information." Please type your Firm's Name in Cell D6 DO NOT REFORMAT THIS SPREADSHEET IN ANY FORM OR MANNER. All answers must be answered in cells D12:D166; and Question 35 in the Tab "Q.35-Performance" in the appropriate tables. LACERS will resize columns (if necessary) to read answers to questions that do not appear on the screen. However, you must adhere to word maximums as stated in the Examples in column "G" (e.g., "20 words" means no more than a 20 word response.) Please type your Firm's Name in Cell D6 Page & Question # Question Your firm's Answers Clarification Notes Only Example Responses Only Page # 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 8, # 1 Name of firm RFP Primary Contact person name Title Address City, state, zip Telephone # Cell phone # Facsimile # E-mail address RFP Contact person name (Back up person) Phone # (Back up person) Fax # (Back up person) E-mail address (Back up person) Website Address Name of Person signing the RFP and Title XYZ Capital Management Ms. Jane Doe 3535 E. Fifth Street Anywhere MK 98765 (555) 531-5555 (555) 531-4545 (555) 531-5554 ms.rfp@xyzcapital management Mr. John Deere (555) 531-5555 (555) 531-5554 ms.rfp@xyzcapital management www.xyzcapitalmanagement.com Tom Taylor Organization & Resources: Give a brief history and ownership of the firm including: a) year firm was established 100 Words 19XX 8, # 2 Page & Question # Question b) the month and year of Investment Advisers Act of 1940 registration Your firm's Answers Clarification Notes Only Example Responses Only 072004 8, # 2 8, # 2 c) the month and year the firm began managing active intermediate fixed income accounts for U.S. tax-exempt clients 8, # 2 8, # 3 8, # 3 8, # 3 061990 061990 30 words 20 words 10 words d) the month and year the subject product was introduced a) history of ownership structure b) affiliated companies or joint venture c) if an affiliate, percent of parent's firm total revenue generated by your organization 8, # 3 8, # 3 8, # 4 8, # 5 d) if joint venture partner, percent of ownership and revenues recognized by each partner to the combined association e) how firm is capitalized Indicate firm office location(s); if more than one, indicate the functions at each location; specify and primary activities performed at each office/location a) Detail any significant restructuring or organizational change (ownership, personnel, business, etc.) that has occurred since inception of your firm’s active intermediate-duration fixed- income management services. 15 words 20 words 1865 3rd Avenue, New York, NY 10017; 30 words 100 words 8, # 5 9, # 5 b) Are there any ownership changes planned or anticipated within the next three years? If so, please describe. c)Explain your firm’s plans for expansion, particularly as they relate to accepting new client business and the quality of service to all clients. Is there a limit to the number of new clients your firm will accept? d) 50 words 50 words Blank Blank 9, # 6 9, # 6 9, # 7 What are the levels of coverage for errors, omissions insurance and any other fiduciary coverage that your firm carries? List insurance carriers supplying coverage. 50 words Investment Philosophy & Strategy 9, # 8 Describe your firm’s investment philosophy as it applies directly to the actively managed intermediate-duration fixed-income product offered. 75 words Page & Question # Question i) Why do you believe this philosophy will be successful in the future? Provide any evidence or research that supports this belief. ii) How has this philosophy changed over time? Your firm's Answers Clarification Notes Only Example Responses Only 40 words 40 words 40 words 9, # 8 9, # 8 9, # 9 Describe this product's strategy. How has it added value over time? 9, # 10 a) Explain your policy portfolio on diversification. What is the maximum exposure permitted in one issuer, and a percent of total portfolio? How many issues are typically contained in a portfolio? b) What is the maximum exposure to one sector? How many issues are typically contained in a portfolio? How are individual security weightings determined? 100 words 75 words 9, # 11 a) How much value in basis points annualized should your investment product add over the mandate’s index each year? Annualized over a full market cycle of five (5) years? Within your investment process, what percentage of the “value added” comes from the following decisions: i. asset allocation (bonds/cash) ii. industry /sector allocation 40 words 9, # 12 0.10 9, # 12 0.10 9, # 12 iii. issue selection 9, # 12 0.10 iv. duration management 9, # 12 0.10 0.10 0.50 v. yield curve 9, # 12 vi. other (specify) Total (should equal 1.00) 9, # 12 0.00 1.00 b) Have you managed intermediate bond portfolio in a down bond market? If so, how did your portfolio perform vs. the benchmark? Which benchmark? c) 50 words 9, # 13 a) Describe market conditions that would favor your investment style or approach. 40 words Page & Question # Question b) What conditions would cause underperformance? c) Why should your style continue to work given the competitive nature of fund management and the impact of transaction costs? Describe your investment process including the following: a) Your BUY decision making discipline: i. What size, quality and liquidity criteria meet the requirements of your buy discipline? ii. What valuation approaches are used? Your firm's Answers Clarification Notes Only Example Responses Only 25 words 9, # 13 9, # 13 40 words 10, # 14 80 words 40 words Blank 10, # 14 10, # 14 10, # 14 10, # 14 10, # 14 10, # 14 b) SELL Criteria: i. What is your sell decision making discipline? ii. Under what circumstances would your firm deviate from these disciplines? Have you ever deviated? If so, please describe. iii. Can this product be used to proivide liquidity to accommodate asset allocation rebalancing? c) Briefly describe the portfolio construction. i. How are individual sector and security weightings determined? Discuss the quantitative and qualitative processes utilized. ii. What latitude is given to portfolio managers within the product team? Who has ultimate decision making authority and accountability? d) Role of fundamental research: i. What is the importance of research in your process?? ii. What are your sources of research? What is the relative percentage importance of each source of research? iii. How is research applied in your process? iv. How do you decide to invest in a particular market? Do you avoid certain markets? 40 words 30 words 30 words 75 words 10, # 14 30 words 10, # 14 10, # 14 10, # 14 10, # 14 40 words 50 words 30 words 30 words Page & Question # Question e) Portfolio Risk Management: i. Describe the risk models and controls used in portfolio costruction and management, including maturity/duration limits or ranges, liquidity constraints, maximum position size, minimum/maximum number of positions, sector weights, credit guidelines, tracking error, etc. ii. What is your firm’s definition of risk with respect to this product? Your firm's Answers Clarification Notes Only Example Responses Only 10, # 14 75 words 30 words blank 10, # 14 10, # 15 10, # 16 If you consider trading a value-added operation, describe the various trading techniques used in relation to this strategy, and how they add value. List the product’s three worst investment experiences. What did the team learn from these experiences? 1) 2) 3) 50 words 10, # 17 75 words 10, # 18 Blank 11, # 19 Briefly describe the strengths of your intermediate fixed-income team and the characteristics that distinguishes your firm from your peer group. Provide any additional information or material that would be helpful in evaluating your firm. Separately describe how your product differs from that of your peers. For the purposes of this proposal, what quantitative/or non-quantitative criteria will demonstrate the superiority of your product over that of your competitors? List clients lost in this Mandate over the past five years ending 6/30/04. Provide the size of each account and the reasons for termination during this period. List clients gained in this Mandate over the past five years ending 6/30/04. Provide the size of each account and the reasons for hiring during this period. a) Provide a complete list of current clients for the specified Mandate, including the dates you retained, sizes of accounts, and any unique special client-imposed constraints. List in declining portfolio size order. 100 words 11, # 20 150 words 11, # 21 75 words 75 words 11, # 21 11, # 22 75 words Page & Question # Question b) What is the median separate account portfolio size in this manadate? The largest? The smallest? Your firm's Answers Clarification Notes Only Example Responses Only 20 words 20 words 20 words 11, # 23 Provide the following references: a) The organization’s five largest funds using this mandate? b) The organization’s three largest public funds noting the following: i. Account size (6/30/2004 account market value) ii. Years Managed iii. Contact Person, address, phone number 75 words 25 words 10 words 40 words 12, # 24 Please provide 6/30/04 market value of the three largest US public pension plans (or equivalent) for which you manage assets in this Mandate. 1) 2) 3) 75 words 12, # 25 Also indicate your assets under management as of June 30th, as follows: 75 words 2004 Total Assets in firm % Fixed Income Assets/Total No. of public fund clients $ (Mil) in active intermediate fixed income # of accounts in active intermediate fixed income Page & Question # Question $ (Mil) in composite included # of accounts in composite included Your firm's Answers Clarification Notes Only Example Responses Only 12, # 26 12, # 26 Provide the information for key professionals: Portfolio Management 50 words 50 words 50 words 25 words 50 words 25 words 12, # 26 Research 12, # 26 Trading 12, # 27 12, # 27 12, # 27 12, # 27 Who will be the portfolio manager for the account? Provide name of contact , phone, email, and address. The client service officer? Provide name of contact , phone, email, and address. 50 words 12, # 28 Provide information regarding the turnover of key professionals within the past three years. 40 words 12, # 29 Blank 12, # 29 12, # 29 12, # 30 13, # 31 a) How long has the team been together? b) How many staff members do you plan to add in the next three years? What type of communications do you provide to clients? Explain any potential for "conflict" your firm would have in servicing the Los Angeles City Employees' Retirement System. "Conflict" may include money management activities, fee relationships (products sold or services provided) with money managers, general partners, LACERS Board members, staff, consultants, other LACERS vendors or other City of Los Angeles officials or staff, etc. What procedures are in place that would mitigate or eliminate potential conflicts of interest? 3 words 3 words 15 words 40 words Page & Question # Question Over the past three years, has your organization, affiliates, parent company, officers, or principals been involved in litigation, legal proceedings, or SEC investigations related to your firm’s investment activities. If so, please provide a brief explanation including the current status and/or the resolution of this action. Your firm's Answers Clarification Notes Only Example Responses Only 13, # 32 50 words 13, # 33 Blank 13, # 34 Please provide performance annualized for 1, 3, 5 years and since inception ending 6/30/2004 1 -year 3-year 5-year since inception a) Provide your AIMR compliant, actual monthly rates of return (net of fees) for the last five (5) years, ending June 30, 2004 with respect to a composite portfolio containing all representative accounts in the mandate’s strategy. NO SIMULATED/BACKTESTED RESULTS WILL BE ACCEPTED. Also provide these on a formatted spreadsheet downloaded from the website and on a disk using an Excel spreadsheet. Performance should be monthly, in chronological order, and in one column, with no spaces or separations for aggregation (such as each quarter or by calendar year). b) Describe how your returns were calculated. Provide the return calculation formula. c) a). What is your preferred benchmark to measure your performance for this product? Why? What do you believe are reasonable performance goals and time frame? b). Is benchmark weight a significant consideration? 00.00% 00.00% 00.00% 00.00% 13, # 35 100 words 40 weords Blank 13, # 35 13, # 35 13, # 36 50 words 30 words Blank 13, # 36 13, # 37 Page & Question # Question Provide performance attribution for your strategy over each of the last 12 quarters, showing the value added (percentages) from issue selection, trading, duraion management, etc. Please provide the following portfolio characteristics as of June 30th. Also please provide this information on a disk using an Excel spreadsheet in the format shown. Number of issues Total Portfolio Credit Quality (S&P rating only) Sector Weighting % @ 6/30/2004 (use two decimal places > .35, .45, etc) Treasuries Agencies Corporates Mortgages Yankee Asset Backed Securities Taxable Municipal Securities High Yield Non-US Other (please specify) Total (sum of decimals should equal 1.00) Provide your lowest separate account asset-based fee schedule for actively managing a customized Intermediate-Duration Fixed-Income portfolio. Separately indicate the fee in basis points and in dollars for the following account sizes: $200 million, $250 million, and $300 million. Fee in basis points: Your firm's Answers Clarification Notes Only Example Responses Only 13, # 38 50 words 14, # 39 50 words 100 AAA 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0 1.00 14, # 40 Page & Question # Question $200 million $250 million $300 million Fee in dollars: $200 million $250 million $300 million Your firm's Answers Clarification Notes Only Example Responses Only 25 bps 20 bps 21 bps $ $ $ Yes, No Blank 14, # 41 15, # 42 15, # 43 Is your firm a certified minority- or women-owned business? Describe any relevant attributes of your firm that would be useful in LACERS’ intermediate-duration fixed-income portfolio management. What makes your firm the best candidate for this engagement? 75 words Blank 15, # 44 Question 35 Please read the tab "Instructions for RFP" before completing this sheet "RFP Information." Your firm's name: ( Please type your Firm's Name in Cell C6; it will appear Year you began managing intermediate-duration fixed-income portfolio: Report performance net of fees as of 6/30th for the last 5 years E X A M P L E Monthly Returns Net Fees Return Index Return Name of Index 2004 January February March April May June July August September October November December 2003 January February March April May June July August September October November December 2002 January February March April May June July August 0 E X A M P L E E X A M P L E Cell C6; it will appear on each table below)