Current through Register Vol. 48, No. 52, December 27, 2024
a) The Board, in consultation with investment
staff and an independent investment consultant, is responsible for the
selection and monitoring of the Investment Options for the Plan.
b) The objective of the Board is to offer a
sufficient range of Investment Options with materially different risk and
return characteristics to allow Plan Participants, by choosing among those
Investment Options, the opportunity to diversify their account balances and
construct portfolios consistent with their unique individual circumstances,
goals, time horizons, and tolerance for risk.
c) The screening process used by the Board to
select Investment Options for inclusion in the Plan will consider attributes
relevant to the specific asset class and search objective, as developed by the
investment staff and investment consultant. The attributes for passively
managed investment options designed to track the return and risk
characteristics of a specific index may differ from the attributes considered
for actively managed strategies. The Board's screening process for certain
attributes may differ from the following selection criteria in an effort to
identify the most suitable Investment Options. Attributes may include, but are
not limited to, the following:
1) Registration
with the Securities and Exchange Commission under the Investment Advisors Act
of 1940 (15 U.S.C. 80b-1 through 80b-21);
2) A minimum number of years of verifiable
firm and team performance history;
3) A minimum number of years for portfolio
manager tenure and experience;
4)
Robustness of firm's investment philosophy and process;
5) Historical performance and risk review of
cumulative, annual and rolling time periods;
6) Classification of style to determine the
basis to compare to other investment managers and investment options with
similar investment style/strategy and to determine if there has been deviation
from style over time;
7) A minimum
level of product and strategy size;
8) Firm's trading, back office, accounting,
reporting and client servicing capabilities; and
9) Fees.
d) The Board's review and/or evaluation
process is expected to consist of the following criteria, as appropriate, and
reviews are expected to be conducted in light of full market cycles.
1) Quantitative criteria to be used by the
Board to select Investment Options may include, but are not limited to, the
following:
A) Adherence to clearly defined
investment objectives and style of discipline over time.
B) Historical performance of annual and
rolling time periods, and risk metrics such as beta, standard deviation, Sharpe
ratio, information ratio, and down-market and up-market capture, versus peers
and applicable market indexes.
C)
Investment management fees and any additional fees (e.g., 12-b1,
administrative, redemption).
D)
Sufficient investment strategy and fund assets under management to accommodate
the assets of the Plan.
2) Qualitative criteria to be used by the
Board to select Investment Options may include, but are not limited to, the
following:
A) Investment philosophy and
process, including the strategy objective, discipline, valuation process,
implementation, and research capabilities;
B) Personnel structure, including portfolio
manager and research team experience, quality, tenure, and turnover;
C) Business goals and structure, including
ownership, compensation, and incentive practices;
D) Demonstrated commitment to operations and
technology efficiencies; and
E)
Willingness, pursuant to contract between the Board, on behalf of the Plan, and
the investment manager, to meet specified requirements, including the
obligation to meet with Board staff and consultant as requested for a review of
the performance of the Investment Option.
e) The Board shall use best efforts to
include representation of emerging investment managers and minority investment
managers in the Plan. The Plan shall seek to include at least one Investment
Option managed by a State certified minority money manager, unless the Board
determines that no such entity exists that conforms to the Board's fiduciary
responsibility.
f) An independent
investment consultant shall be responsible for performing thorough due
diligence on each Investment Option, monitoring the performance of the
Investment Options on an ongoing basis, and providing a quarterly report to the
Board that addresses the performance of each Investment Option relative to the
appropriate index and peer universe.
g) The selection of Investment Options for
the Plan will occur in an environment of full disclosure characterized by
competitive selection, objective evaluation and proper documentation. The
overriding consideration with respect to all decisions made by the Board
concerning the Plan is that the decisions be made solely in the best interests
of the Plan's Participants and Beneficiaries. The following protocols guide the
Board's selection of Investment Options for the Plan:
1) The Board shall select Investment Options
for the Plan, in consultation with its investment staff and independent
investment consultant, through a competitive proposal process, using uniform
documents for the solicitation, review and acceptance of the Investment Option.
Uniform documents may vary by the investment structure of an Investment Option.
The Board may deviate from this process only if, in consultation with its
investment staff and independent investment consultant, it determines that an
emergency procurement is in the best interest of the Plan's
Participants.
2) The competitive
proposal documents shall contain, at a minimum:
A) a description of the goal to be
achieved;
B) the particular
strategy of Investment Option;
C)
the need for the Investment Option;
D) the qualifications that are necessary;
and
E) a plan for post-performance
review by the Board's investment consultant.
3) The Board and its investment consultant
shall determine parameters for the Investment Option search. Advertisements for
the Investment Option search shall be placed in one or more industry
periodicals at least 14 days before the response is due.
4) All interested respondents shall return
their responses to the Board, as directed by the proposal document. Investment
staff and investment consultant shall open the responses, record them and
thoroughly review each for content, quality and compliance with proposal
document requirements.
5) Following
review and evaluation of the responses from interested firms, the field of
candidates is narrowed to a smaller list of the most highly qualified
Investment Options. At this point, the Board's investment staff and investment
consultant will meet with representatives of each Investment Option to obtain
an independent assessment of each option's capabilities.
6) Following the interviews with the selected
Investment Options, the Board's investment staff and investment consultant will
recommend to the Board one or more Investment Options for the Plan. Generally,
the finalists appear before the Board to present their
qualifications.
7) The Board will
accept or modify the recommendation and is tasked with making the final
decision with respect to the Investment Options for the Plan.
8) Subsequent to the Board's decision, the
Board's legal counsel, investment staff and investment consultant will
coordinate with representatives of the Investment Option, Department and the
Recordkeeper, in order to provide an appropriate transition for the new
Investment Option into the Plan and provide appropriate notice of the
transition to the Plan.
