HomeMy WebLinkAbout2002 08 12 Informational C Defined Benefit Pension Plan
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COMMISSION AGENDA
ITEM C
CONSENT
INFORMATIONAL X
PUBLIC HEARING
REGULAR
1.).-
~
Allellst~, 2002
Meeting
MGR ~EPT~
A lIthori7Rtion
REQUEST:
The Finance Department informing the Commission that the Pension Board of Trustees has
elected to go out for RFP for Investment Management Services for the Defined Benefit Pension
Plan.
PURPOSE:
To inform the City Commission that the Pension Board is seeking proposals for investment
management services over the pension funds.
CONSIDERATIONS:
. The Pension Board felt it was an appropriate time to evaluate providers of investment
management services over pension funds given the City's new retirement investment policy.
. Our current contract for investment management services with SunTrust has no expiration
date. The contract is dated 7/6/98. Notice of termination may be given in writing by either
party with 60 days notice.
. The RFP was designed by our Investment Consultant, Steve Alexander, with Public
Financial Management (PFM) and reviewed and approved by the Pension Board.
. The Pension Board, Investment Consultant and the Finance Director will participate in the
evaluation and recommendation of the various proposers.
. According to the attached timeline, we expect to have the recommendation before the City
Commission on 10/28/2002 for their final approval.
. Investment Management over pension funds is expected to occur under new contract
beginning January 1,2003.
ATTACHMENTS:
. RFP
. Retirement Investment Policy
. Timeline
RECOMMENDATION:
N/A - Information Only.
COMMISSION ACTION:
. REQUEST FOR PROPOSAL 1 .
FOR INVESTMENT MANAGEMENT SERVICES FOR DEFINED
. .. : BENEFIT PENSIO~ PLAN FUNDS I .. .
For
City of Winter Springs, Florida
RFP Number: #019-02/LF
Due Date: Friday, August 30, 2002 by 3:00pm
Page
I. INTRODUCTION 2
II. GENERAL SPECIFICATIONS 2
III. BACKGROUND 2
IV. EXAMINATION OF RFP 3
V. SCOPE OF WORK 3
VI. MINIMUM QUALIFICATIONS 4
VII. PAYMENT 4
VIII. ADDITIONAL INFORMATION 4
IX. CONTRACT TERM 5
X. SPECIAL PROVISIONS 5
XI. RESPONSE TO THE REQUEST FOR PROPOSALS .6
XII. SUBMISSION OF PROPOSAL 9
XIII. EVALUATION OF PROPOSALS 9
XIV. AWARD OF CONTRACT 9
XV. CITY COMMISSION APPROVAL 9
XVI. ANTICIPATED CONTRACT TERMS AND CONDITIONS 9
XVII. PROPOSER'S WARRANTY 14
XVIII. ATT ACHMENT 15
General Employee Retirement System Investment Policy Statement
Timeline
City of Winter Springs, Florida I
REQUEST FOR PROPOSAL FOR I
INVESTMENT MANAGEMENT SERVICES FOR DEFINED BENEFIT PENSION
PLAN FUNDS I
I. INTRODUCTION
Pursuant to its Purchasing Policies and Procedures, The City of Winter Springs, Florida, invites the
submission of proposals to provide Investment Management Services for its Defined Benefit Pension
Plan funds. All proposals must be submitted in a sealed envelope marked "Proposal-Investment
Management Services" and received by the Office of the Director of Finance, 1126 East State Road
434, Winter Springs, Florida 32708, no later than 3:00 P.M. Friday, August 30,2002.
Proposals will be acknowledged and evaluated by an ad hoc committee of city staff, the pension Board
of Trustees, and outside consultants. A final determination on the placement of funds will be made by
the City Commission at a date and time to be determined.
It is understood that the City of Winter Springs reserves the right to reject any or all proposals as it
determines to be in the best interest of the City.
II. GENERAL SPECIFICATIONS
The City of Winter Springs (the "City") invites proposals from qualified financial institutions interested
in providing investment management services for the City's pension funds. The City wishes to contract
for services with a firm registered with the Securities and Exchange Commission (SEe) under the
Investment Advisor's Act of 1940, which will act in a fiduciary capacity. The successful proposer will
be required to manage the funds in accordance with the laws of the State of Florida, and investment
policies and procedures outlined in the City's pension plan documents.
III. BACKGROUND
The City of Winter Springs, Florida, is a home-rule municipality operating under the Council-Manager
form of government. The City Commission is comprised of five voting members. A separately elected
mayor votes only in the case of a tie. The City is located in south Seminole County, approximately 15
miles northeast of Orlando, Florida, and has a population of approximately 31,000. It is primarily an
upscale, suburban, residential community, with home values generally ranging between $150,000 to
over $1,000,000. The city has adopted plans for extensive commercial development in a central city
core called the Town Center. The city's workforce numbers almost 251, and at six months of service, all
employees are required to participate in the pension plan. Each employee contributes 3% of hislher
compensation to the fund, and the city contTibutes the equivalent of 8% of each employee's
compensation. As of June 30, 2002, the Defined Benefit Pension Plan fund contained just over
$5,875,000 and is currently managed by SunTrust Bank in Orlando.
IV. EXAMINATION OF RFP
The City encourages interested parties to examine this RFP carefully. The Investment Manager and/or
its affiliates will be required to attain the highest possible yields on the fund, consistent with directives
in the pension plan documents, mandates of the Board of Trustees, and the laws of the State of Florida.
The Investment Manager shall act solely in a fiduciary capacity, and shall receive fees or compensation
pursuant to the provisions of its contract with the City.
V. SCOPE OF WORK
Specific responsibilities of the Investment Manager will include, but will not be limited to the following:
I. Execute purchases and sales of securities with approved brokers/dealers in accordance
with state law and directives of the city.
2. Provide monthly reports on investment activities, earnings, the value of the portfolio holdings,
and projected portfolio cash flows. These reports must include a market-to-market valuation
and other information needed for the City to report investment holdings under GASB 31. The
Investment Manager must maintain accurate reports of investments including the diversity of
investments and compliance with applicable investment policies of the City and the State of
Florida.
3. Provide quarterly investment reports including, but not limited to, a description of market
conditions, investment strategies employed, performance, and suggested changes to investment
strategy. Investment performance must be provided on a total return basis and compared to
appropriate benchmarks.
4. Maintain a list of approved broker/dealers that have met the City's approved criteria, and
furnish evidence of compliance with those criteria to the City.
5. Provide professional presentations to the Board of Trustees on portfolio status and
performance.
6. Provide customized reporting on investment activity, earnings, and portfolio status.
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VI. MINIMUM QUALIFICATIONS
To be considered by the City, proposers must:
I. Have a minimum of five years experience in managing pension fund assets for state and/or
local governments, including experience managing portfolios with assets in excess of five
million dollars.
2. Assign an account manager to the City's account who has a minimum of five years experience
in providing investment services to public entities equivalent in workforce size to the City of
Winter Springs.
3. Be familiar with all applicable Florida statutes with regard to qualified investments for public
entities.
4. Be registered with the Securities and Exchange Commission under the Investment Advisor's
Act of 1940 and be properly registered to provide investment management services in Florida.
5. Be financially solvent and adequately capitalized to be able to service the City for the duration
of the contract.
6. Be either completely independent of any financial institution or securities brokerage firm, or
fully and continuously disclose to the City any such relationships with such financial institution
or securities brokerage firm, specifically as that relationship impacts the firm's dealings with
the city.
7. Have Errors & Omissions and Fiduciary Liability Insurance coverage of at least ten (10)
million dollars.
8. Adhere to the Code of Professional and Ethical Standards as described by the Association for
Investment Management and Research (AIMR).
VII. PAYMENT
The successful proposer will only receive payment for rendered servIces after the city receives
properly prepared invoices.
VIII. ADDITIONAL INFORMATION
Inquiries regarding this RFP shall be directed to:
Ms. Louise C. Frangoul
Finance Director
City of Winter Springs
1126 East S.R. 434
Winter Springs, Florida 32708
Phone (407) 327-5960
Fax to (407) 327-4753
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IX. CONTRACT TERM
The successful proposer will be awarded a three (3) year contract effective January 1, 2003, through
January 1, 2006 It may be extended for two (2) additional one (I) year terms, provided all terms and
conditions (except for the contract period being extended) remain unchanged and in full force and effect.
This option, if exercised, is to be executed in the form of a Letter of Agreement, to be issued not sooner
than ninety (90) days prior to the expiration of this contract, nor later than the final day of the contract
period. The decision to renew the contract will be at the sole discretion of the City.
Refusal by the City to exercise this renewal option will cause the contract to expire on the original or
mutually agreed date. The total period of this contract, including all renewals as a result of exercising
this option, may not exceed a maximum combined period of five (5) years.
X. SPECIAL PROVISIONS
Proposers are encouraged to submit concise and clear responses to the RFP. Responses that are excessive
in length or complexity are discouraged. The City reserves the right to include the entire selected
proposal or any part thereof in the final contract. Emphasis should be on completeness and clarity of
content.
By submission of a proposal, the proposer certifies, and in the case of a joint proposal each party
certifies, that in connection with any cost proposal submitted, the prices quoted are not the product,
direct or indirect, of any collusion with any other proposer, and have not been knowingly disclosed by
the proposer, either directly or indirectly, to any other proposer prior to submission to the City.
All proposals must state the period for which the proposal shall remain in effect. Such period shall not be
less than 90 days from the proposal due date.
Notwithstanding any other provisions of this RFP, the City reserves the right to award this contract to
the proposer that best meets the requirements of the RFP. Further, the City reserves the right to reject
any or all proposals prior to execution of the contract, with no penalty to the City.
Potential proposers are prohibited from directly or indirectly communicating with City Commission
members regarding proposer qualifications, or the award of a contract. Also prohibited is contact with
City staff, unless submitting an inquiry in compliance with the provisions of "ADDITIONAL
INFORMATION" above. Any violation will result in immediate disqualification of the proposer from
the selection process.
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XI. RESPONSE TO THE REQUEST FOR PROPOSALS
At a minimum, responses to this RFP must include the following:
A. FIRM BACKGROUND:
1. Describe the organization, date founded, and ownership of your firm. Has it experienced
significant change in organizational structure, ownership, or management during the past
three years and, if so, please describe.
2. Describe any other business affiliations (e.g., subsidiaries, joint ventures, and "soft dollar"
arrangements with brokers).
3. Describe your firm's policy on soft dollars.
4. Does your firm have an office in the State of Florida?
5. Is your firm a registered investment advisor under the Investment Advisor's Act of 1940?
6. Describe any SEC, NASD or any other regulatory censure or litigation involving your firm
or its employees during the past five (5) years.
7. Summarize fidelity bond coverage, errors and omissions, employee dishonesty, fiduciary
liability insurance, or other fiduciary coverage your firm carries, and provide a current
Certificate of Insurance.
8. Provide a copy of your firm's ~ost recent audited financial statement.
9. Describe your firm's revenue sources and comment on your firm's financial condition.
10. Does your firm adhere to the Code of Professional and Ethical Standards as described by.
AIMR?
B. EXPERIENCE:
I. Describe your firm's experience in managing investment portfolios for public funds and
governmental entities.
2. Summarize your assets under management (institutional only) over the past five years.
3. What is your firm's experience in developing investment policies and portfolio
management guidelines for public employee pension funds?
4. Does your firm act as a broker or as a primary dealer in securities or receive any other form
of additional compensation (including soft dollars) for client transactions aside from the
direct fee paid by clients?
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5. Provide five client references (public sector) for which you provide similar services
including client name, contact personnel, address, phone number, and length of time you
have managed their assets.
6. Provide the number and types of accounts, total asset value, and composition of portfolios
currently being managed by your firm.
7. List your most comparable municipal clients and the length of time they have been clients.
8. How many accounts have you gained in the last 12 months? How many accounts have you
lost in the last 12 months, and provide an explanation for the loss of each of these accounts.
Provide contact name and number for each of the accounts lost in the last 12 months.
C. PERSONNEL:
1. Provide an organizational chart showing analytical, investment and research staff, other
decision support, and back office support. Identify the primary contact and describe the
roles of each key person.
2. Provide detailed resumes and biographical information for all key investment professionals
who will be directly responsible for the investment of the City of Winter Springs pension
funds. Include the following information: title, number of years at your firm, total number
of years of experience, professional designations or licenses.
3. Describe your firm's activities to keep portfolio managers informed of developments
relevant to the management of public sector investment portfolios.
D. INVESTMENT MANAGEMENT APPROACH AND DISCIPLINE:
1. Briefly describe your firm's investment management philosophy, including your approach
to managing public employee pension funds.
2. How are portfolios managed (e.g., by team, individual manager)? What is the back up when
the manager is away?
3. What are the strategies employed by your firm for adding value to portfolios (e.g., market
timing, credit research, etc.)?
4. Describe the in-house technical and research support services you have available. What
other sources does the firm utilize on a regular basis?
5. How will you handle fluctuating cash flows and the cash forecasting process?
6. Describe the investment program you are proposing for the City, including the type of
securities you propose to purchase, how the funds will be managed after the initial
investments are made and how you will provide liquidity.
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7. Provide your firm's investment performance as compared to the benchmarks listed in the
City's General Employee Retirement System Investment Policy Statement for the past I, 3,
5 and 10 -year periods. Please show annualized quarterly returns gross of all management
fees.
8. How frequently would you suggest your staff make contact with the City's staff? Who will
make contact?
9. Briefly describe any additional feature, attributes or conditions that the City should
consider in selecting your firm.
E. ACCOUNTING AND REPORTING:
1. Describe the investment accounting and reporting system used by your firm an<;l whether it
complies with AIMR standards.
2. Describe the frequency and format of reports that your firm would provide to the City,
including the methods and formulas used to calculate yield and performance. Provide a
sample of all reports that will be provided.
F. FEES:
1. Describe your firm's fee schedule. Is there a minimum fee? What expenses would be
covered through the fee structure?
2. What additional expenses, not covered by the fee schedule, will the City be expected to pay
in order to implement your investment services?
3. What fees would be required to provide specific advice concerning aspects of the present
portfolio?
..
4. Provide a description and/or example of the billing method that will be used.
G. SUPPLEMENTAL INFORMATION:
1. Provide a copy of your firm's most recent Form ADV, Parts I, and II as on file with the
SEC.
2. Provide proof of state registration.
3. Provide any contract language your firm would request or require in a contract with the
City.
4. Provide assurances that the proposer will be cognizant of, comply with, and enforce all
applicable Federal, State and Local statutes and ordinances.
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XVI.
XVII.
XVIII.
XIX.
XVI.
SUBMISSION OF PROPOSAL
Seven (7) copies of the proposal must be submitted. Proposals received after the above date
and time will not be considered. The City is under no obligation to return proposals.
EVALUATION OF PROPOSALS
An ad hoc committee as previously described will evaluate proposals submitted in response to
this RFP. The selection of a proposal and the execution of a contract, while anticipated, are not
guaranteed by the City. The City reserves the right to determine which proposal is in the City's
best interest and to award the contract on that basis. The City may reject any and all proposals,
waive any irregularities of any proposal, negotiate with any potential proposer (after proposals
are opened) if such is determined to be in the best interest of the City.
After all proposals are reviewed, proposers may be selected for interviews or oral presentations
as may be necessary. The City makes no commitment to any respondent to this RFP beyond
consideration of the written response to this RFP.
AWARD OF CONTRACT
After selection of a proposer based on qualifications, the City will then enter into negotiations
as to the terms of the agreement, all aspects and levels of services, and compensation to be
paid. In the event the negotiations between the proposer selected and the City cannot be
completed as a result of an inability to reach agreement on the fee for services, or the scope of
work to be performed, then at the option of the City, the contract may be awarded to the second
most qualified proposer. Negotiations will continue in this sequence until a contract is finalized,
or all proposals are rejected.
CITY COMMISSION APPROVAL
The final contract will be submitted to the City Commissi~n for approval. The selected
proposer will be required to assume responsibility for all services offered in their proposal. The
selected proposer will be considered the sole point of contact with regard to contractual matters,
including payment of any and all charges resulting from the contract. The selected proposer
will be required to enter into a written contract with the City in a form approved by the City
Attorney. This RFP and the proposal, or any part thereof, may be incorporated into and made a
part of the final contract. The City reserves the right to negotiate the terms and conditions of the
contract with the selected proposer.
ANTICIPATED CONTRACT TERMS AND CONDITIONS
1. Standards of Performance
A. The performance of all services by the proposer under this Agreement will be
by persons appropriately licensed or registered under state, local and federal
laws.
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B. In performing all services under this Agreement, the firm will use that degree of
care and skill ordinarily exercised for similar projects by professional firms who
possess special expertise in the types of services involved under this Agreement.
C. Any provisions in this Agreement pertaining to the City's review, approval and
lor acceptance of written materials prepared by the firm's subsidiaries or sub-
contractors in connection with this Agreement will not diminish the firm's
responsibility for the materials.
D. The firm will perform all of its services in coordination with the City, and will
advise the City of data and information it needs to perform its services. The
firm will meet with City representatives at mutually convenient times to
assemble this data and information.
E. In performing all services under this Agreement, the firm will comply with all
local, state and federal laws.
2. City's Responsibilities
A. The City will provide information to the firm regarding the City's requirements
or the firm's services under this Agreement.
B. The City will designate an authorized representative to act on the City's behalf
with respect to this Agreement. The City will examine documents and
information submitted by the firm, and promptly render responses to the firm on
issues requiring a decision by the City. .
3. Firm's Records
A. All expense records of the firm's personnel will be kept on a recognized
accounting basis acceptable to the City, and will be available to the City at
mutually convenient times. This provision applies only if the firm is to be
reimbursed for any expenses.
B. The City, its auditors, and federal and state agencies that have monitoring or
auditing responsibilities for this Agreement will have access to any books,
documents, papers and records of the firm which are directly pertinent to this
Agreement for the purpose of making audits, examinations, excerpts, copying
and transcriptions.
C. The firm will furnish to the City, at such time and in such form as the City may
require, financial statements including audited financial statements, records,
reports, data and information, as the City may request pertaining to the matters
covered by this Agreement.
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4. Ownership and Use of Documents
A. All documents prepared by the firm in connection with this Agreement will
become the property of the City.
B. The firm will retain all of its records and supporting documentation relating to
this Agreement, and not delivered to the City, for a period of three years,
except that in the event the firm goes out of business during that period, it will
turn over to the City all of its records relating to the City.
5. Term and Termination of Agreement
A. The term of this Agreement begins upon its execution by the City, and will end
upon the firm's completion, and the City's acceptance, of all services described
in this Agreement.
B. Either party upon 30 days prior written notice may terminate this Agreement,
should the other party fail substantially to perform in accordance with its terms
through no fault of the party initiating the termination.
C. The City upon at least 30 days prior written notice to the firm may terminate
this Agreement at will.
D. In the event of termination as provided in this Section, the firm will be
compensated for all services performed to the termination date which are
deemed by the City to be in accordance with this Agreement. This amount will
be paid by the City upon the firm delivering to the City all information and
materials developed or accumulated in performing the services described in
this Agreement, whether completed or in progress.
6. Insurance and Indemnity
A. The firm will hold harmless, indemnify, and defend the City and its employees,
agents, officers and servants from any and all lawsuits, claims, demands and
causes of action of any kind arising from the negligent or intentional acts,
errors or omissions of the firm, its officers, employees or agents. This will
include, but not be limited to, the amounts of judgments, penalties, interest,
court costs, reasonable legal fees, and all other expenses incurred by the City
arising in favor of any party, including the amounts of any damages or awards
resulting from claims, demands and .causes of action for personal injuries,
death or damages to property.
B. The firm will procure and maintain at its expense insurance with insurance
companies authorized to do business in the State of Florida, covering all
operations under this Agreement, whether performed by the firm or its agents,
subcontractors or employees. Before commencing the work, the firm will
furnish to the City a certificate or certificates in a form satisfactory to the City,
showing that firm has complied with this paragraph. All certificates will
provide that the policy will not be canceled until at least 30 days written notice
has been given to the City, and will name the City as an additional named
insured on all coverage's. The kinds and amounts of insurance required are as
follows:
Workers' Compensation Insurance in accordance with the statutory
provisions of the State of Florida Liability Insurance.
Commercial general liability insurance with a combined single limit of
$2,000,000 for each occurrence and $2,000,000 in the ag!,rregate.
Automobile liability insurance in an amount not less than $2,000,000
for injuries to anyone person, $2,000,000 on account of anyone accident, and
in an amount of not less than $2,000,000 for property damages.
Professional liability insurance with a combined single limit. of
$2,000,000 for each occurrence and $2,000,000 in the aggregate.
Employee dishonesty coverage and fiduciary coverage in an amount
adequate to cover related assets.
C. The stated limits of insurance required by this Paragraph are minimum only--
they do not limit the firm's indemnity obligation, and it will be the firm's
responsibility to determine what limits are adequate. These limits may be met
by basic policy limits or any combination of basic limits and umbrella limits.
The City's acceptance of certificates of insurance that do not comply with these
requirements in any respect does not release the firm from compliance with
these requirements.
7. Miscellaneous Provisions
A. The laws of the State of Florida govern this Agreement. Exclusive venue for
any dispute arising under this Agreement is in Seminole County, Florida.
B. As to all acts or failures to act by either party to this Agreement, any applicable
statute of limitations will commence to run and any alleged cause of action will
be deemed to have accrued when the party commencing the cause of action
knew or should have known of the existence of the subject act or failure to act.
C. The firm agrees not to use funds received by it under the terms of this
Agreement for any partisan political activity or to further the election or defeat
of any candidate for public office.
D. The firm hereby affirms that it has not made or agreed to make any valuable
gift whether in the form of service, loan, thing, or promise to any person or any
of his/her immediate family, having the duty to recommend, the right to vote
upon, or any other direct influence on the selection of firms to provide
professional services to the City within the two years preceding the execution
of this Agreement.
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E. In performing the services required under this Agreement, the firm will not
discriminate against any person on the basis of race, color, religion, sex,
national origin, age or disability.
F. All references in this Agreement to any particular gender are for convenience
only and will be construed and interpreted to be of the appropriate gender. The
term "will" is mandatory in this Agreement.
G. Should any provision in this Agreement be found or deemed to be invalid, this
Agreement will be construed, as not containing the provision, and all other
provisions, which are otherwise lawful, will remain in full force and effect. To
that end, the provisions of this Agreement are declared to be severable.
H. All services provided pursuant to this Agreement are for the exclusive use and
benefit of the City.
1. Florida statutes applicable to public records and the public dissemination
thereof govern the City of Winter Springs.
J. This Agreement and all written information generated under this agreement
may be subject to release.
K. The City and the firm, respectively, bind themselves, their partners, successors,
assigns and legal representatives to the other party to this Agreement and to the
partners, successors, assigns and legal representatives of such other party with
respect to all covenants of this Agreement. The City and the firm may not
assign, sublet or transfer any interest in this Agreement without the written
consent of the other.
L. This Agreement represents the entire and integrated Agreement between the
City and the firm, and supersedes all prior negotiations, representations or
agreements either written or oral. Except as to a change in the scope of
services, this Agreement may be amended only by written instrument approved
by the City's governing body and signed by both the City and the firm.
M. Any exhibits and/or attachments attached to this Agreement are incorporated
by reference into this Agreement as though included verbatim herein.
N. In the event of any conflict between these Terms and Conditions and the
provisions of any exhibit or attachment to this Agreement, these Terms and
Conditions will govern and control.
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XVII. PROPOSER'S WARRANTY
The undersigned person by his/her signature affixed hereon warrants that: (a) he/she is an officer of the
institution submitting the proposal; (b) he/she has fully read and understands this RFP and has full
knowledge of the scope, nature, quantity, and quality of work to be performed; the detailed
requirements of the services to be provided, and the conditions under which the services are to be
performed; and (c) acknowledges that the institution has no objection to incorporating the Request for
Proposal and its responses to it as an attachment to the contract we may mutually develop for the
Investment Management Services for the Defined Benefit Pension Plan Funds services.
PROPOSER
Name of Institution
Signature
Name (Print or Type)
Date
Address
Telephone Number
Fax Number
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XVIII. A TT ACHMENT
General Employee Retirement System Investment Policy Statement
Timeline
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,<;:.,::,. .., .:: INVESTMENT:POLlCY:STATEMENT
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APPROVED ON 9/12/(flBYTHE'PENSIONBOARD'AND9/24/0.;biBYrE'"
. CITY COMMISSION.
Retirement System Investment Policy
City of Winter Springs
Page 2
Table of Contents
Page
I. SCO PE ......................................................................................... 3
II. INVESTMENT OBJECTIVES ............................................................3
III. PERFORMANCE MEASUREMENT.................... .......... ... . . ........ .... .. ... 3
IV. INVESTMENT AND FIDUCIARY STANDARDS ...................................4
V. A UTHORIZED INVESTMENTS......................................................... 5
VI. MA TURITY AND LIQUIDITY REQUIREMENTS.................................. 6
VII. PORTFOLIO COMPOSITION ............................................................ 7
VIII. RISK AND DIVERSIFICATION .........................................................7
IX. EXPECTED ANNUAL RATE OF RETURN .......................................... 8
X. THIRD PARTY CUSTODIAL AGREEMENTS....................................... 8
XI. MASTER REPURCHASE AGREEMENT............. ............... . .......... . . . .... 8
XII. BID REQUIREMENT..................................................... ..... .. ...... ... .. 8
XIII. INTERNAL CONTROLS.................................................................. 8
XIV. C{)NTINUING EDUCATION.............................................................9
XV. REPO R TIN G . . . . . .. .. . . . . .. . .. . . . . . . .. . . . . .. . . .. . . .. . .. . . .. . . .. .. . .. . . . . . . . . . . . . . . . . . . . . . . . . .. 9
XVI. FILING OF INVESTMENT POLICy................................................... 9
XVII. V ALUA TION OF ILLIQUID INVESTMENTS....................................... 9
Retirement System Investment Policy
City of Winter Springs
Page 3
CITY OF WINTER SPlUNGS
GENERAL EMPLOYEES' RETIREMENT SYSTEM
INVESTMENT POLICY STATEMENT
I. Scope
A. The City Commission of Winter Springs ("City") has adopted this investment policy statement
for the investment of the General Employees' Retirement System ("Plan") assets to be
administered by the Board of Trustees ("Board") of the General Employees' Retirement System
in accordance with applicable Florida State Statutes and City Ordinances. To that end, this
investment policy is intended to set forth the investment objectives and parameters for the
management of those assets in a manner designed to fulfill the requirements of the Board's
fiduciary investment responsibilities.
B. The Board recognizes their responsibility for the investment of the Plan's assets, and in order to
implement this function, the Board is authorized by law to retain the services of Investment
Managers who possess the necessary skilled personnel and facilities to provide the expertise with
respect to the investment of the Plans funds.
C. This investment policy will be reviewed annually by the Board and may be revised upon the
City's approval.
II. Investment Objectives
A. The foremost objective of this investment policy is the proper investment of the assets of
the Plan in order to provide ongoing pension benefits to the Plan's members and their
beneficiaries.
B. The Board will strive to increase the Plan's total rate of return through capital appreciation and
income while limiting the amount of risk exposure to the Plan. The methodology to determine
the Plan's risk/return characteristics is through a diversification of investments across various
asset classes detailed in Section V.
C. Additionally, the Board will try to keep losses at a minimum due to erosion of market value or
from security defaults. To that end, investment managers will trade securities from time to time
to improve yield, maturity, quality, credit risk, and total return potential.
D. The assumed actuarial rate of return, over a market cycle (3-5 years), along with the annualized
total return for the Plan should exceed the rate of inflation as measured by the Consumer Price
Index ("CPI") by 4 percent.
III. Performance Measurements
A. The Board shall adopt performance measurements for the Plan's assets to be reviewed on a
quarterly basis and evaluated based on a market cycle of 3-5 years. The Board may retain the
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City of Winter Springs
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services of an independent investment consultant to assist in monitoring the investment
performance of the Plan's individual investment managers. Such performance is measured to
determine the following:
1. If the investment manager has performed according to this investment policy.
2. If the investment manager has performed within the appropriate investment style.
3. How the manager has performed in relation to the performance measurements for the
appropriate asset class.
B.. The performance measurement indexes on the asset categories are as follows:
1. The Plan's total fund return will be compared to the CPI Index as an inflationary
measurement and the actuarial interest assumption as described in Section IX.
2. The Plan's fIxed income portfolio return will be compared to the weighted average return
of the Lehman Aggregate Bond Index or equivalent.
3. The Plan's domestic equity portfolio return will be compared to the weighted average
return of the Standard and Poor's 500 Index or equivalent.
4. The Plan's international portfolio return will be compared to the weighted average return
of the Morgan Stanley Europe, Australia, & Far East (EAFE) Index or equivalent.
5. The Plan's emerging markets portfolio return will be compared to the weighted average
return of the MSCI Index for Emerging Markets or equivalent.
IV. Investment and Fiduciary Standards
A. The Plan's assets will be invested in a manner consistent with the standards set forth in:
1. The Employee Retirement Income Security Act of 1974 at 29 US.c. s. 1104(a)(1)(A)-
(C).
2. Chapters 112 and 518, Florida Statutes.
3. City of Winter Springs Ordinances.
4. The Plan's Investment Policy Statement.
5. The Pension Plan document.
6. In the event of a conflict within these provisions or any other provisions of law
authorizing investments, the investment and fIduciary standards set forth in Section
112.661(4), Florida Statutes and item I above shall prevail.
B. The Board will adhere to the Prudent Person standard and this standard shall be applied in the
context of managing the overall Plan. The Prudent Person standard is as follows:
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"Iiwestments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the probable income to
be derived from the investment."
C. Any person or firm hired or retained to invest, monitor, or advise concerning these assets shall
be held to the higher standard of Prudent Expert. The standard shall be that in investing and
reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these
funds, the contractor shall exercise: the judgment, care, skill, prudence, and diligence under the
circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting
in a like capacity and familiar with such matters would use in the conduct of an enterprise oflike
character and with like aims by diversifying the investments of the funds, so as to minimize the
risk, considering the probable income as well as the probable safety of their capital.
V. Authorized Investments
A. Funds placed with investment managers are to be invested only in those authorized classes of
investments as contained in this investment policy. Investments should be made subject to the
Plan's cash flow needs and such cash flows are subject to revision due to changes in the Plan's
needs and market conditions. Investments not listed in the investment policy are prohibited.
B. The authorized classes of investments for the Plan are as follows:
I. Obligations guaranteed as to principal.and interest by the United States government.
2. Bonds, securities, and certificates of indebtedness of United States government agencies.
3. Obligations guaranteed as to principal and interest by government-sponsored agencies
of the United States government.
4. The Florida Local Government Surplus Funds Trust Fund (SBA).
5. Commercial Paper rated in the highest category by a nationally recognized rating service.
If a Letter of Credit (LOC) backs the Commercial Paper, the long-term debt of the LOC
provider must be rated A or better by at least two nationally recognized rating services.
6. Bankers Acceptances of United States banks or a federally chartered domestic office of
a foreign bank, which are eligible for purchase by the Federal Reserve System, rated in
the highest category by a nationally recognized rating service.
7. Corporate bonds or notes, registered or unregistered under Rule 144A, issued by firms
organized and operating within the United States or by depository institutions licensed
by the United States rated (A) or equivalent by a nationally recognized rating service at
the time of purchase. Rule 144A bonds or notes must include rights of registration. Any
bond or note that falls below investment quality must be eliminated immediately.
8. General Obligation and/or Revenue Bonds of state or local government taxable or tax-
exempt debt rated A, for long term debt, by a nationally recognized rating service or
rated MIG-2 or SP-2, for short term debt, by a nationally recognized rating service.
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9. Intergovernmental investment pools authorized pursuant to the Florida Interlocal
Cooperation Act provided in Section 163.01, Florida Statutes.
10. Common and preferred stocks from domestic or foreign corporations.
11. Real estate and real estate securities as deemed proper investments by the Board.
12. Repurchase Agreements
a. The Plan's investment managers may invest in repurchase agreements composed
of only those investments authorized in numbers 1,2, and 3 (above). All firms
are required to sign the Plan's Master Repurchase Agreement prior to the
execution of a repurchase agreement transaction.
b. A third party custodian with whom the Plan has a current custodial agreement
will hold the collateral for all repurchase agreements with a term longer than
one (1) business day. A clearly marked receipt that shows evidence of
ownership must be supplied to and retained by the Plan's investment manager.
c. Securities authorized for collateral must have maturities less than 10 years with
a market value for the principal and accrued interest of 102% of the value and
for the term of the repurchase agreement. Immaterial short-term deviations
from 102% requirement are permissible only upon the approval of the Pension
Plan Administrator.
13. Mutual funds registered under the Investment Company Act of 1940.
VI. Maturity and Liquidation Requirements
A. The Plan's maximum investment maturities for the following securities are as follows:
1. The overall duration of the principal return for the Plan will be less than 140% of the
Lehman Aggregate Bond Index.
2. For commercial paper, 180 days or less from the date of purchase.
3. For bankers' acceptances, 180 days or less from the date of purchase.
4. For repurchase agreements, 90 days or less from the date of purchase.
B. On a quarterly basis, the Plan's Actuary will notify the investment manager of the plan's liquidity
requirements for the payroll and administrative expenses.
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VII. Portfolio Composition
The Board has adopted the following long-term target asset mix for the Plan as shown below.
I. 70% of the Plan's assets market value will be allocated to equity investments. Based on
market fluctuations, the Board will accept variances of up to five percent (between 65%-
75%) from the above asset target. This target is further allocated as follows:
ategory
High Grade Equity
High Grade Equity Income
Small Caps
Mid Caps
International
10% - 30%
15% - 25%
15% - 30%
15% - 30%
5% - 15%
2. 30% of the Plan's asset market value will be allocated to the fixed income securities.
3. Quarterly, the Board will review the investment portfolio for the purpose of potentially
reallocating assets within the individual asset class target ranges based on changes
within the capital market environment.
4. The Board will review these asset allocation targets annually and will revise the targets
if any significant changes OCCl,lr within the capital market environment.
VIII. Risk and Diversification
A. The Board has adopted a strategy, described in Section VII, whereby the Plan's assets will be
diversified to the extent practicable in order to control the risk of loss which might result from
an over-concentration of investments in a specific security, maturity, issuer, dealer, or bank
through which financial instruments are bought or sold.
B. In a further effort to control the risk of loss and assure adequate diversification, the following
limitations are imposed upon the investment of the Plan's assets:
1. A maximum of 5% investment in the outstanding common stock of anyone company
or organization.
2. A maximum of 5% investment in the outstanding debt issuance of anyone company or
organization.
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IX. Expected Annual Rate of Return
The Board has set the Plan's current expected rate of return at 9% and to the extent the actual rate of
return various from the expected rate of return the gains or losses will be spread over a 5 year moving
average period. The short term expected rate of return is 9%, and long term expected rate of return to
be at least the actuarial interest assumption rate of 9% along with an additional annualized return that
exceeds the rate of inflation measured by the CPT.
X. Third-Party Custodial Agreements
All securities will be held with the custodial bank under a contractual agreement \vith the Board. All
securities purchased by and all collateral obtained by the investment managers and/or the Board are
designated as assets of the Plan. No withdrawal of securities, or transfer of funds, in whole or in part,
can be made from safekeeping except by authorization of the Board and written execution by anyone of
the following: the Board Chairman, Vice-Chairman, or the Plan Administrator. Securities transactions
between a broker/dealer and the custodial hank involving the purchase or sale of securities by transfer
of money or securities must be made on a "delivery vs. payment" basis, if applicable, to ensure that the
custodial bank will have the security or money, as appropriate, in hand at the conclusion of the
transaction.
XI. Master Repurchase Agreement
All approved institutions and dealers transacting repurchase agreements will execute and perform as
stated in the Master Repurchase Agreement. All repurchase agreement transactions will adhere to the
requirements of the Master Repurchase Agreement.
XII. Bid Requirements
Each investment manager shall obtain competitive bids and offers on investment transactions to the
fullest extent possible. The investment managers will make periodic reports to the Board reflecting
purchases, sales, or other activity.
XIII. Internal Controls
A. The Plan Administrator will establish a system of internal controls and written operational
procedures to be a part of the Plan's operational procedures. The internal controls should be
designed to prevent losses of funds, which might arise from fraud, employee error, and
misrepresentation by third parties, or imprudent actions by employees. The written procedures
should include reference to safekeeping, repurchase agreements, separation of transaction
authority from accounting and record keeping, wire transfer agreements, banking service
contracts, collateraVdepository agreements, and "delivery-vs. -payment" procedures. No person
may engage in an investment transaction except as authorized under the terms of this investment
policy.
B. Independent auditors, as a normal part of their annual financial audits, will conduct a review of
the system of internal controls to ensure compliance with policies and procedures. Additionally,
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City of Winter Springs
Page 9
the Plan's Actuary, Investment Consultant, and the City auditors will complete an annual system
revIew.
XIV. Continuing Education
Annually, members of the Board have the responsibility for completing continuing education programs
in matters relating to the Plan's investments by reading the appropriate materials and by attending the
appropriate local and national conferences and seminars as authorized by the Board.
XV. Reporting
On an annual basis, the Board will provide the City with an investment report regarding the Plan's
investment portfolio. The annual report shall provide all, but not limited to, the following: name and type
of securities in which the funds are invested, the amount invested, income earned, the book value and the
market value of the investment portfolio. Investment reports shall be available to the public.
XVI. Filing of Investment Policy
A. Upon adoption, the Board will promptly file this investment policy statement with the State of
Florida's Department of Management Services, the City of Winter Springs, and the Plan's
Actuary.
B. The effective date of this investment policy shall be the 30u, calendar day following the date filed
with the City of Winter Springs.
XVII. Valuation of Illiquid Investments
All illiquid investments ~or which a generally recognized market is n<?t available or for which there is no
consistent or generally recognized pricing mechanism will be. given an actuarial valuation by the Plan's
Actuary on an annual basis. For each actuarial valuation, the Board must verify the determination of a
fair market value for those investments and ascertain that their determination complies with all applicable
state and federal requirements. The Board will disclose each illiquid investment to the State of Florida's
Department of Management Services and to the City of Winter Springs.
APPROVED AND ADOPTED BY THE GENERAL EMPLOYEE'S RETIREMENT SYSTEM
BOARD OF TRUSTEES ON 9/12/01 AND 9/24/01 BY THE CITY COMMISSION..
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Page 10
CITY OF WINTER SPRfNGS
REQUEST FOR PROPOSAL
INVESTMENT MANAGEMENT SERVICES FOR DEFfNED BENEFIT PENSION
PLAN
FD = Finance Director
PB = Pension Board
VD = Yendors
Sunday, August 4, 2002 FD - Advertise RFP in Orlando Sentinel
Monday, August 5, 2002 FD - Place ad in DemandStar
Friday, August 30, 2002 YO - RFP's due at City
Week of Sept 2, 2002 PB/FD - Distribute RFP's to Pension Board
Members/Consultant for review
Week of Sept 23,2002 PB/FD - Special Meeting to discuss proposals and
Day TBD arrive at short list for oral presentations
Week of Sept 30, 2002 FD - Schedule Presentations
Week of Oct 7, 2002 PBND - Oral Presentations
Day TBD
Week of Oct 14,2002 PB/FD - Special Meeting to review results of oral
Day TBD presentations and arrive at a recommendation to the City
Commission
Friday, Oct 18, 2002 FD - Agenda Item - Pension Board Recommendation
for Invst Mngr due to City Manager
Monday, Oct 28, 2002 FD - Commission Meeting - Gain Authority to Execute
Contract with Recommended Invst Mngr
Thursday, Oct 31, 2002 FD - 60 day Written Notice to SunTrust regarding
cancellation of existing contract
Nov, Dec 2002 NA - Fulfill remaining 60 day notice requirement to
SunTrust and execute contract with approved firm
Wednesday, January 1,2003 VD - Begin services with selected firm