City of Burlington



4681855352933000UBS Institutional ConsultingPrinceton Investment ConsultingCity of Burlington Employees' Retirement System10/8/2020righttop UBS Financial Services Inc.UBS Institutional Consulting GroupPrinceton Investment Consulting10/08/2020City of Burlington Employees' Retirement SystemWe would like to thank the City of Burlington for allowing us to participate in this request for proposal for providing institutional consulting services.The UBS Institutional Consulting Group has been providing investment consulting services to a variety of institutional clients since 1984. With an average of 27 years of experience, our Institutional Consultants have significant consulting experience with current combined client assets of about $92 billion1. Working with our Institutional Consulting Team provides access to the global scope and economies of scale that a global wealth manager such as UBS can provide.UBS Institutional Consultants provide clients with customized investment consulting advice on a continuing basis with an outstanding dedication to client service. Our Team maintains a commitment to understanding each organization’s financial needs and objectives. Our efforts to understand these needs and objectives and our ability to convert this understanding into a customized investment plan are the keys to our success.As your Investment Consultant, we will offer the following investment advisory services: Asset Allocation AssistanceInvestment Policy AssistancePerformance ReportingInvestment Performance Monitoring Investment Manager Search and Due DiligenceInvestment Advice and ConsultingTrustee and Board EducationThis response is based on our preliminary understanding of the scope of work and complexity of the assignment. Although we believe it to be a fair response with a fair fee for service, we are open to further discussion regarding the details of your needs to better address your concerns. If we receive the opportunity to work with you, the City of Burlington would be a valued client to UBS and our team. If UBS can provide any additional information to you during your evaluation process, please don't hesitate to contact us directly with any questions.Sincerely,Princeton Investment Consulting As of 12/31/2019 for the UBS Institutional Consulting Group Services ProgramTable of Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc53057314 \h 4Response to RFP PAGEREF _Toc53057315 \h anization PAGEREF _Toc53057316 \h 6B.Potential Conflicts of Interest PAGEREF _Toc53057317 \h 10C.Legal Fiduciary Status, Investment Advisory Status and Litigation PAGEREF _Toc53057318 \h 12D.Insurance PAGEREF _Toc53057319 \h 13E.Staffing and Facilities PAGEREF _Toc53057320 \h 14F.Clients PAGEREF _Toc53057321 \h 17G.Services PAGEREF _Toc53057322 \h 191.General PAGEREF _Toc53057323 \h 192.Investment Policy Development & Portfolio Design PAGEREF _Toc53057324 \h 203.Manager Selection PAGEREF _Toc53057325 \h 254.Performance Measurement and Evaluation PAGEREF _Toc53057326 \h 295.Risk Control PAGEREF _Toc53057327 \h 346.Transition Management PAGEREF _Toc53057328 \h puter and Technical Capabilities PAGEREF _Toc53057329 \h 36H.Fees PAGEREF _Toc53057330 \h 38I.Miscellaneous PAGEREF _Toc53057331 \h 40UBS Form ADV & Important Information PAGEREF _Toc53057332 \h 42Form ADV Part I & Part II PAGEREF _Toc53057333 \h 42Executive SummaryInsightful advice. Ongoing collaboration.Managing a thriving organization today takes broad capabilities. When you collaborate with the UBS Princeton Investment Consulting you receive the benefits of:Individualized, hands-on guidanceA knowledgeable and diverse perspective, gained through our broad experience serving many types of institutionsThe clear fiduciary responsibility we assume for the investment advice we provide, and our ability to help you develop processes consistent with fiduciary standardsA commitment to client serviceThe intellectual capital, global insights and research capabilities of UBS, the largest wealth manager in the world1Objective advice, focused on your goalsIn the UBS Institutional Consulting program our advice is focused on your goals as our fees are not tied to specific investments that we recommend. Rather, we are paid a consulting fee that does not vary depending upon your portfolio choices. Moreover, we will acknowledge in our Services Agreement that we will act as a fiduciary for our services as described more fully in our Agreement.A recognized leader guiding the investment process2UBS Princeton Investment Consulting is part of the UBS Institutional Consulting Group—a select group within UBS. The UBS Institutional Consulting Group has been servicing clients for more than 30 years. We share your commitment to sound governance, and provide practical solutions to help you manage your duties and responsibilities and achieve your goals.UBS designates only certain Financial Advisors as UBS Institutional Consultants. Institutional Consultants must have a combination of education, financial industry experience, and institutional assets under management. Some of these requirements generally include:Attaining some of the more rigorous designations in the industry, such as: Certified Investment Management Analyst (CIMA?) or Chartered Financial Analyst? (CFA?)3 credentials Meeting certain client asset thresholds at UBS Possessing at least five years of institutional industry experienceMaintaining eligibility prerequisites which are verified annually by program managementPersonal attention and customized adviceOur team takes time to understand your organization so that we can offer a thoughtful, customized path to pursue your long-term goals and objectives. We are available to meet with you at a minimum quarterly, providing a regular opportunity for discussion whether in person or virtually so you can fully understand our recommendations and the impact of those decisions.A robust core service offering tailored to your needsOur team is equipped with sophisticated modeling and analytical tools, insightful research and customized investment reporting solutions that can be tailored to meet your needs. Our core services include:Investment Policy Advice and Assistance - A clearly defined Investment Policy Statement (IPS) is vital to any well-executed investment program and is your guidepost for consistent, informed decision-making. We’ll help you to develop or fine-tune your IPS, enabling your organization to define and manage your responsibilities, governance and portfolio goals.Asset Allocation Studies and Analysis - We’ll help you evaluate different paths to your organization's goals using portfolio optimization techniques, economic forecasts and proprietary capital market assumptions developed by UBS and based on your risk profile.Investment Manager Search, Identification and Recommendation - We'll begin by examining the universe of managers that have been approved by our investment manager research team. Our team then uses your Investment Policy Statement and our own experience and observations to recommend the right mix of investments for your needs.Portfolio Evaluation and Review - With regular evaluation and review of your investment holdings, we will help you stay on top of short- and long-term objectives for your portfolio while making recommendations to optimize investments and manage risk.Prepared to help you fulfill your investment objectives4UBS Institutional Consulting Group founded in 1984An active network of over 100 consultants averaging over 27+ years of experienceServing more than 730 institutionsBacked by the intellectual capital of UBS Group AG, a global wealth management firm with a 150-year heritageWe look forward to working with the City of Burlington Employees' Retirement SystemWe sincerely appreciate the opportunity to respond to your proposal, and we hope to have the chance to serve you. We look forward to meeting in person to learn more about your objectives and how we can help you pursue them. Thank you,Princeton Investment Consulting1 Scorpio Partnership’s “Global Private Banking Benchmark 2017” rank of global wealth managers by assets under management. Click to view.2 Best Research and Asset Allocation Advice, Euromoney, 2018, 2016, 2015. Accolades are independently determined and awarded by their respective publications. For more information on a particular rating, visit its corresponding website. Neither UBS Financial Services Inc. nor its employees pay a fee in exchange for these ratings. Accolades can be based on a variety of criteria including length of service, compliance records, client satisfaction, assets under management, revenue, type of clientele and more.3 CIMA? is a registered certification mark of the Investments & Wealth Institute (formerly IMCA) in the United States of America and worldwide. CFA? and Chartered Financial Analyst? are trademarks owned by the CFA Institute.4 as of 12/31/2019Response to anization1.Name of firm.UBS?Financial?ServicesUBS Institutional?Consulting?Group2.Name, address, and telephone number(s) of key contact.L. Marc Shegoski100 Overlook Center, Suite 100Princeton, NJ 08540609-919-23313.Ownership structure of firm.UBS AG is one of the world's leading financial firms, a leading global wealth manager and investment banking and securities firm with a strong institutional and corporate client franchise and a key asset manager. UBS is present in all major financial centers worldwide. It has offices in more than 50 countries and employs approximately 67,000 people around the world with about 31% of its employees working in the Americas, 32% in Switzerland, 19% in the rest of Europe, the Middle East and Africa and 18% in Asia Pacific (as of 12/31/2018). Its shares are listed on the SWX Swiss Stock Exchange and the New York Stock Exchange (NYSE).UBS is managed through four Business Groups: Wealth Management & Swiss Bank; Wealth Management Americas; Asset Management; and Investment Bank. As a member of the UBS AG family, UBS Financial Services Inc. is a full service brokerage firm with a network of over 6,680 Financial Advisors. UBS AG enjoys strong long-term credit ratings from all the major agencies (as of 03/21/2019): S&P A+/S Moody's Aa3/SUBS Institutional Consulting is a distinct group within UBS Financial Services which in turn is part of Wealth Management Americas. UBS Institutional Consulting?has over 35 years of experience providing clients with comprehensive and customized investment consulting services within UBS Financial Services Inc. Investment consulting clients include corporations, private and public retirement plans, Taft-Hartley plans, municipalities, foundations, and endowments. There are over 170 Institutional Consultants and Endowment and Foundation Consultants, and 500 Retirement Plan Consultants nationwide with approximately $149 billion of client assets under advisement (12/19).4.Team structure brief biographies of individuals to be assigned.Marc Shegoski Managing Director - Wealth Management Senior Institutional Consultant ?As a Barron’s Top 100 Financial Advisor in America and a Financial Times 400 Top Advisor, Marc has 38 years of experience building long-lasting relationships with nonprofits, unions, municipalities, endowments, and retirement plans. As a UBS Senior Institutional Consultant, a designation held by only 28 of UBS’ Top Institutional Consultants, Marc specializes in asset allocation, manager due diligence, and portfolio construction.?Marc was a partner in the development of the UBS Institutional Consulting Group, previously named PRIME Asset Consulting at Paine Webber & Kidder Peabody. With deep experience beyond consulting, Marc was a founding partner of a New York Stock Exchange firm, a Director of the Office State Courts Administrator for the State of Missouri and a Consultant to the Special Investigation Commission of the New Jersey Senate. ?The credentials that help build confidence ? Barron's Top 100 Advisor – 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 Barron's Top 50 Institutional Consultant, 2018 Forbes Best-In-State Wealth Advisor – 2018, 2019, 2020 Financial Times Top 400 Advisor – 2013, 2017, 2019, 2020 Financial Times Top 401 Retirement Plan Advisor – 2017-2019 Plan Advisor's Top 100 Retirement Plan Advisors – 2016 Top 100 Wirehouse Advisors - 2014 Pursuing Wealth Advisor designation at the Booth School of Business B.A. degree in the political science & computer science from Rutgers College M.S.P.A. degree in public policy from University of Missouri – Columbia David Sears, CIMA?, CFP?, CRPS? First Vice President - Wealth Management ?Senior Institutional Consultant Named as a Forbes America's Top Next-Generation Wealth Advisor, National Association of Plan Advisor‘s 2015 50 Under 40, and Top 35 Advisor Under 35 at UBS, David has more than 12 years of experience working with a wide array of institutional clients and high net worth families. David supports UBS' Institutional Consulting with portfolio construction, asset allocation, risk management, investment manager research, equity and fixed income trading, portfolio reporting and financial planning. ?David is a member of the UBS Institutional Consulting Advisory Council, a group of 12 Institutional Consultants from around the country who advise the firm on all aspects of the institutional business. He joined UBS in 2007 as part of a select group chosen nationally to complete a focused wealth management and institutional consulting program. ?The credentials that help build confidence ? Certified Financial Planner? Professional Certified Investment Management Analyst? CIMA Certification Commission Member Chartered Retirement Plans Specialist? National Association of Plan Advisors Top 50 Under 40 – 2015 UBS Top 35 Advisors Under 35 – 2017, 2020 Forbes America's Top Next-Generation Wealth Advisor – 2017, 2018, 2019 Barron's Top 50 Institutional Consultant, 2018 B.S degree in finance and economics from Rutgers Business School UBS Institutional Consulting Advisory Council Member ?Ryan T. Iannuzzo CRPS?Wealth Strategy Associate ?Ryan Iannuzzo has been with Princeton Investment Consulting for over four years and acts as a vital part of our institutional business. Passionate about constantly challenging himself and our team, Ryan is our point person for performance reporting, presentation preparation, daily client trading and RFPs. He strives to provide our clients with a unique and enhanced perspective through diligent attention to financial planning, goal setting and market awareness. A flexible and constant team player, Ryan showcases a unique ability to tackle multiple projects at once, assisting our team whenever needed to ensure timely and accurate delivery. ?Ryan is also an active member of the UBS Institutional Consulting Administrative and Operations Advisory Council. The Council consists of a select group of UBSIC Ops professionals that help shape and share best practices with UBS Institutional Consulting Teams nationally to improve the efficiencies of the firm's administrative and operational processes. ?Ryan holds the Series 7, 63 and 66 licenses as well as the Chartered Retirement Plan Specialist (CRPS?) designation. He received his bachelor's degree in finance and marketing from Manhattan College's Business School. ?Teresa Treanor Team Administrator ?Teresa Treanor joined Princeton Investment Consulting in 2018 as our new Team Administrator. In this role, Terri works with our administrative staff to deliver exceptional client service and assists the team with preparing for client meetings, fixed income and equity trading and coordinating marketing and business development efforts. Throughout a successful 25 year career, she has filled many roles within the branch office, from branch cashier to Operations Manager, branch manager's assistant, senior registered client service associate & wealth strategy associate. Using the knowledge and experience she's gained throughout the years, Terri has proven herself to be a great addition to our team. ?Terri understands the value personal connections bring to the financial services business. Her understanding of the markets and the needs of our clients as well as her ability to quickly adapt to changes make her the perfect person to oversee our day-to-day business. ?Terri has her Series 7, 63, 65 and NJ Insurance Producer's licenses. In addition to being our team administrator, Terri is the CSA Coach for the Princeton, NJ office, setting objectives and helping other staff members drive results across the firm. Lisette Hernandez Senior Client Service Associate ?Lisette Hernandez is a 23 year industry veteran and the first point of contact for incoming client and prospect requests for Princeton Investment Consulting. An integral part of the business, Lisette's patience, understanding of the financial services industry and ability to connect well with others makes her the ideal fit to be our lead CSA for all inquiries, new account openings and to act as our liaison between the team and branch operations/home office. Lisette also assists the team with security trading, margin reporting and scheduling. ?Her passion for helping our clients has been consistent for over 23 years. She focuses on what's needed and then pools knowledge, advice and resources to arrive at the best solution. Listening is important during this process and Lisette excels at attention to detail. Her understanding of UBS processes enables her to quickly and accurately accomplish all tasks at hand. ?Lisette holds both the Series 7 and 66 licenses.5.Business focus/client base.a.What is the primary business focus of your firm? Is your firm affiliated with any organization(s), specifically a brokerage firm? If yes, please describe the relationship in full.The UBS Institutional Consulting Group generates 100% of its revenue from investment consulting services.UBS is a global firm that offers a full range of investment products and services for individuals and institutions. You can view UBS Financial Statements and other related documents at: . b.What is your firm’s targeted market in terms of plan size?Our teams target market in terms of plan size is $15-200 million.c.How many pension consulting clients do you currently have? What is the average plan size of your clientele?Our team consults of 14 pension clients with an average plan size of $78 million.?d.What is the client turnover (gains and losses) of your firm over the last three years?Over the past three years Princeton Investment Consulting has gained 6 clients while losing one.?e.How many full-time staff is employed by your team and firm?Our team has five full time members while UBS employs 67,000 people around the world. As a part of the UBS Institutional Consulting Group?our team is?supported by 22 home office staff that are dedicated to the administration and management of the consulting business. Additionally, there are 4 legal and compliance counsel representatives, 2 marketing officers, and 10 supervision and operational personnel.f.When did your organization begin providing investment advisory services?The UBS Institutional Consulting Group has served the investment consulting needs of institutional investors since 1984.?g.Is providing investment advisory services currently one of your organization’s principal lines of business?Yes,?the UBS Institutional?Consulting?Group?exclusively?provides?investment advisory?services?as?a fiduciary.?Any investment that would?create a conflict of interest is?prohibited?from?being?recommended.h.What percentage of your organization’s revenues in the last fiscal year was attributable to the investment advisory practice?Find our response to inquiry "a" in this section.?6.Is your organization registered with the Securities Exchange Commission (SEC) as an investment advisor under the Investment Advisors Act of 1940?UBS Financial Services Inc.?is a?fully?licensed broker/dealer and is a registered advisor with the SEC?under the?Investment Advisor Act of 1940 and functions as?a fiduciary?as provided under such Act.?The?firm’s Form ADV?Part I is available through publicly?available filings at the Securities and Exchange Commission at ? UBS Institutional Consulting program provides services as?a fiduciary?under a separate Form ADV?which?allows us to provide independent Institutional Consulting services. ?Our Form ADV?Part II Disclosure Document?is available through public?filing at the Securities and Exchange Commission ? provide a copy of your organization’s Form ADV Part II A&B.Please see our previous response.?B.Potential Conflicts of Interest1.Does your organization provide trust, investment management or securities brokerage services (including commission recapture)? If so, please identify and explain all such services provided:We do not provide trustee services; however, we have the ability to partner with numerous trust companies that can provide these services if needed.Our fees are solely from the provision of Consulting Group services. We do not accept brokerage commissions from your investment managers as an offset to our fee. Our Consulting Group services can be provided to clients who custody their assets at UBS or custody their assets at another financial services firm. If your assets are custodied at UBS, our fee will encompasses consulting, custody and trading through UBS, all under a single fee that is stated as a percentage of assets under advisement. For assets held at UBS, trades made through an IC Account will be executed at zero commission. In order to comply with principal trade restrictions, orders for our UBS Consulting Group accounts are routed for agency execution.When using mutual funds we will select the lowest cost, institutionally priced shares available. These lower cost share classes typically do not pay any 12b-1 distribution fees or revenue sharing payments, but if any 12b-1 fees are received for assets held in a UBS Consulting Group Account, they will be automatically rebated back to the portfolio and credited directly to your account. We do not receive any revenue sharing for assets held in a UBS Consulting Group account.For assets held away, 12b-1s received will be used as an offset to the Consulting Group fee on a dollar for dollar basis and any excess will be credited to you. However, for assets held away from UBS we prefer not to receive such mutual fund compensation, as this would alleviate the issue of soft dollars and is also a more transparent way to track expenses.a.What percentage of your 2019 revenue was attributable to such trust, investment management or securities brokerage services?Please refer to our response in the previous inquiry.For a more detailed breakdown of our revenue UBS has both quarterly and annual financial statements. The quarterly statements are unaudited. The annual statements are audited. You can view UBS Financial Statements and other related documents at: Financial Services has bi-annual Statements of Financial Condition. The June Statement of Financial Condition is unaudited. The December Statement of Financial Condition is audited by Ernst & Young. You can view these documents at: b.Does your organization provide any other services or engage in any other lines of business aside from investment advisory, trust, investment management, commission recapture, soft-dollar or securities brokerage services? If so, please describe such services in detail, noting the percentage of your firm’s 2019 revenue that was attributable to such services.UBS is managed through four Business Groups: Wealth Management & Swiss Bank; Wealth Management Americas; Asset Management; and Investment Bank.The UBS Wealth Management Groups offer high net worth and affluent individuals around the world a complete range of tailored advice and investment services with an approach that is based on the trusted relationship of our Financial Advisors and their clients.The Asset Management Group offers investment capabilities and investment styles across traditional and alternative asset classes for private clients, intermediaries and institutional investors, by taking a connected approach, drawing on different viewpoints and philosophies of investment teams to provide clients with the best of our thinking.The Investment Bank Group provides corporate, institutional, and wealth management clients with expert advice, innovative financial solutions, outstanding execution and comprehensive access to the world's capital markets. It offers investment banking and capital markets, research, equities, foreign exchange, precious metals and tailored fixed income services in rates and credit through its two business units, Corporate Client Solutions and Investor Client Services. The Investment Bank is an active participant in capital markets flow activities, including sales, trading and market-making across a range of securities.2.If any part of your organization provides brokerage services, soft-dollar services, directed brokerage, discount brokerage or commission recapture programs (collectively, “brokerage related services”):a.What percentage of your organization’s 2019 revenue was received in soft dollars?See response to the next question.?b.What percentage of your organization’s 2019 revenue was attributable to (or compensation for) brokerage-related services??As it relates?to the UBS Institutional Consulting?business,?no revenue is received in soft dollars or brokerage?related?services.?As?mentioned above,?if a client elects to custody?assets at?UBS,?trades made through an institutional?account will be executed at zero commission as agent.3.Does your organization offer or sell services or products to investment managers? If so, identify these in detail and name every manager who purchased any such services or products (with hard or soft dollars) over the last two fiscal years. The UBS Institutional Consulting Group and our Consulting Team do not sell information, software, research or any other services to investment managers or other investment firms. Our fees are solely from the provision of Consulting Group services. Outside of the?UBSIC Group, UBS or its affiliates may sell such information to investment managers, mutual funds or alternative investment funds. For firm information, please see our Form ADV including Item 10 Other financial industry activities and affiliations; Item 11B Participation or interests in client transactions. 4.Please confirm that your organization will not accept any commissions or other remuneration from any service providers in exchange for placing business with that organization.Our team and the UBS Institutional Consulting Group will not accept any commission or remuneration from any service providers for anything. The only compensation we receive is from our clients.5.Does your organization solicit or accept fees for placing or helping to place money managers? If so, please explain.No, our fee stated in our consulting contract is the only compensation received by UBS. Any finder's fee that may exist is prohibited.?6.Does your organization charge to include any investment managers in your database or in any search? If so, please explain.Managers are not charged, nor do they pay to be included in our proprietary database. In turn our Institutional Consulting Team cannot and does not accept any compensation from managers to be included in searches.Investment managers in our advisory programs are asked to contribute to our overall training and education costs for Financial Advisors in our advisory programs. Neither contribution towards these educational expenses, nor lack thereof, is considered as a factor in analyzing or determining whether an investment manager should be included or should remain in our advisory programs. These Manager contributions are not disclosed to UBS Institutional Consultants and are not part of their compensation. For additional information on those contributions, please see our Form ADV Disclosure Brochure, Item 11B2 Sources of Compensation from Third Parties; Contributions to Training and Education Expenses. 7.Does your organization have any clients or associations that could present a conflict of interest and possibly compromise the objectivity of its advice to the City of Burlington? If so, please explain.We do not anticipate any such conflicts of interest in serving your accounts. Our UBS Institutional Consulting team is not aware of any business relationships with your Committee members. Unfortunately, due to the size and scope of UBS, we cannot answer on behalf of the entire firm.?8.Does your organization receive any products or services from any investment managers? If so, identify each service and the amount of compensation paid, if any.Our team does not receive any products or services from investment managers. Please refer to our answer in question 6 for organizational level services.?C.Legal Fiduciary Status, Investment Advisory Status and Litigation1.Does your organization consider itself to be a fiduciary in its role as investment advisor? Will your organization contractually agree to accept fiduciary responsibility with respect to its investment advisory services?We will acknowledge in our UBS Institutional Consulting Group Services Agreement to act as a fiduciary for our services to your Plan under the Investment Advisors Act. In addition, we will also acknowledge our fiduciary responsibility under Section 3(21) of ERISA for the “investment advice” that we provide to you or the Plan. These fiduciary acknowledgements are provided by UBS Financial Services Inc., a leading financial services firm with a 45-year heritage and a strongly capitalized balance sheet. 2.Does your organization serve as an independent fiduciary to any client subject to court supervision or a U.S. Department of Labor judgment or decree? If so, please identify them.While the Department of Labor may periodically conduct a plan audit to ensure that the plan is operating in line with applicable rules and regulations, UBS cannot provide the information of clients currently subject to DOL judgment due to privacy reasons.UBS Financial Services adheres to a high level of client confidentiality and privacy. It is the policy of UBS that all information concerning the Firm's clients, former clients and prospective clients must be treated as confidential and must not be disclosed to anyone outside of UBS unless the disclosure is expressly authorized by the client; permitted by law, rule, regulation, or legal process. These same standards will be applied in protecting your privacy.3.Has your organization, or a principal, employee, or agent of your organization, ever been investigated or charged by the SEC, the U.S. Departments of Justice or Labor, the Internal Revenue Service, or any other federal, state or local regulatory agency for any purported or actual violation of applicable law? If yes, please explain and provide date(s) of the violation(s).Marc?Shegoski & David Sears,?the Institutional Consultants responsible for?this relationship have not been?involved in any?client litigation relating to Institutional Consulting services at any time during the previous ten?years.Their regulatory history is available through the FINRA Broker Check at InvestorInformation. Over the last five years, the UBS Institutional and Retirement Plan Consulting Group has not been the subject of any regulatory inquiries. The Retirement Plan Consulting Services Group has not been involved in any litigation or arbitration matter. During the past five years, the Institutional Consulting Program has only be involved in one arbitration concerning a client's investments, which were inherited from their prior consulting relationship.? These investments were not recommended by the UBS Consulting Group or our Consulting Group team. At the firm level, not unlike most securities firms, UBS Financial Services Inc. is and has been a defendant in numerous legal actions relating to its securities and commodities business that allege various violations of federal and state securities laws including allegations of fraud, misrepresentation and/or breach of fiduciary duty which have resulted in civil or monetary liability being assessed against UBS Financial Services and/or its employees. Our parent, UBS AG ("UBS"), is a public company (UBS ADRs are listed on the NYSE) and regularly reports to the Securities and Exchange Commission ("SEC") and the NYSE regarding material litigation, including administrative proceedings. These reports are publicly available and include information about UBS Financial Services matters. As part of the securities industry registration and licensing process, UBS Financial Services is required to disclose certain arbitration awards, disciplinary, financial and regulatory events to FINRA. Information about UBS's complaints and litigations matters is available on FINRA's BrokerCheck website (). This information includes the disclosures the Firm is required to report on its Form BD filings with the SEC. 4.Over the past five years, has your organization or any principal, employee or agent been named or threatened to be named as a party in any private or governmental litigation, arbitration or other dispute resolution proceedings; been a target in any governmental or professional investigation; or settled any actual or threatened claim? If so, please provide details including a copy of all relevant complaints and communications, a list of all parties, and the results or status of such proceedings(s), investigation(s) or settlement(s). All fillings, or otherwise, must be disclosed.See the previous response.D.Insurance1.Does your organization carry a fidelity bond and/or fiduciary liability, professional liability or any other insurance that would be beneficial to the Plan? If so, please describe the insurer, the type of insurance coverage, the beneficiary of such coverage, the limits of such coverage and the deductible amount under such coverage. Please also attach a copy of each such policy or an applicable certificate of insurance.UBS AG has primary insurance through Zurich Insurance Company for global liability and global property insurance. Workers compensation insurer is Sentry Insurance. The Zurich Insurance Company holds strong financial strength ratings from the major ratings agencies: S&P: AA-/stable; A.M. Best: A+/ stable (09/19).Errors and Omissions Coverage/Fidelity LiabilityUBS has Errors and Omissions insurance through National Union Fire Insurance Company which protects the firm against wrongful acts in the rendering or failure to render professional services, including services as a fiduciary and an ERISA fiduciary. The annual aggregate limit of liability is $25 million. National Union Fire Insurance Company which has a financial strength rating by A.M. Best: A/stable (07/19). Fidelity Bond/ Employee DishonestyUBS maintains a fidelity bond with National Union Fire Insurance Company and?is available for loss to the firm due to employee dishonesty, theft, destruction, or other perils.? The?limit of liability?is $25 million. UBS maintains an ERISA bond coverage for ERISA qualified plans for up to $1 million. National Union Fire Insurance Company which has a financial strength rating by A.M. Best: A/stable (07/19). Cyber LiabilityUBS has Cyber Risk insurance through AIG Europe AG which covers the costs associated with a security breach, a system breach or a breach of data protection obligations in the amount of $25,000,000.Account ProtectionUBS Financial Services Inc. is a member of the Securities Investor Protection Corporation (SIPC). SIPC protects securities customers of its members up to $500,000, including $250,000 for claims of cash. Explanatory brochure available upon request or at UBS Financial Services Inc., and certain affiliates have purchased supplemental protection. The maximum amount payable to all clients collectively under the supplemental policy is $500 million as of December 10, 2018. Subject to the policy conditions and limitations, cash at UBS Financial Services Inc. is further protected up to $1.9 million in the aggregate for all your accounts held in a particular capacity. A full copy of the policy wording is available by asking your Financial Advisor.Neither the SIPC protection nor the supplemental protection apply to:Certain financial assets controlled by (and included in your account value) but held away from UBS Financial Services Inc. For example certain:Insurance products including variable annuities, andShares of mutual funds where shares are registered directly in the name of the account holder on the books and records of the issuer or transfer agent;Investment contracts or investment interests (e.g., limited partnerships and private placements) that are not registered under the Securities Act of 1933;Commodities contracts (such as foreign exchange and precious metal contracts), including futures contracts and commodity option contracts; andDeposit accounts (except certificates of deposit) at UBS Bank USA, UBS AG Stamford branch and banks in the FDIC-Insured Deposit Program.The SIPC protection and the supplemental protection do not apply to these assets even if they otherwise appear on your statements. The SIPC protection and the supplemental protection do not protect against changes in the market value of your investments (whether as a result of market movement, issuer bankruptcy or otherwise).Ask your Financial Advisor for more information about SIPC. To obtain more information, including the SIPC brochure, you may also contact SIPC directly by visiting the SIPC web site at or calling 202-371-8300.2.Is your organization currently aware of any claims that have been made, are being made or may be made with respect to such policies? If so, please describe.Unfortunately, UBS cannot comment on our claims experience. To do so would violate our duty of confidentiality to our insurers.?3.Has your organization ever assisted a client in reducing its fiduciary liability insurance premiums? If so, please explain how, and to what extent your organization has done this (and provide references), and whether and how your organization would assist the Plan in reducing its premiums.UBS Institutional Consulting does not provide services related to liability insurance premiums.?E.Staffing and Facilities1.How is your organization structured to service your accounts?Our team consists of 2 Institutional Consultants, a Wealth Strategy Associate, Team Administrator and Senior Client Service Associate. All members of the team are involved in delivering services to all of our clients. This collaborative framework has led to a positive experience for our clients, one in which they are frequently contacted and can easily speak to someone on our team very quickly.2.How many of your staff are investment consultants?There are two Senior Institutional Consultants: Marc Shegoski and David Sears.?3.What is the average number of accounts handled per investment advisor?The average number of accounts per consultant is 16.?4.Describe the qualifications and expertise of your organization’s professional staff (both local and national), including their years of service and experience in the public pension sector.Working with our Institutional Consulting Team provides access to the global scope and economies of scale?that a global wealth manager such as UBS can?provide.?One advantage of our structure is that you?may?receive the?resources of?a global firm through?a boutique consulting team.Thus,?in addition to our Institutional Consulting team members, many?UBS Financial Services?analysts,?due?diligence officers and investment strategists will provide considerable value to our Team behind the scenes.?In?addition,?we have?access to several manager research groups within UBS Financial Services,?all reviewing?investments that may?be?suitable for your organization.1.Manager Research Group of Wealth Management Solutions Approximately?12 investment research professionals including five Chartered Financial Analysts?(CFA)?with an average of?15 years of financial services experience. 175 years of combined investment experience Proprietary,?multi-step process that utilizes both?quantitative and qualitative analysis of?separate account managers.?Considers both traditional and alternative strategies. Investment research professionals who also research managers that?work?primarily?with large?institutions.UBS has an agreement?with Mercer Investments?to allow?the UBS Manager Research Group access to?Mercer's 9,000 manager research opinions and performance analytics to?augment the group's?existing?investment process capabilities. ?The extensiveness of the manager research opinions UBS now?has?access to?through the Mercer agreement ?means UBS?can both substantially?increase strategies reviewed in our?proprietary?database and?enhance our highest conviction manager recommendations.?It is important to note?that UBS manager research group will still have final say?over all managers.?This supplemental data?is used as?a basis for further analysis by?the UBS manager research team.2.UBS Alternative Investments US A select group of 13 analysts focused exclusively on researching alternative investment?strategies such as: hedge?funds,?diversified?fund-of-funds,?multi-strategy,?relative value,?managed futures,?real estate,?private?equity,?long-short equity,?and other strategies that may?be appropriate for your consideration.3.Asset Allocation Team The Strategic?Asset Allocation for Wealth Management America’s is the responsibility?of?Wealth Management Solutions’?Investment Strategy group. ?In?addition,?the Wealth?Management Americas Investment Committee (WMA IC)?reviews and approves inputs relating to WM Americas' strategic?asset allocations,?as well as?vets Wealth Management Research?Americas’?tactical asset allocation recommendation? WMA IC is responsible for signing off on?any?changes made to?the SAA. The WMA IC?also signs?off on adjustments made to the capital market assumptions underlying?the SAA. The Investment Committee of UBS Wealth Management Americas (WMA?IC)?is made up of?representative from Wealth Management Research,?Wealth Management?Solutions and Private?Wealth Management.The UBS Institutional Consulting Group has been?providing institutional consulting services to public?pension plans?for three decades.?Marc Shegoski was one of the initial consultants in the UBS Institutional Consulting Group and has been servicing public pension funds for over 38 years.5.Please list the name and location of the primary individuals who will be responsible for the City of Burlington’s Plan, and provide detailed biographies of such persons, including their tenure with your organization. How many Plans similar to Burlington’s do these primary individuals service? Please list the number of clients that are assigned to these individuals.Please see our full?biographies?provided?on?previously in this report.?Marc Shegoski?has?been?with?UBS for 26?years,?while?David?Sears?has?been?with?UBS?for?13?years.?The?team services?approximately 14?other plans?similar to?Burlington.6.How many consultants have left your organization during the past two years? Include their reasons for leaving. Please describe the measures your organization takes to assure continuity of service when a team member leaves your organization.During the past two years, three Institutional Consultants were removed from the UBS Institutional Consulting Group. The departure of these consultants occurred when the financial advisors chose to focus on non-institutional clients.The total number of Institutional Consultants in the UBSIC Program over the last three years is detailed below:?2019: 1082018: 1062017: 103?Our Team does?not expect?any?significant changes?to?our team in?the near-term?and?we have a succession plan prepared?in?case changes?were to?develop.?UBS Program Management is?aware of every?client and?the services?that?are being?provided.?In?the event?that?our?team were to?leave?UBS, program management would?assign?a?new?consultant?to?provide services?to?your organization.?The goal?is?to ensure that you would?continue to receive the high?level?of service?and?support?that?you?experience over?the?course of the relationship.7.Please provide a full disclosure of whether any of your organization’s professional staff has ever been suspended or disbarred from performing investment advisory services or other professional services, has been subject to any disciplinary actions, or has committed any criminal offenses evidencing fraud, dishonesty or breach of trust.No member of our team has ever been suspended or disbarred from performing investment advisory services or other professional services, has been subject to any disciplinary actions, or has committed any criminal offenses evidencing fraud, dishonesty or breach of trust.At the firm level, not unlike most securities firms, UBS Financial Services Inc. is and has been a defendant in numerous legal actions relating to its securities and commodities business that allege various violations of federal and state securities laws including allegations of fraud, misrepresentation and/or breach of fiduciary duty which have resulted in civil or monetary liability being assessed against UBS Financial Services and/or its employees. Our parent, UBS AG ("UBS"), is a public company (UBS ADRs are listed on the NYSE) and regularly reports to the Securities and Exchange Commission ("SEC") and the NYSE regarding material litigation, including administrative proceedings. These reports are publicly available and include information about UBS Financial Services matters.8.Please describe the location(s) and capabilities of your organization’s computer/data processing staff. Is the entire staff in-house? Does your organization outsource any of these services? Please describe the security of these resources.UBS Financial Services Inc. internally maintains a dedicated backup Data Center which will be used in the unlikely event that its Primary Data Center becomes in-operable. Data from its Primary Data Center is continuously copied to the backup Data Center utilizing a data mirroring protocol over a proprietary encrypted network.Daily & weekly backups are taken and stored off-site to ensure recoverability in the event of a local need to recover a business application, file, or hardware component. Data retention is specific to the frequency of data change and the requirements of the various business applications for recovery purposes.F.Clients1.Please provide a representative list of your organization’s investment advisory clients of similar size.A representative client list for the UBS Institutional Consulting Program is included as a separate attachment to this email.?2.Please list your organization’s government public Pension system clients and the portfolio size for each.City of Reading, PA – $245MM+City of Norwich, CT – $195MM+City of Columbia, MO – $150MM+ Town of Little Compton, RI – $12MM+ Town of Lincoln, RI - $32MM+Town of Newington, CT – $94MM+ 3.Please complete the following table:Size of Plan Assets# of PlansTotal Pension AssetsUNDER $100M$100M TO $200M$200M TO $300MOVER $300MTOTAL4.Please list the number of clients that have terminated your organization’s services during the past three years, including their reasons for termination.We have had one client terminate our team's services in the past three years and their reason was a desire to have a local advisor.?5.For reference purposes, provide the name, address, telephone number and contact person for four current clients (three must be government public Pension system clients) for whom your organization provides comprehensive investment advisory services.City of Reading, PA – Lilliana Castillo – 610-655-6348815 Washington Street, Reading PA 19601?City of Columbia, MO – Matthew Lue – 573- 874 -7457701 E Broadway, Columbia, MO 65205?Town of Little Compton, RI – Bob Mushen – 401-635-452940 Commons, Little Compton, RI 02837?Town of Newington, CT – Janet Murphy – 860-665-8525131 Cedar St, Newington, CT 06111G.Services1.GeneralPlease indicate which of the services listed below your organization intends to provide to the Plan (Please indicate yes or no):attend or teleconference regularly scheduled Board meetings (generally monthly). In person quarterly meetings at a minimum; Yesadvise the Board during these meetings on the investment impact of plan amendments that may be considered; Yesprovide oversight of all investment aspects of the Board’s operations;?Yesreview and develop an investment policy statement and provide an analysis on the reasonableness of investment assumptions; Yesadvise the Board on the prudence and relative financial impact of various investments; Yesreview, develop and periodically rebalance asset allocation; Yesrecommend hiring, retention and termination of investment managers, mutual funds and other investment products; Yesprepare and present quarterly performance evaluations, including a review and report of all investment transactions by all investment managers in a five year investment performance history of the Plan (if source date is available); Yesreview and comment upon investment management agreements prepared by the Plan’s counsel; Yes, when applicabledevelop and monitor adherence to individualized investment guidelines, risk controls, proxy voting and adherence to proxy voting policies; No, we do not vote proxies, but rather allow the investment managers to vote proxies.monitor custody bank and assist in retention and replacement, as appropriate; UBS can serve as custodian. Should you choose to custody plan assets elsewhere UBS cannot actively monitor your custody bank.supervise, monitor and verify transfer of assets in the event of change of investment manager; Yesprovide assistance required by audits or examinations conducted by governmental agencies; Yesn.assist in reducing fiduciary liability insurance premiums and address special investment and other issues as they arise.While we cannot provide this service, we can assist by coordinating and acting as a liaison between any parties that may be assisting you with this service.?2.Investment Policy Development & Portfolio Designa.Describe briefly the processes and tools your organization uses to help clients develop investment policies and objectives.Investment Policy StatementHelping clients develop a comprehensive investment policy statement is one of the four key services we provide as a fiduciary under our Institutional Consulting Services Agreement. An investment policy statement specifies investment goals and objectives, and details the acceptable investment vehicles that may be used to get there. The result of our intensive process will be an investment policy that more closely aligns the assets of your organization with the risk tolerance and investment objectives of your organization.The investment policy is intended to be a blueprint for current and future committee members. It should offer guidance for the selection, monitoring and replacement of investments. We have customized a wide variety of policy statements over the years, ranging from broad overview statements to highly detailed documents. We believe that adhering to an appropriate documented process and reviewing the policy annually are critical components of fulfilling a trustee’s fiduciary responsibility.We will work with your committee to understand your organization’s time horizon, liquidity needs and risk tolerance. The investment policy statement should address, at minimum, the following elements:o Investment objectiveso Asset allocation parameterso Investment manager selection and evaluation criteriao Expected returns o Benchmarks for performance evaluationo Acceptable risk levelso Allowable and prohibited investmentsWe will help you establish return objectives using our proprietary UBS capital market assumptions and the organization's risk tolerance. In addition, we have the tools and research to assist in understanding the risk/return tradeoff of pursuing active management strategies versus passive strategies.Your investment policy statement will establish guidelines that investment managers must follow and by which they will be assessed. The continued use of a manager will be scrutinized if any of the criteria are not being met. We typically recommend a replacement manager after several quarters of underperformance.Your Plan's funding level and anticipated future contributions are critical to determining investment objectives. From low funding levels (where the primary objective is to achieve full funding) to overfunded status (where the focus is almost exclusively on managing funded level volatility), the Investment Policy Statement may require adjustment as the objectives change.By their definition, ongoing plans with new entrants and unlimited time horizons require careful consideration of liabilities that may fluctuate significantly from year to year. As new liability streams are produced with each actuarial valuation, that year's contributions and existing assets are realigned with the liability stream. Accordingly, investment policy may need to include multiple objectives for various portions of the Plan.b.How does your organization identify and understand the Plan’s financial and investment objectives?We believe the first?and most important step in a?consulting relationship is?to facilitate the development or?review?of?your investment policy,?guidelines,?and objectives. This is the best way to initially understand the Plan's financial and investment objectives.c.In addition, comment on your organization’s process for recommending modifications to investment guidelines.We look to?review?the investment policy?statement annually.?Even?if no?changes?are made,?the exercise of?reviewing?the policy is?helpful?for?Committee members?and?usually?facilitates?proactive discussions?about?the objectives?of?the plan.?Additionally, we seek to?create?a policy?that?is?practical.?Usually,?we?are?able?to?suggest modifications?that will?enhance the policy?to?match?the current investment environment.d.Describe your firm’s philosophy and approach to using alternative investments, including:1)How you differentiate between traditional and alternative investments.Alternative Investments strategies may?include: Hedge Funds and Hedge Fund-of Funds (for example diversified fund-of-funds,?multi-strategy,?relative?value,?event?driven, equity long/short,?directional/tactical, global macro,?managed futures,?structured products);?Real Estate?and Private?Equity; Commodities and Exchange Funds.2)Explain why you would use alternatives, i.e., risk reduction, alpha, non- correlated assets, etc.? Why would you not use them?Inclusion of alternative investments may further diversify?overall portfolio risk and sources of return over the?long term.?By?combining?alternative strategies with traditional assets,?eligible and qualified investors have an?opportunity?to?create?more efficient portfolios. ?However, we?recognize that alternative investing is not?appropriate for every?investor due to?a variety?of?special characteristics, namely a highly?illiquid nature, varying?levels complexity?and?a general lack?of transparency (especially?with hedge funds, private equity?and venture?capital). ?Alternative?investments are speculative in nature. ?While some of?our clients have elected?to include?alternative investments in their investment program,?other clients have?decided not to include alternatives.3)Alternative investments you currently utilize.Most of our clients that have elected to invest in alternative investments have done so in private real estate, equity long/short hedge funds, or diversified fund of funds.4)Typical percentage of alternative investments, including hedge funds.Although it does vary, the typical percentage of alternative investments is around 10% of the portfolio.5)Delivery structure(s) in use (i.e., mutual funds, ETFs, separate accounts, CITs, limited partnerships, MLPs, etc.)If a client elects to use alternative investments, our team prefers limited partnerships or private placements as the delivery structure.??e.Describe your philosophy and approach to using factor weighted (Smart Beta) funds?We believe in?evaluating?all?investment opportunities?for their?merits, and?evaluating?whether they service a place in?our client's?portfolios.?As?it relates?to?smart beta funds,?we?do?see their place in certain portfolios. We recognize that market-cap?weighted?indexes,?while having low cost and provide broad?market exposure, may not provide the specific?investment profile we seek. Factor weighted?indexes?can?be used to maintain?that?same broad,?low?cost exposure,?but in?a more deliberate way based on certain factors that may be in-line?with?a client's?objectives.f.Describe your firm’s philosophy and approach to development of asset allocation strategies, including:The UBS investment process is designed to achieve replicable,?high-quality?results through applying intellectual rigor,?strong process governance,?clear responsibility,?and a culture of challenge.1)Methodology and approach used for asset allocation modeling, including linkage to asset/liability modeling and funding.Our ApproachOur team will conduct an interview to understand your organization’s investment objectives, projected cash flow needs, time horizon and tolerance for risk.The process used to develop your organization’s proposed asset allocation combines the science of optimization and statistical modeling with the art of capital markets experience and professional judgment.The optimization process uses UBS capital market assumptions for the expected return, risk and correlations among the various asset classes. We also apply a qualitative overlay, or set of constraints, based on investment judgment.Ultimately, your recommended Strategic Asset Allocation will be tailored to your organization’s needs and will reflect:Our firm’s research on the future risk and return potential of each asset categoryEquity and fixed income allocations that are segmented into subclasses and investment stylesCombinations of managers that complement each other within and across asset classesIf appropriate, allocations to alternative assets (such as hedge funds, private equity, managed futures and commodities) will be included or carved out of the broad asset class allocation, based on your organization’s risk tolerance and level of comfort with these more complex investments.MethodologyOur process leverages the expertise of investment experts from around the globe, covering all key markets and asset classes. This integrated and systematic process, which combines input from both UBS and external investment experts, forms the foundation of our Investment House View.Constructing internally consistent capital market assumptions (CMAs) enables us to bring together many of the risk and return parameters of each asset class used in your asset allocation to estimate the overallestimated return and volatility of any given investment portfolio. The CMAs consist of two key elements: 1) the covariance matrix (volatility and correlations) and 2) the estimated risk/return premiums.The covariance matrix consists of estimates of volatilities and correlations for each asset class, and describes the average behavior of assets over different market cycles. The estimated returns for each asset class are based on a combination of the implied returns and adjustments based on return estimations developed by the respective asset class specialists in the Chief Investment Office (CIO).Based on the analyses and assessments conducted and vetted throughout the investment process, the Chief Investment Officer (CIO) formulates the UBS Wealth Management Investment House View (e.g., overweight, neutral, underweight stances for asset classes and market segments relative to their benchmark allocation) at the Global Investment committee (GIC). Senior investment professionals from across UBS, complemented by selected external experts, debate and rigorously challenge the investment strategy to ensure consistency and risk control.We recognize that a globally derived house view is most effective when complemented by local perspective and application. As such, UBS has formed a Wealth Management Americas Asset Allocation Committee (WMA AAC). WMA AAC is responsible for the development and monitoring of UBS WMA’s strategic asset allocation models and capital market assumptions. The WMA AAC sets parameters for the CIO Americas, WM Investment Strategy Group to follow during the translation process of the GIC’s House Views and the incorporation of US-specific asset class views into the US-specific tactical asset allocation models.2)Application of major variables (i.e., risk tolerance, return, correlation, skewness, kurtosis, etc.).The process begins with?mean-variance optimization of a set of capital market assumptions to define the “efficient frontier”?of mixes of broad asset classes.?The “efficient frontier”?refers to a statistical and visual representation of the various blends of these asset classes that provide the highest overall expected return for?each given level of expected risk and the estimated correlations between the various asset classes.?For the?optimization process to?be effective,?the asset?classes on which the optimization is done must be distinct and?different; therefore, we?define the broad asset classes as?U.S.?equity, U.S.?fixed income,?non-U.S.?equity,?non-U.S.? fixed income and cash.?The optimization process uses a proprietary?set of capital market?assumptions,?which includes the expected return,?risk and correlations of the different asset classes.?These capital market?assumption inputs are a?critical element of the optimization process,?as they?influence the investor’s exposure?to specific asset classes.?Since the optimization process is purely quantitative, we then apply?a?qualitative?overlay (or set?of constraints)?based on investment judgment to?arrive?at our recommended allocations.3)How frequently and under what circumstances do you believe asset allocation should be changed??Periodically?the plan may?need to address an asset rebalancing to adjust asset allocations to comply with strategic levels indicated in your investment policy?statement. Systematic?portfolio rebalancing augments asset allocation by?keeping the portfolio from drifting too far off the mark.?Together,?asset allocation and rebalancing help you establish and adhere to?a long-term investment strategy and avoid “style drift”. There are many forms of?rebalancing strategies with?varying degrees of complexity,?featuring variations in how frequently to rebalance (calendar vs. contingent)?and how?far to?rebalance (absolute target,?target band, etc.). Each strategy has its merits,?and determining which strategy is better for you would?require an in-depth review?of the?plan and its needs.4)Does your firm employ a tactical allocation strategy? If yes, describe the parameters and the decision making process.We believe that, from time to?time,?the market?presents opportunities to?either generate expected additional returns or decrease the risk in a portfolio.?When we identify?such opportunities,?we may recommend taking?advantage of them through tactical allocation changes.?Alternately,?you?may?ask us to make?recommendations about?short-term shifts in?marginal weights across your?portfolio.Our affiliation with a global diversified?financial services firm,?along with the depth and breadth of resources available to us,?enables us?to provide tactical recommendations backed by?thoughtful thematic research.?CIO?Americas, Wealth Management Research (WMR) provides guidance and monthly?research to help you with?tactical asset allocation recommendations.?The research relies on a thorough analysis of factors such as: market valuations, current market?conditions, economic trends, company?earnings and credit fundamentals.The recommendations are developed by?a team?of investment strategists who draw?on the work?of our?economics team?and our sector analysts.?Tactical?asset allocations that appear in the WMR publication?Investment Strategy Guide?are vetted by?the Wealth Management Americas Investment Committee.5)Does your firm use alternative asset allocation methodology beyond Markowitz? Please explain.It is common within the financial industry?to determine CMAs through the lens of equilibrium.?In equilibrium, as it relates?to traditional?capital market?assumptions,?riskier assets require proportionally larger expected?returns than safe assets to incentivize?investors to hold them.?Although the equilibrium approach provides a?sound starting point,?the traditional model has several limitations,?especially?for global multi-asset class?portfolios.?The model also does not consider that asset classes evolve quickly?or are relatively?immature.To address the limitations of the traditional “equilibrium” model,?UBS has developed a modified methodology for determining CMAs,?while retaining the benefits and addressing the limitations of the traditional?approach.?First,?UBS employs a simulation process called “bootstrapping” for the global market cap portion of proposed?investment portfolios.?Bootstrapping simulates thousands of sample outcomes based on historical data,?and?then averages those outcomes?to determine the?optimal mix of asset allocations for a given level?of risk.?Next,?an analytic technique known as the Black-Litterman model is applied,?which overlays UBS’s long-term market?perspectives onto the relative returns that were calculated in?the bootstrapping analysis.?These forward-?looking market views include UBS estimates for interest rates, inflation,?the equity?risk premium,?and the relative outperformance?of certain?asset classes.?The Black-Litterman model can also be used to adjust return?expectations for asset classes that are increasing in importance but have had limited?or evolving?history.Up?to this point,?we have described a framework?for estimating relative returns among different asset classes?without describing a methodology?for estimating?total return?expectations.?To do that, we take two?additional steps.?First,?all of the relative?returns are scaled based on our expected return differential between?stocks and cash.?This differential estimate is called the equity?risk premium (ERP). Second, after scaling the?asset class returns to?reflect?the ERP, we?create the total return?estimate by?adding our cash return assumption.?The cash return assumption was derived from the average?cash rate over the next seven years?implied by?current financial markets combined with UBS’s view?regarding the direction for cash rates.?We?then add this cash assumption to the excess return assumption to calculate the total return estimate for each?asset class.?As?a result,?any?change in either the risk- free rate?of return or?risk premium will impact the?forward-looking return estimate.A critical ingredient in developing our CMAs is the firm’s proprietary,?forward-looking research views. These forecasts on economic and?market factors flow from our outlook for changes in key?structural drivers that are?likely?to shape the global?landscape in the foreseeable future.?An essential backdrop behind our assumptions is the Great Deleveraging outlook that UBS expects to persist for a number of years.?Fiscal austerity,?quantitative easing,?population aging and financial instability,?in our view, will all have a profound impact on?financial markets. Overall,?in such an environment,?UBS expects continued elevated levels of policy uncertainty?along with choppy?and?volatile market conditions.6)Does your firm utilize liability driven methodology? Please explain.While our asset allocation model allows us to analyze the anticipated effects of plan inflows and outflows, our model does not explicitly forecast actuarial liabilities. We will work with the Plan’s actuary in understanding the salary growth, mortality, and benefit assumptions used to calculate the Plan’s future obligation. If the?Plan had a significant benefit under-funding or a non-uniform liability term structure, you may need to conduct an asset/liability study that would more closely match the Plan’s current assets with its unique liability term structure. We can be of assistance if you choose to have this type of analysis prepared. Our Team can work with you in developing an asset allocation in line with the actuarial return.Our team will work with you to determine which assets can be used to hedge long-term liabilities. This practice, known as Liability Driven Investing (LDI), seeks to create a hedge portfolio. The goal is to immunize future expected cash flows (liabilities) with the principal and income from long-duration fixed income assets.This practice includes an approved LDI investment manager conducting an asset liability analysis. Our team will work with you to develop an asset allocation that aligns with the actuarial return and incorporates your expected contributions, withdrawals and liabilities. Together, we will create a strategic asset allocation designed to reduce the risks associated with the unique objectives of your organization's pension plan.3.Manager Selectiona.Briefly describe the process and methodology of choosing an investment manager and fund from initial screening through the development of your recommendation.UBS Investment Management Research (IMR), the group responsible for evaluating managers since 1978, is a dedicated team of analysts that construct and maintain the UBS proprietary manager selection database. IMR uses a proprietary, multi-step due diligence process that utilizes both quantitative and qualitative analysis. It is a carefully crafted and disciplined process that is focused on selecting the best managers to fulfill certain mandates.?Our proprietary researched database currently contains over 520 individual investment strategies from approximately 215 investment managers. In order to get approved for inclusion in our database, our manager research group will interview each manager, collect the qualitative and quantitative data, and present it to our internal Manager Due Diligence Committee. The Committee will then give a rating of Select (Highly Recommended), Recommended or Not Recommended. The managers that are eligible for our team to recommend must have ratings of either Select (Highly Recommended) or Recommended. In addition, to continue to be included in the database, these investment managers are subjected to rigorous on-going due diligence conducted by IMR. IMR will schedule meetings and visits as appropriate to investigate significant developments. Follow up meetings and/or telephone interviews take place on an ongoing basis with these firms and we require questionnaires be completed by the managers. Over the past few years, this group has averaged over 750 meetings per year.IMR also works hand in hand with our team to identify and review new manager strategies for submission and for potential inclusion in our firm's proprietary manager database.Of the approximately 1,700 managers and mutual funds who have been approved for the firm's proprietary database, there are roughly 150 separately managed account managers and mutual funds that the group believes are well positioned for alpha generating potential and are included on a Select List. To make the Select List, managers and funds go through a rigorous process which attempts to access whether each manager possesses a distinct advantage that will increase likelihood of outperformance relative to its peers over a five-year time horizon. Our team utilizes the Select designated strategies as an additional resource for recommending high-conviction managers and funds.b.Indicate the source of information for investment manager candidates, CITs, funds, ETFs, etc.Since 1978, UBS Investment Management Research (IMR) has been committed to identifying high-quality investment management firms to build and manage the accounts in our managed programs. The group uses a proprietary process that includes both quantitative and qualitative analysis to select the best managers to fulfill each mandate. To be selected for our proprietary database, each manager must pass certain due diligence standards, and must continue to meet these criteria over time in order to remain in good standing.Approximately 1,700 managers, offering over 7,000 investment products, meet the basic requirements for inclusion in our search process. Through each step of the selection process, we narrow this universe, with the hurdles becoming progressively more demanding. These high standards help separate those top-tier managers from the rest, as only very few manager candidates make it through the entire selection process.Manager search and selection processIdentify candidates: The process begins with a preliminary selection of managers who specialize in the asset class or investment style being sought. The search is augmented with manager databases and the group's network of contacts.Collect and analyze information: The group analyzes a detailed questionnaire that covers all aspects of the manager's investment philosophy, process and research capabilities. A performance attribution analysis identifies and breaks down the sources of historical performance.Understand the investment philosophy and process: The group conducts meetings with key members of the manager’s organization in order to gain a thorough understanding of the philosophy, process and track record.Verify and build conviction: If the group is satisfied with the outcome, they convene an in- depth due diligence meeting in an effort to expose any structural weaknesses or procedures that are inconsistent with the manager's stated goals.Discussion and decision: A final analysis and recommendation is presented to the Investment Management Research Committee, which includes senior members of both the Investment Management Research and Investment Management. This part of the process requires an appreciation and awareness of the intangible and qualitative factors that help distinguish a manager as a leader. The committee determines the final evaluation and rating for each manager candidate.c.Does your organization conduct on-site due diligence meetings? Please explain. How often do you visit with managers or representatives of the funds used in your portfolios??All of the managers on the firm's researched list, reflecting completed due diligence and approval for recommendation to clients,?had in person interviews with UBS Manager Research professionals.?At present there are over?600?individual investment manager?strategies from approximately?300?managers on the firm's researched list.?Follow?up meetings and/or telephone interviews take place on an ongoing basis?with these firms.?We?require questionnaires be completed by?the managers. ?Money managers are monitored?on a quarterly?basis and do not have a formal staff visit calendar. ?If?we have a?concern, we?will schedule a meeting by?phone or onsite with the money?manager. ?For an on-site review, our goal is to understand more than just?how?an investment manager has?performed in the past.?We?focus on whether that manager has the qualities,?capabilities?and expertise?to potentially?perform well in the future using both quantitative and qualitative criteria.d.Does your organization classify equity managers and funds by style? If yes, please indicate the style categories your organization uses and what process it uses to determine the manager’s/fund’s style?Manager Research evaluates managers across Equity, Fixed Income and Satellite style buckets.Within the Equity asset class, strategies are categorized between two spectra: Capitalization (Large, All-Cap, Mid, Smid, Small) and Style (Aggressive/Traditional/Conservative/Core Growth, Core, Core/Relative/Traditional/Deep Value). International, Emerging Markets and Income (Dividend) categories are also present.Within Fixed Income, strategies are categorized across the Duration spectrum. Additional styles are High Yield, International, Global, Emerging Markets and Municipal (including state-specific). Other categories include Balanced, Commodities, Convertibles, Domestic REITs, Global Real Estate and Preferred Securitiese.How does your organization verify the validity of limited partnership and separate account managers’ performance records?Evaluating each manager's performance record is a critical?component of our due diligence process. As?we?consider a strategy,?we?will seek to determine?whether the presented performance record is a fair reflection?of the strategy in place today.?We?also judge whether the performance captures any changes in the process?or investment personnel?that may?have been a?key?to the strategy's history.?In addition, we closely examine?the manager's responses?to the performance section of our questionnaire.The questions we consider at this point in the process include,?but are not limited?to:1. Has the manager?claimed to abide by?industry?standards for preparing?and presenting performance data?(i.e.?the?CFA Institute's GIPS standards)?2. Has the manager's?claim been verified by?an external auditor,?and has a copy?of the?auditor's report been?supplied?3. Over time,?how?many investors have been in the strategy and?what?has been the amount of variation in the?performance realized by individual client accounts?4. Has the manager ever?restated performance results?At this stage,?we?may also compare related?investments,?for example?mutual funds and separate accounts managed in the same strategy.?Clarification and additional information,?if required,?would be obtained through interviews with?personnel responsible for generating the performance data at?the investment?manager.f.What is your position relative to active and passive investing?We will advise?you on the use of both active and?passive equity?strategies,?and?work with?you to help determine the appropriate blend for your organization’s?goals and objectives.?Each style has certain benefits. Passive index?investments tend to have lower fees,?while active?managers?may?be more?effective at controlling?risk during negative markets. We?measure the effectiveness of these strategies by?their upside or?downside?capture ratios over multiple time periods.?While the merits of indexing are compelling, the decision?to index?should not be made solely?based on short-term market performance?or cost.Creating an investment portfolio with active?management involves identifying strong active managers. The firm’s Manager Research?Group focuses on finding those strong managers.?A key?role of the?Group?is to understand the emotional side of investing and to identify?managers who possess the traits?we believe are necessary to?keep their emotions in check.?Although economic theory holds that markets are efficient, behavioral finance suggests that inefficiencies may?exist. The Investment?Manager Research group seeks those active managers?who,?through their processes,?experience and skill,?can benefit from weaker managers’ behavioral mistakes.g.Do you use multiple funds or managers for larger sleeves such as Large Growth, Core or Value?In general, we seek to implement your asset allocation strategy by choosing managers who complement each?other within each asset class and style.?The?goals are to minimize correlation among holdings and?to achieve?exposure to different investment approaches.?For?example,?each of our recommended managers for the large-cap equity?portion?of a portfolio?might pursue alpha in different ways,?such as:fundamental,quantitative,top-down,bottom-up,earnings momentum-driven,high beta-oriented,quality?bias,quantitative,?or other approaches.Of course,?we?only?recommend managers who have been approved through our firm’s rigorous?due diligence process.?And?our recommendations will be tailored?to?each client’s goals?and objectives. Depending on the?asset sleeve,?we?may elect to use multiple complimentary?managers.h.For portfolios of a similar size as the City of Burlington’s pension plan, what types of investment vehicles (as shown below) would you use, and what percentage:1)CITs - 0%2)Mutual Funds - 15%3)ETFs - 0%4)Individual bonds - 0%5)Individual stocks - 0%6)Limited Partnerships - 10%7)Separately Managed Accounts (SMA) - 75%8)Other (explain) - 0%Please note, the above sample is provided for informational purposes only and is not intended to be a recommendation of the investment vehicles identified nor a solicitation for the purchase or sale of any securities. Past performance is no guarantee of future results.??4.Performance Measurement and Evaluationa.Describe your organization’s approach to monitoring and evaluating portfolio performance, risk, investment style and individual investment managers for your clients. Please discuss how you benchmark the managers or funds.While we provide quarterly?performance results?for our?clients,?we?are reviewing?returns?for managers on a monthly basis.?While?we recognize active managers?will?deviate from the?benchmark, we?are seeking to understand the reasons?for any?underperformance,?and?determine if it is?consistent?with?what?we?would expect from?their specific?style or philosophy.Along?those lines, we?are also?consistently?evaluating?investment style.?One advantage of custodying assets at UBS?is?our ability?to?run?daily?style analysis?reports based?on?the underlying holdings. Each respective manager will?have a designated?benchmark they deem?appropriate.?Usually, these?are?the benchmarks we will utilize?unless?there is?a?compelling?reason?to?have a secondary?benchmark for reference. We also create a policy?index with?is?tied?to?the long?term strategic asset?allocation?in?the investment policy, as well as a?custom?composite benchmark which?represents?a dynamic?allocation?of the?current managers.Our team provides?regular evaluations?of your organization’s?portfolio?including: Change?in?value?of the assets,?including?any?additions?or?withdrawals Industry standard?time-weighted?rates?of?return Risk-adjusted?return?analysis Detailed?investment performance analysis Objective comparisons?to?appropriate benchmarks,?peers,?inflation?and?stated?goals Market cycle comparisons Performance attribution?analysis?for separately?managed?accountsWe?go?beyond?the returns?to?analyze and?interpret the?composition?of those results. Based on the performance of?your investments?and?your progress?toward?your goals, we?can?make recommendations about whether to?adjust the focus?and?types?of investments?held?in?your portfolio We will consider whether any?changes?in?your organization’s?structure or mission?may affect the?composition?of?your portfolio.You?have access?to?the firm’s?global?and?domestic economic outlook in?order to?help?your Committee stay current with?broad?trends.?Your Institutional?Consultant is?available for ongoing education that can equip your organization?to?make more informed?decisions.?In?addition,?our team can?serve?as?a facilitator to enhance the?exchange of information?between?your organization?and?other professionals associated with your portfolio,?such?as?auditors,?actuaries?and?investment?managers.For?an?overall?evaluation,?we?would?review?the overall?portfolio?performance?versus?the policy benchmark. Then our team reviews?each?manager’s?performance?against?the specific benchmark for each?manager as specified?in?the Investment Policy?Statement.?We?will?also?evaluate?manager performance within?the context of the market?cycle?and?peer performance.b.How often does your firm review an investment manager’s performance?The Manager Research Group produces a Strategy?Profile that outlines the strategy investment objective, investment process and performance history,?among other statistical information on the strategy. Currently, the Manager Research Group prepares evaluation?updates each quarter,?as part of the Strategy Profiles after?new?performance data become available,?analyzing a manager’s sources?of return in the most recent calendar?quarter and comparing those results to?longer-term results.?The Strategy?Profile performance reviews focus on?performance and portfolio attribution.?The reports highlight the major positive and negative factors?impacting?the short and long-term?performance of the strategy.c.Explain what would cause you to recommend a manager or fund to be terminated? Also explain what would cause you to place a fund or manager on Watch?The process begins with?a review of your investment policy?statement which will establish guidelines for investment managers to follow.?We?would question the continued use of?a manager if any?of?those criteria were not being met,?or for any?of the following reasons: Consistent underperformance over?the long term compared to the appropriate market?index?and/or peer group; Significant changes in the organization,?such as?key?personnel or ownership,?that may have a?negative impact on potential performance; A drift in the manager’s established investment process; The manager fails to meet your long-term objectives; or To enact any changes you make in your asset allocation.We encourage you to?not dismiss a manager based solely?on short-term underperformance.If a manager is underperforming,?we will seek to?uncover the factors?contributing to the underperformance and evaluate them in the?context of overall market conditions.?If we find that the manager could potentially?continue to hinder long-term performance, we?will conduct a fund manager search to identify?potential?replacements.d.Briefly describe your organization’s reporting system and the components of your performance reports. Please explain the extent to which these performance reports can be customized to meet a particular client’s needs.Our team will review?and evaluate your organization's performance through the lens of your organization's goals as defined in your Investment Policy?Statement as well as through the perspective of a?Capital Markets?Overview that will put manager performance into perspective with the overall markets. Your customized?performance report is one of our primary?tools used for evaluation.Our UBS Institutional Consulting team adds value to our quarterly?performance reviews by customizing our reports to the needs and?concerns of your organization.?We generally?start each meeting with a Capital Markets Overview that?can help put the performance of each?manager in perspective. We believe this perspective is critical to?making informed long-term assessments and decisions.We present performance?in a variety?of dimensions,?including the return relative to the level of?risk.?The rate of return is calculated with an industry?standard time-weighted,?geometrically?linked approach.?The risk measure is derived from?calculating the variance?of returns,?and is typically?depicted as the standard deviation of returns.?Additional risk measures may?include?portfolio beta,?R-squared,?Sharpe ratio?and up-market/down- market analyses.To derive this information,?we use published?return and risk calculations on the various benchmarks, as well as those available through our performance measurement system.?Our team will analyze?factors such as?timing,?security?selection,?sector?weighting and style to determine the?contribution of each one to investment return.Our performance evaluation reports generally?include the following elements,?which we?believe are essential?for understanding an investment program and its?progress over time: Summary?of assets at?the beginning and end of the?period,?including any?additions or?withdrawals; Industry?standard time-weighted rates of return; Risk-adjusted return analysis; Detailed investment performance analysis; Objective comparisons to appropriate indices,?inflation and stated goals; Appropriate universes of similarly managed funds; Market cycle?comparisons;?and Performance attribution analysis.e.Describe the types of analysis and investment performance comparisons included in a typical performance evaluation report. To what extent does your organization provide analysis of year-to-year changes? How does your organization monitor and report performance data that is typically delayed, i.e., LPs. Are there any performance adjustments that you use to compensation.Find a sample performance report in the appendix of our response. To the extent that the data is available, we can provide a historical view of the asset allocation over time. This will also show the growth of the portfolio based off of realized return compared to a custom benchmark.Our performance reports are available by the 7th business day after a quarter ends. For LPs that do not have their statements available by that time, we carry the previous market value forward. Upon availability of the LP's statement, we will regenerate the performance report.What is your organization’s typical turnaround time for the preparation of such analysis?See the response to the previous inquiry.?f.Are rates of return routinely presented on a net of fee basis?Yes, rates of return are net of fees.?g.Databases:1)Please describe the databases your firm uses?UBSIC draws from a?proprietary?research database that contains more than 520 individual investment strategies from approximately?215?investment managers.?The database includes the full spectrum of asset classes,?investment styles,?strategic?approaches and product types,?including:Domestic and international equity?in all capitalizations and stylesDomestic and international fixed income in all sectors,?durations and creditsAlternative investments including hedge funds,?private?equity?funds,?real?estate,?managed?futures and commoditiesFundamental, quantitative and passive strategiesSeparately?managed accounts,?exchange-traded funds and mutual fund strategiesThe investment strategies in our database are under continual due diligence.?Meanwhile,?new?strategies are?added and underperforming strategies are removed on an ongoing basis.2)Is the database proprietary to your firm or purchased?The database is proprietary.?3)If purchased, how many do you use and for what purposes?N/A4)How many investment managers are in your database(s)?The strategies in our proprietary?Investment Management Research database?currently include: 275 domestic equity?and?balanced strategies 170 domestic fixed income strategies 70 global and international equity?and balanced strategies105 alternative strategies (including hedge funds,?private?equity?funds,?real estate,?managed?futures and commodities) 1,000 ETFs 3,450 mutual fund strategies5)If you maintain your own proprietary database, how does your firm gather, verify and analyze the data collected on managers for the database(s)? Include name of any external sources.To be included in our proprietary?database,?managers must satisfy?stringent requirements and are subject to?ongoing due diligence review.?Investment?Management Research evaluates over 520 manager strategies and?meets with approximately?200 different managers?each year. We add approximately?40 to 50 managers to?the database and remove approximately?20 managers from the database?annually.?In 2017 (as of 8/31),?2016,?and 2015,?Investment Management Research completed more than 690, 912, and 701 meetings,?respectively, with portfolio managers and analysts at investment firms. Unfortunately, due to confidentiality?concerns,?we?cannot disclose the managers we?meet.6)Describe your screening process and capabilities.Our goal is to understand more than just how?an?investment manager has performed in the past.?We focus on whether that manager has the qualities,?capabilities?and expertise to potentially?perform well in the future. Our research does not stop there,?however. Once?selected,?each manager?must continue to?meet our rigorous?evaluation standards to?remain?a part of our researched database.?Our analysis includes both quantitative and?qualitative?factors.The following bullet points highlight the Investment Management Research team's process.?A more in-depth discussion of each step follows if additional details?are needed. Screen asset class for managers Screen based on Quantitative analysis Screen based on Qualitative analysisQuantitative analysisOur guidelines generally?require at least five?years of?performance history?for each strategy being reviewed, or three years if the?portfolio manager managed the exact strategy?elsewhere.?We?also generally?require a fund or separate account composite to have at least $100 million of assets.?The quantitative criteria we consider include:? Organization: The investment management firm?must be financially?and structurally?sound,?and?have the resources to?carry?out its strategy. Personnel: An investment process is only?as good as the people who own it?– as individuals and?as?a team. The manager?must have skilled,?experienced and knowledgeable professionals. Philosophy: The manager must have a?clearly?defined,?disciplined investment philosophy?that is?based on sound investment theory. Process: It is important that a manager's techniques for selecting and selling securities be sound,?consistent and research-intensive. Risk?Management:?Although risk cannot be eliminated,?it can be managed.?We expect?the?manager to have a?system of risk controls as part of its investment process. Quality?of Research:?It?is essential that the manager's research team?have the capacity?and?resources to evaluate and?track the?full universe of investment opportunities defined by?the?investment philosophy. Implementation?and?Style Consistency:?The implementation of a manager's ideas into client?portfolios must be timely?and efficient.?The manager also is expected to adhere to its particular?investment style. Performance:?To give a?complete picture,?a?manager's performance must?be studied in context?and over a sufficiently long period of time.Qualitative analysisWhile quantitative performance screening and monitoring is an important?part of the process,?it represents only?a portion of the criteria we?consider.?Our analysis considers qualitative?traits that include: Experience:?The?markets?are?great?teachers,?but?you?have?to?have?been?a?student?long enough to learn the lessons they?offer. Objectivity:?The?perspective?that?keeps?one?from?being?caught?up?in?the?emotion?of?the?marketplace to see things clearly for?what they are,?and what they?are?not.?This quality?positions a manager to find opportunities in the markets. Independent?Thinking:?The?ability?to?think?differently?from?the?crowd?and?to?act?accordingly.?The goal of independent?thinking is to be able to?proactively?exploit the excess emotions of the?markets. Creativity:?The?foresight?to?find?a?solution?before?anyone?else?sees?it.?Creative?managers?are constantly looking forward and challenging the status quo. Patience:?The?manager's?ability?to?wait?for?genuine?opportunities?and?to?resist?the?pressure?to?act when opportunities?do not exist. Discipline:?The?manager's?strict?adherence?to?their?stated?investment?philosophy?and?process, regardless of market conditions.Our key?role is to understand the emotional side?of investing,?and through analysis,?to identify?managers who?possess the traits and experience necessary?to keep their emotions in check.?Those investment managers who?retain?the self-awareness to?overcome?human limitations during the decision-making process are more likely?to achieve successful investment performance.7)How many managers are actively monitored?Investment Management Research evaluates over 600 manager strategies.5.Risk Controla.Does your organization assist clients in developing individualized, written investment manager guidelines? If so, attach a sample of such guidelines for a domestic equity manager and for a domestic fixed income manager.Typically, we will provide a?manager the section of the broad investment policy?statement that applies to their?portfolio.?In the event a?manager has more specific guidelines,?we?will draft individualized direction, however?their guidelines are usually?covered?within the broad policy.?b.Please explain how your organization measures and analyzes relevant financial characteristics regarding each manager’s account and funds, and the entire fund portfolio in order to detect and control risk. The process begins with a review of your investment policy statement which will establish guidelines for investment managers to follow. We would question the continued use of a manager if any of those criteria were not being met, or for any of the following reasons:Consistent underperformance over the long term compared to the appropriate market index and/or peer group;Significant changes in the organization, such as key personnel or ownership, that may have a negative impact on potential performance;A drift in the manager’s established investment process;The manager fails to meet your long-term objectives; orTo enact any changes you make in your asset allocation.We encourage you to not dismiss a manager based solely on short-term underperformance. If a manager is underperforming, we will seek to uncover the factors contributing to the underperformance and evaluate them in the context of overall market conditions. If we find that the manager could potentially continue to hinder long-term performance, we will conduct a fund manager search to identify potential replacements.c.How do you manage for extreme left-tail risk? Do you consider Value at Risk (VaR) or Conditional Value at Risk (CVaR)??We will use Monte Carlo simulations to illustrate a range of outcomes associated with a specific allocation. Once agreed upon with the trustees, we will establish a strategic long term allocation.? To the extent possible, the allocation will include a mix of correlations between asset classes or investment styles to minimize drawdowns.? We believe the funding volatility, and not having a strong understanding of the plan’s liabilities poses a greater risk than extreme tail risk.? If the assumptions being used to fund a pension plan are too aggressive, this poses a greater cumulative risk than a one-off left tail event.d.How do you define risk for a defined benefit plan? How do you help sponsors mitigate that risk??We believe the main risk to a defined benefit plan is longevity risk.? A portfolio can have great performance, and be setup to navigate uncertain investment environments, but if the liability stream is not evaluated and a proper funding plan is put in place, performance will not make up the different.? We understand the constraints public funds may have as it relates to funding, but it is our job to educate the trustees on the many variables that attribute to a plan’s success.e.What do you consider the critical success factors for a de-risking strategy?De-risking defined benefit plans is one of the most important topics to sponsors of these plans. ?The risk that?sponsors are looking to mitigate is twofold;?first plan sponsors want to?be certain?that participants and their?beneficiaries will receive?the benefits they?are entitled?to under the plan and second they?want to manage,?and if possible eliminate,?the risk of additional pension expense so?as?to maintain?those anizations with?closed defined benefit plans that have employees with?significant length of service have to be particularly aware?of this risk given that employees approaching retirement are contemplating their pension benefits as?an essential aspect?of retirement income?planning.Many?clients of UBS Institutional Consulting leverage LDI investment to match expected liabilities?with cash flows. An?LDI?framework for a public?pension plan is an educational process. ?We?have?worked with several municipalities to discuss the?concept of Liability?Driven Investing and how?it may be implemented. ?It is our view that a?full LDI strategy?can only?be implemented in today's low?interest rate?environment for those plans have high funding ratios. ?We?have discussed plans to?de-risk as funding increases (dynamic?asset allocation), with a possible LDI implementation in the future.f.Describe the optimization or risk management techniques used in the portfolio construction process. Detail strategies employed to prevent excessive volatility.Prospectively, our team uses an advanced proprietary portfolio analysis and simulation tool that employs sophisticated simulation techniques to calculate estimates for the future projected growth of a portfolio. We also use robust quantitative analysis tools to quantify past portfolio performance and assess a broad array of key statistics at the manager and portfolio level. These include well-known measures such as standard deviation, Sharpe ratio, R-squared and information ratio. The tool also calculates additional information such as Treynor ratio, Sortino ratio, upside and downside capture and downside deviation, among others. For fixed income securities, we also measure duration, convexity and credit quality. Specific to your investment portfolio, three distinct groups within our firm work to monitor aspects of your portfolio, including the asset allocation and investment restrictions of your IPS: that of your Institutional Consulting team, the branch Supervisory team, and the Institutional Consulting Program Management team. Our consulting team will evaluate and execute potential adjustments and conduct searches for new investments in your portfolio in line with your IPS. In addition, we will review portfolio performance against your IPS objectives with you on a quarterly basis.g.How does your approach differ for plans that are closed versus active?Cash flow will be an important factor in determining an asset allocation. A plan with contributions can generally withstand more risk than a portfolio that will predominantly be making distributions.1)How do you propose meeting periodic cash flow needs?We can set up periodic payments that are generated by selling the portfolio proportionally.6.Transition Managementa.In light of the five LPs in the current Plan, describe how you would transition the assets to your recommended portfolio and custodian?As a part of our evaluation of the entire portfolio we will look at the LPs on an individual basis and make a recommendation whether to keep or replace the investments. If the consensus is for some or all of the LPs be liquidated, we will gather the liquidity details from the contra firm and recommend a plan for each transition.b.What extra costs would be involved?No additional cost would be incurred.?puter and Technical Capabilitiesa.Describe the software and hardware that will be used to support the proposed work plan.?We have?the capabilities?to electronically?submit all performance reports to clients.?For assets custodied at UBS?Financial Services we can?also provide on-line account access and statements.?Statements?are usually available on-line within ten business days?after the end of the month.In?utilizing?UBS?as?your?custodian,?an?intuitive,?user-friendly?secure website?is?provided?at no additional charge. Online you would be able to?track: Activity Holdings Daily?changes in value Current and historic performance Asset allocation Historical statements and trade confirmations Considerable UBS economic researchWe would also have access on our system to your UBS website account (). This enables us to?talk through a web-related?question with staff and/or directors while both?of us review the exact same material.UBS has one of the most comprehensive web sites in the financial services industry.?UBS?Online Services allows clients 24/7 access to account information,?news, and market research and analysis,?as well as numerous tools and educational resources.Dynamic market info is fed continuously?to the client home page,?which is highly?customizable.?There is also up-to-date research on U.S., European and Asian markets, in addition to?news highlights and market analysis?from around the world.?Clients can also access the MorningStar mutual fund database.b.Describe your catastrophic data recovery plans. How often do you test your recovery system?Our firm is committed to protecting its business information,?processes and customer data from unpredictable?events.?We?do this through the preparation and testing of our primary?and backup systems to ensure that we?have the ability?to continue to operate in the event of a business interruption.?These capabilities?are designed?to: Provide for the recovery of our technology?infrastructure and information Prevent the loss of company?or customer information and transactions Allow?us to continue to conduct our primary?business functionsOur Disaster Recovery?Plan is constructed with the goal that we should be able to recover?and resume normal?operations within predefined time frames (in most cases by?end of the?next business day)?following?an?incident.?To accomplish this,?we have: Formalized processes across our firm designed to allow?us to continue or promptly resume our critical business functions.These take into account the various types,?scopes (single facility, local or regional) and durations of possible disaster events.? ?However, please note that the ability to conduct trading and other transactional activity?is?dependent on stock exchanges being open and the general availability of other infrastructure components (e.g.?power and telecommunications). Arranged for offsite alternative workspace for our?personnel and data systems in the event our facilities are unusable as?a result of an incident. ?This applies to home office?and branch locations,?so we will be able to respond to your inquiries?and provide information regarding your accounts?during an incident. Established procedures for the backup of files.?Copies of critical information are backed up on a regularly scheduled basis?and stored offsite at multiple secure locations.For the most critical information,?data is backed up in real-time at multiple secure locations. In addition, information required by?regulatory?agencies is archived?and stored offsite at secure locations.Created?a protocol to test our Disaster Recovery Plan. ?In order to evaluate?our Disaster Recovery?Plan we perform periodic?tests that simulate the?effect of a?disaster event.c.Describe your maintenance and backup procedures including daily backups, retention timetable and off-site backup storage approach. Where are your off- site backup facilities located? Is the backup data saved on disc or in the cloud?UBS Financial Services Inc.?internally?maintains a?dedicated backup Data?Center which will be used in the unlikely event that its Primary?Data?Center becomes in-operable. ?Data from its Primary?Data Center is continuously copied to the backup Data Center?utilizing a data mirroring protocol over a proprietary encrypted network.Daily?& weekly?backups?are taken and stored off-site to ensure recoverability?in the event of?a local?need to recover a?business application,?file,?or hardware?component. ?Data retention is specific to the frequency of data change and the requirements of the various business applications for?recovery purposes.d.Describe how any database(s) can be accessed by the Burlington Employees’ Retirement System Board staff.While UBS proprietary?database information cannot be accessed by clients,?our team?can provide you with relevant periodic?research reports published by?UBS Wealth Management?reporting on a variety of topics, from broad thematic?research examining long-term social,?economic,?demographic,?financial and geopolitical trends likely?to impact global financial markets to more specific?categories?of securities, including traditional?asset classes,?market sectors,?investment vehicles?and alternative investments.In addition,?our firm also?produces a number of annual economic and investment forecasting research reports?that we are?pleased to share with you as well.?UBS conducts broad thematic?research that examines long-?term social,?economic, demographic,?financial?and geopolitical trends likely?to impact global financial markets.?The research also focuses on more specific categories,?including asset classes, financial instruments?and?market drivers.Research reports are issued continuously?throughout the year from?our analysts located around the world. Your Consultant can provide relevant reports to you.?In addition,?the firm?produces a number of annual economic and investment forecasting research reports that we are pleased to share with our clients.H.Fees1.Please outline your fee structure for this plan. Please indicate all services you propose to provide and their associated fees. Specifically, detail in terms of your retainer, manager searches, performance monitoring on a monthly basis and other functions.Based on our current understanding of your needs, we propose an annual fee of 0.10%This fee includes the following consulting services:InitiallyQuarterlyAnnuallyAs Needed* Assist in developing the Investment Policy Statement* Asset allocation analysis* Investment searches?* Investment performance measurement reports* Portfolio analysis and performance attribution reports* Investment manager evaluation* Attend Board meetings?* Review Investment Policy Statement* Review progress toward goals as listed in the IPS?* Update asset allocation* Search for replacement managers* Ongoing strategic consulting* Ongoing Board education?For assets custodied at UBS:We propose an asset-based fee that encompasses consulting, trading and asset custody. Trades made through an IC account will be executed at zero commission. Investment manager ("SMA Manager") fees are additional and will vary based on the managers you select. Note that your SMA Manager may effect trades through other broker-dealers. These transactions, which are referred to as “step out” trades because your SMA Manager directs or “steps out” the trade to another broker-dealer, are generally traded from broker to broker and are usually cleared net, without any commissions. However, under certain circumstances, you may be assessed commissions or other trading related costs (for example, mark-ups) by the other broker-dealers executing the step out trades. These trading costs may be embedded into the price of the security allocated to your account. Your SMA Manager is responsible for meeting its best execution obligations to you for your SMA Accounts and to ensure that any additional commissions or mark-ups assessed to you when they decide to step out trades to other broker- dealers are consistent with their best execution obligations.For assets custodied away:We can work with you via a flat fee or an asset based fee. The flat fee is charged annually for retainer consulting services. The asset-based fee is charged as a percentage of the market value of the assets under advisement.It is important to note that our consulting fee remains the same regardless of the investment products and managers you choose. Fees charged by money managers and investment expenses are additional and vary by manager/investment.2.Please indicate the number of years for which your organization would be willing to guarantee its fees.Under a UBS Institutional Consulting Group Services Agreement, we can guarantee our fee for up to three years.?3.Please list any anticipated miscellaneous expenses and disbursements for which your organization will charge or seek reimbursement and unit costs of such expenses (if applicable).N/A?4.Disclose your portfolio management philosophy as it relates to negotiating/establishing fee arrangements with money managers. Disclose your review/evaluation process to determine reasonableness of each investment manager fee. Disclose your process for periodic review and recommendation of service fee reductions or consolidation.We can leverage our scale and long-standing relationships with investment managers to assist our clients in the negotiation of their fees and account minimums.5.What are the anticipated fund, limited partnerships, separate account, CITs, ETF, etc., fees and expenses?We anticipate the weighted average of investment management fee/expense to be in the range of 0.28-0.32.?6.What are the estimated fees and expenses charged by your Custodian/Trustee?We anticipate the total trustee and custodian fees for both plans to be approximately .02%-.025% contingent upon the number of underlying accounts utilized.7.Do you intend to charge for special projects or ad hoc work? If so, how would these services be defined and billed? Would there be a discount from the standard fees or special projects?We do not charge for special projects.?8.If hired, will your firm receive any other form of compensation from working with this account that has not yet been revealed? If yes, what is the form of compensation?We do?not receive any other form of compensation besides the fees received for our consulting services.?9.Describe in detail any mutual fund revenue sharing (recapture), 12b-1 fees, finder’s fees, directed brokerage commissions (separate accounts), collective trust rebates, and any other revenues or fee rebates. Full transparency and disclosure of expenses, fees, revenue sharing, etc. is an absolute and nonnegotiable requirement.When using mutual funds we will select the lowest cost, institutionally priced shares available. These lower cost share classes typically do not pay any 12b-1 distribution fees or revenue sharing payments, but if any 12b-1 fees are received for assets held in a UBS Institutional Consulting Account, they will be automatically rebated back to the portfolio and credited directly to your account. We do not receive any revenue sharing for assets held in a UBS institutional consulting account.Our fees are solely from the provision of institutional consulting services. We do not accept brokerage commissions from your investment managers as an offset to our fee.We are prohibited from accepting finder's fees.? For Alternative investments on? our platform, specific institutional consulting shares classes are used, where the only fee is that in our contract.10.If your organization plans to bill for special projects on an hourly basis, please include a schedule showing the hourly rates of the professionals who would be assigned to the Trust’s account. If selected, your organization will be expected to provide detailed back- up documentation reflecting the number of hours expended on a special project, billing rates, the subject matter of the services rendered, and the particular person(s) rendering those services.N/A?I.Miscellaneous1.Please provide a confirmation of your organization’s willingness and availability to commence work immediately upon selection and to devote sufficient resources to perform any and all services in a timely and efficient manner.As consultants of the City of Burlington we would deliver our services in a timely manager. Additionally, if the Committee has specific requests as a results of this process, we are willing and available to work and deliver on those request as soon as possible.2.A certification that all information contained in the proposal is complete and accurate, signed by a person authorized to negotiate on behalf of and contractually bind your organization. Any misrepresentation in the proposal could result in the termination of the contract at any time and potential liability.All information contained in the proposal is complete and accurate, please see our cover letter for signed confirmation.Please note that this RFP submission would not be included within our UBS Institutional Consulting Services Agreement. We have included a copy of a sample consulting agreement as a separate attachment for additional reference.We would also like to address certain requirements and representations provided in your RFP which will require adjustments:Under Section VI, Specific Terms and Conditions – Paragraph M. Contract Changes.Any contract changes must adhere to the standard UBSIC modification provision as detailed in the Additional Contractual Matters section within the attached sample consulting contract. The services provided under a UBS Institutional Consulting Agreement are fiduciary investment services and would not allow UBS to permit modifications to our services without reviewing the change in advance.3.Any other information you feel will be beneficial to support your proposal.Princeton Investment Consulting is uniquely positioned to provide exceptional Investment Management Services to the Foundation for Advanced Education in the Sciences for the following reasons: Experience. Our team with two Senior Institutional Consultants, and three direct support staff members, combines specialized institutional knowledge with over 50 years of combined consulting experience. Our decades of institutional experience help clients navigate through various market cycles. ?Institutional consultants providing advisory services. We act as investment advisors (rather than as brokers) with a flat fee structure regardless of investment product selected; and a defined set of roles and responsibilities as investment advisors ?Open architecture for money managers. A variety of managed investments are available including manager strategies specific to institutions. Scale that benefits you. We leverage our scale and long-standing relationships with investment managers to assist you with negotiating lower fees and account minimums ?Ability to acknowledge fiduciary status. We will acknowledge in our consulting services agreement to act as a fiduciary under Section 3(21) or 3(38) of ERISA for the "investment advice" that we provide to you or the Plan. We will also acknowledge our fiduciary role for our contracted services under the Investment Advisors Act of 1940. These fiduciary acknowledgements are provided by UBS Financial Services Inc., a leading financial services firm with a 45-year heritage and a strongly capitalized balance sheet. Customization of performance reports. We recognize the time limitation of committees and boards and have created our streamlined and comprehensive one-page report summary. We utilize performance reporting which enables us to produce customized clients reports which can includes historical performance data ?Access and attention because of our intentional low client count. ?A client-centric focus that embraces the fact that our team’s compensation does not depend on the type of investments selected. ?Education. We strongly emphasize trustee and investment committee education so that we can work better together for your benefit to help you make informed decisions. ?Global reach. UBS is an industry leader in its depth of research and has analysts, strategists and economists worldwide. ?Policy driven. Our ongoing focus on your investment policy statement helps clients to assess how the performance of their investment is consistent with their objectives and benchmarks provided in their investment policy statement. ?Proactive and committed. Our consulting process is an ongoing, dynamic process. We are committed to serving our clients consistently over the long-term. ?Dedicated Legal and Compliance Oversight – As part of a large financial services firm, the legal and compliance departments have dedicated personnel with responsibility for oversight of our business. These professionals are not employees of our consulting practice and their compensation is not tied to our activity.?For your review we have attached the following: Sample UBS performance report Sample UBS Institutional Consulting Contract Sample Institutional Consulting Client List Sample Asset Allocation Report (Zephyr)???????????Sample Investment Policy Statement?We sincerely appreciate the opportunity to respond to your proposal, and we hope to have the chance to serve you. If you need clarify on any of our responses or need additionally information, do not hesitate to reach out.UBS Form ADV & Important InformationForm ADV Part I & Part IIUBS Financial Services Inc. is a fully licensed broker-dealer and is a registered advisor with the Securities and Exchange Commission (SEC) under the Investment Advisor Act of 1940 and functions as a fiduciary as provided under such Act. The firm’s Form ADV Part I is available through publicly available filings at the Securities and Exchange Commission at: I. UBS Institutional and Retirement Plan Consulting Services Group programs provide services as a fiduciary under a separate Form ADV which allows us to provide independent consulting services. Our Form ADV Part II Disclosure Document is available through public filing at the Securities and Exchange Commission (SEC):II. InformationUBS Financial Services Inc. (and its affiliates) (UBS) make various interactive tools, worksheets, white papers, guidebooks, newsletters, research, reports, portfolio analyses and planning tools, and other marketing and disclosure materials (collectively Materials) available to its UBS Consultants, clients and prospective clients. The goal of the Materials is to aid and educate our UBS Consultants, clients and prospective clients in understanding the scope of our service offerings, the issues that should be considered before engaging in an investment transaction, the basic tenants of investing, our views of long-term economic trends and projections, and, subject to certain assumptions, the potential effects that a particular strategy, investment program or product or series of transactions may have on a portfolio. The Materials may include hypothetical illustrations, case studies, discussions of factors to be considered in assessing a potential investment product, strategy and items to consider with respect to account types, services and asset allocation.This document contains illustrations based on information you have provided to us regarding your particular financial circumstances and investment preferences for the applicable assets. Because there can be several ways and combinations to implement an investment strategy, this document may present one or more hypothetical illustrations. The options presented are for discussion purposes only and do not constitute a recommendation to buy, hold, or sell any securities or investment products. ?You must make independent decisions with respect to any proposals contained within this report. In making those decisions you should review the terms of any Plan with respect to which you are a fiduciary and your obligations to any such Plan under applicable law, including ERISA. Illustrations are made with the understanding that your investment strategy will be implemented at UBS or through a UBS advisory program. We do not assume responsibility for activity you conduct at other financial institutions.This document and corresponding Materials are provided for discussion and consideration and are intended to aid (and be used by) UBS Consultants in providing you with actual individualized investment recommendations.? Therefore, this document and corresponding Materials should only be considered in conjunction with the actual recommendations and advice of your UBS Consultants, our standard UBS account documents, agreements, disclosures, including the ADV Disclosure Brochure(s), and the additional factors that warrant consideration for your particular financial situation, including costs.? This material is not intended and should not be construed to constitute investment advice and does not itself create a fiduciary relationship between you and UBS. ................
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