Burlington Employees' Retirement System



City of Burlington Employees' Retirement Systemc/o Arthur Meizner, Hooker & HolcombeVia Email: ameizner@October 8, 2020Dear Mr. Meizner,We are pleased to enclose AndCo’s response to your Request for Proposal for investment advisory services. You will find that there are significant distinctions between our firm and our competitors. We accept full fiduciary responsibility for each of our clients, without equivocation or exception. Our proposed fee is for a full-service relationship. We do not provide unbundled or a la carte pricing options because such arrangements can lead to counterproductive investment decisions. These arrangements often cause Trustees to withhold decision making because of the additional cost. We attempt to avoid such conflicts by using all-inclusive fees. Our proposed fee also includes travel expenses. We consult over 690 institutional clients with approximately $100 billion in assets under advisement as of December 31, 2019. We generally have more contact with institutional boards each quarter than most of our competitors have in a full year.An experienced and credentialed team supports each consultant. Our firm’s commitment to pooling our collective resources helps us in our goal to provide a high-quality client experience. Our seasoned team of 92 professionals includes 23 CFA? Charterholders and 39 advanced degrees.Trust, integrity, confidence, and respect are the cornerstones of any successful business relationship. We will always seek to ensure that our clients come first. Please check with our client references. We also encourage you to speak to other industry professionals about our firm and our service. We are confident that their honest feedback will distinguish AndCo from other firms. We would be honored to consult the City of Burlington Employees' Retirement System, and we look forward to meeting with you soon. Sincerely,Steve GordonPartnerResponse to Request for ProposalOctober 8, 2020City of Burlington Employees' Retirement SystemSections TOC \h \z \t "*Head1,1,*Head1 - PageBreak,1" A. Organization PAGEREF _Toc52371489 \h 4B.Potential Conflicts of Interest8C.Legal Fiduciary Status, Investment Advisory Status and Litigation10D.Insurance11E.Staffing and Facilities13F.Clients18G.Services20H.Fees51I.Miscellaneous55Disclosure57ExhibitsClients Lost (3 Years)Exhibit 1Form ADVExhibit 2Certificate of InsuranceExhibit 3Client List (Similar Size Clients)Exhibit 4Client List (Governmental Clients)Exhibit 5Sample Investment Policy StatementExhibit 6A. OrganizationName of firm.AndCo Consulting, LLCName, address, and telephone number(s) of key contact.Ian Jones, ConsultantMain Office (Headquarters):531 West Morse Blvd.Suite 200Winter Park, FL 32789Phone: (716) 712-5373Location: Buffalo, NYOwnership structure of firm.AndCo is structured as a Limited Liability Corporation.?AndCo’s principal owners are outlined below:Mike Welker (Managing Member)Bryan BakardjievKim SpurlinSteve GordonTroy BrownTeam structure brief biographies of individuals to be assigned.Primary ConsultantThe primary consultant leads the consulting team and is ultimately responsible for servicing the account. He is responsible for optimizing investment portfolios, conducting investment manager due diligence reviews, selecting investment managers, developing investment policy guidelines, and preparing performance-monitoring reports. He will attend all meetings and be the primary contact to field questions in between meetings.Ian JonesConsultantIan has over 30 years of institutional investment experience. He provide all aspects of the firm’s consulting services. He serves as the primary consultant for various institutional plans including defined benefit, defined contribution, and private foundation investment portfolios. His duties include serving as the primary point of contact for various Plan Sponsors and Boards of Trustees and assisting them with their investment decisions and fiduciary responsibilities. Through his involvement with these plans, Ian coordinates all components of AndCo’s consulting services including providing investment recommendations, asset allocation and investment manager evaluations, developing investment policy guidelines, and delivering investment policy compliance and performance reviews. Ian joined AndCo in 2014. Prior to joining AndCo, Ian worked for the following firms: Graystone Consulting from 2011 – 2014, The Marco Consulting Group from 1994 – 2011 and ASB Capital Management from 1984 – 1994.Bachelor of Science, Business Administration, Cornell UniversityClient Solutions Group The Client Solutions Group is responsible for client service support including but not limited to investment research, performance analysis, plan administration, compliance monitoring, and operational and administrative support. While the position is mostly internal, they will attend client meetings on occasion and are expected to have an intimate knowledge of all assigned client portfolios. They are always available for client’s questions or concerns and add an additional layer of support for our clients. Brooke Wilson, CIPM?Client Solutions Group Brooke’s primary responsibilities include a comprehensive range of duties including but not limited to investment research, performance analysis, plan administration, compliance monitoring, and operational and administrative support.Prior to working at AndCo, Brooke was a Group Project Specialist at MFB Financial, Inc. Prior to MFB Financial, Brooke held positions at Merrill Lynch and Pershing, LLC. Bachelor of Business Administration magna cum laude, Finance, Stetson UniversityCertificate in Investment Performance Measurement (CIPM), CFA InstituteBusiness focus/client base.AndCo has one line of business: investment consulting. We derive 100% of our revenue through hard-dollar fees for consulting services for all types of defined contribution, deferred compensation, defined benefit, non-qualified, OPEB, VEBA, cash management and endowment and foundation plans. 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.AndCo is a truly independent institutional investment consulting firm. We have no parent or affiliated companies. Additionally, we have no economically beneficial relationships with any bank, broker/dealer, investment manager, insurance company, actuary, or other vendor. What is your firm’s targeted market in terms of plan size?AndCo clients range from approximately $1 million to over $17 billion. All of our institutional plans utilize the full services of our firm. AndCo is structured to best serve retirement plans that are structured like the Retirement System where we are viewed as an extension of your staff. How many pension consulting clients do you currently have? What is the average plan size of your clientele?AndCo currently has approximately 690 clients. Our average client size is approximately $145 million.What is the client turnover (gains and losses) of your firm over the last three years?As of December 31, 2019, AndCo has gained 122 new client relationships and has lost 36 clients over the previous 3 years.? ?IMPORTANT: Please see Exhibit 1. As Exhibit 1 illustrates, only 5 clients in the referenced 3-year period have terminated AndCo due to service-related issues. All other client losses were due to factors outside of the services we provide.For purposes of this question, AndCo defines a “client” as an entity with which we have a retainer contract and a “loss” as an entity that we are no longer invoicing at the client’s request. Accordingly, the figure of lost clients provided encompasses broad categories of losses, including both service and non-service related. ?Please note there are certain circumstances which AndCo does not define as a loss, such as fund closures, our resignation, assets rolling into a new/existing AndCo client, and clients which re-engage our services within a limited period of time.? Along with the reasons for termination, we have also included the asset values of all terminated client relationships.AndCo works hard each day to exceed our clients’ expectations. This is revealed in our firm’s client retention rate of approximately 98% since our firm’s inception nearly 20 years ago.*Figures are to the best of our knowledge and certain numbers may be approximations. How many full-time staff is employed by your team and firm?AndCo employs 92 professionals that consist of some of the top talent from a variety of educational and financial industry backgrounds and features 34 dedicated consultants who average over 20 years of experience. AndCo’s professional team holds the following credentials:23 Chartered Financial Analyst (CFA?) Charterholders7 Certified Plan Fiduciary Advisor (CPFA) Designees6 Chartered Alternative Investment Analyst (CAIA) Members5 Certified Investment Performance Measurement (CIPM) Certificants4 Certified Investment management Analyst (CIMA?) Designees39 advanced degreesWhen did your organization begin providing investment advisory services?AndCo has been providing institutional investment consulting services analogous to the work described in this proposal since the inception of our firm in 2000. Is providing investment advisory services currently one of your organization’s principal lines of business?AndCo has one line of business: investment consulting. We derive 100% of our revenue through hard-dollar fees for consulting services for all types of defined contribution, deferred compensation, defined benefit, non-qualified, OPEB, VEBA, cash management and endowment and foundation plans. What percentage of your organization’s revenues in the last fiscal year was attributable to the investment advisory practice?100%.Is your organization registered with the Securities Exchange Commission (SEC) as an investment advisor under the Investment Advisors Act of 1940?Yes. AndCo is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Our SEC registration # is 801-58253. Effective 1/10/2001.Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability.Please provide a copy of your organization’s Form ADV Part II A&B.We have provided our Form ADV as Exhibit 2.Potential Conflicts of InterestDoes your organization provide trust, investment management or securities brokerage services (including commission recapture)? If so, please identify and explain all such services provided:No.What percentage of your 2019 revenue was attributable to such trust, investment management or securities brokerage services?0%.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.No.If any part of your organization provides brokerage services, soft-dollar services, directed brokerage, discount brokerage or commission recapture programs (collectively, “brokerage related services”):What percentage of your organization’s 2019 revenue was received in soft dollars?0%.What percentage of your organization’s 2019 revenue was attributable to (or compensation for) brokerage-related services?0%.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.No.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.Confirmed.Does your organization solicit or accept fees for placing or helping to place money managers? If so, please explain.No.Does your organization charge to include any investment managers in your database or in any search? If so, please explain.No.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.No.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.No.Legal Fiduciary Status, Investment Advisory Status and LitigationDoes 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?Yes.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.No.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).Prior to joining AndCo, Troy Brown did not complete certain FINRA (formerly known as the National Association of Securities Dealers or NASD) continuing education modules and tests required by Merrill Lynch in 2003 and 2004. FINRA issued, and Troy Brown accepted, an Acceptance, Waiver and Consent (AWC) sanction regarding this action. No client or employee was impacted, and Troy immediately took corrective action on his own to complete the continuing education requirements when he was notified of the oversight.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.No.InsuranceDoes 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.AndCo has several insurance policies through highly rated, stable insurance companies. We believe our coverage is sufficient for our role as a traditional investment consultant since we do not serve as custodian for any plan assets, nor directly manage any investment portfolios.Our total policy coverage is as outlined below:We have also provided copies of our Certificates of Insurance as Exhibit 3.CoverageDollar AmountProfessional Liability/Errors & Omissions Insurance*$15 millionGeneral Liability Insurance$2 millionCyber Liability Insurance$5 millionFidelity/Blanket Crime Insurance**$1 millionWorkers Compensation and Employers’ Liability Insurance$1 millionUmbrella Liability Insurance$4 millionAutomobile Liability Insurance$1 million*The Errors & Omissions policy also includes Directors & Officers coverage and Fiduciary Liability coverage**The Fidelity Bond encompasses an ERISA bond with coverage of $500,000Is 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.No.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.Although AndCo has not directly assisted a client in reducing fiduciary liability premiums, we believe AndCo’s partnership with clients can have a positive influence on lower fiduciary liability insurance premiums across our client base.? Specifically, we have significant experience talking to fiduciary liability insurance underwriters regarding our services and independent framework and how we believe our structure should lower AndCo’s own internal fiduciary liability premiums.? We have successfully secured premium reductions for AndCo during multiple renewal cycles through these market discussions.? We would be happy to discuss with your insurance agent or fiduciary liability insurance carrier how our structure can help lower the risk to your plan and potentially reduce your premiums. Staffing and FacilitiesHow is your organization structured to service your accounts?All clients are serviced by a service team which includes the following personnel:Primary Consultant:? The primary consultant leads the client’s consulting team and is responsible for assisting the client with all aspects of building and maintaining their investment program.? The primary consultant attends all client meetings and is the primary point of client contact between meetings.Client Solutions Group:? The Client Solutions Group is responsible for client service support including, but not limited to, investment research, performance analysis, plan administration, compliance monitoring, and operational/administrative support. While the position is mostly internal, client solutions consultants can also attend client meetings periodically and maintain an intimate knowledge of each assigned client. They are a critical component of the service team and are always available to address client questions or concerns in the absence of the primary consultant.Research Group:? Each service team also utilizes the insight and experience of various members of the Research Group, as needed, to address client-related projects, questions, and manager issues.How many of your staff are investment consultants?Our team of 34 consultants, who average over 20 years of experience, consists of some of the top talent from a variety of educational and financial industry backgrounds and features following credentials:11 Chartered Financial Analyst (CFA?) Charterholders3 Certified Plan Fiduciary Advisor (CPFA) Designees2 Chartered Alternative Investment Analyst (CAIA) Members2 Certified Investment management Analyst (CIMA?) Designees1 Certified Investment Performance Measurement (CIPM) Certificants12 advanced degrees? What is the average number of accounts handled per investment advisor?Our consultants service an average of approximately 20 client relationships. Management regularly assesses each consultant’s account load based on their experience, portfolio complexity, meeting frequency and travel requirements, collectively measured as a consultant’s capacity. Firm management assigns new client relationships based on its ongoing assessment of capacity factors and will modify current client partitioning if it determines the quality of our service could be negatively impacted by consultant assignments. 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.As one of the largest truly independent public plan consultants in the country, AndCo services over 450 public plans, with approximately $67 billion in public plan assets under advisement. AndCo was formed, in large part, to meet the needs of public sector clients and this has been the focus since our inception. We have extensive experience in portfolio structuring, asset allocation, manager selection and monitoring. We have built a growing business and are especially proud of our history in helping pension plan sponsors make informed decisions about investment policies, service providers and investment strategies. In our approach, we strive to help clients build portfolios with low fees and structure them to meet the fund’s needs. Our team of 92 professionals consists of some of the top talent from a variety of educational and financial industry backgrounds and features 34 consultants who average over 20 years of experience. AndCo’s professional team holds the following credentials:23 Chartered Financial Analyst (CFA?) Charterholders7 Certified Plan Fiduciary Advisor (CPFA) Designees6 Chartered Alternative Investment Analyst (CAIA) Members5 Certified Investment Performance Measurement (CIPM) Certificants4 Certified Investment management Analyst (CIMA?) Designees39 advanced degree holders? 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.Primary ConsultantThe primary consultant leads the consulting team and is ultimately responsible for servicing the account. He is responsible for optimizing investment portfolios, conducting investment manager due diligence reviews, selecting investment managers, developing investment policy guidelines, and preparing performance-monitoring reports. He will attend all meetings and be the primary contact to field questions in between meetings.Ian JonesConsultantBuffalo, NYIan has over 30 years of institutional investment experience. He provide all aspects of the firm’s consulting services. He serves as the primary consultant for various institutional plans including defined benefit, defined contribution, and private foundation investment portfolios. His duties include serving as the primary point of contact for various Plan Sponsors and Boards of Trustees and assisting them with their investment decisions and fiduciary responsibilities. Through his involvement with these plans, Ian coordinates all components of AndCo’s consulting services including providing investment recommendations, asset allocation and investment manager evaluations, developing investment policy guidelines, and delivering investment policy compliance and performance reviews. Ian joined AndCo in 2014 where he serves as a senior investment consultant to 16 client relationships. Prior to joining AndCo, Ian worked for the following firms: Graystone Consulting from 2011 – 2014, The Marco Consulting Group from 1994 – 2011 and ASB Capital Management from 1984 – 1994.Bachelor of Science, Business Administration, Cornell UniversityClient Solutions Group The Client Solutions Group is responsible for client service support including but not limited to investment research, performance analysis, plan administration, compliance monitoring, and operational and administrative support. While the position is mostly internal, they will attend client meetings on occasion and are expected to have an intimate knowledge of all assigned client portfolios. They are always available for client’s questions or concerns and add an additional layer of support for our clients. Brooke Wilson, CIPM?Client Solutions Group Brooke’s primary responsibilities include a comprehensive range of duties including but not limited to investment research, performance analysis, plan administration, compliance monitoring, and operational and administrative support.Prior to working at AndCo, Brooke was a Group Project Specialist at MFB Financial, Inc. Prior to MFB Financial, Brooke held positions at Merrill Lynch and Pershing, LLC. Bachelor of Business Administration magna cum laude, Finance, Stetson UniversityCertificate in Investment Performance Measurement (CIPM), CFA InstituteHow 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.Over the last 2 years, AndCo has had 2 voluntary* departures in our consulting department. *Voluntary departure includes another job offer, relocation, and/or personal reasons. Count does not include 4 retirements.The lead consultant is supported by an experienced and credentialed team that plays an active, ongoing role in servicing each client relationship. We believe it is extremely important to provide each client with a depth of experience and a range of perspectives that extend beyond the viewpoint of a single consultant. If the lead consultant is unable to service the client relationship for any reason, another member of our experienced service team will work to seamlessly transition into the lead consultant’s role. In addition to each client’s dedicated service team, we also have 3 directors within the consulting department that support and assist our consultants as we collectively service client relationships. The team concept helps ensure that multiple professionals from our firm will be abreast of the client’s portfolio and governance dynamics. This provides both ongoing continuity and different perspectives to drive value-added service for the client. From the outset of any client relationship, our goal is to provide the client with seamless service for the long term that builds and regularly reinforces loyalty and trust. As a testament to the cohesiveness of the team we have built to serve our clients, we are pleased to state that we have not experienced any unplanned senior consultant turnover since the inception of our firm. This continuity of personnel allows us to provide consistent service and retain institutional memory as we strive for superior, quality driven client service.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.Prior to joining AndCo, Troy Brown did not complete certain FINRA (formerly known as the National Association of Securities Dealers or NASD) continuing education modules and tests required by Merrill Lynch in 2003 and 2004. FINRA issued, and Troy Brown accepted, an Acceptance, Waiver and Consent (AWC) sanction regarding this action. No client or employee was impacted, and Troy immediately took corrective action on his own to complete the continuing education requirements when he was notified of the oversight.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.Our information technology is housed in our Winter Park, FL headquarters and is managed by our Director of Information Technology, Jason Purdy. Jason has 25 years of experience and prior to joining AndCo he worked for one of the area’s largest hospital systems. Jason is supported by an I.T. Systems Administrator, Jamie Utt. AndCo maintains a privacy policy that establishes rules for the collection, use and disclosure of confidential information and protects the confidentiality of that information and the privacy of individuals with respect to that information, while facilitating the effective provision of consulting services. A combination of electronic and physical security is utilized to protect AndCo and the information we hold on behalf of our clients from internal and external IT security threats. AndCo’s new employees are trained on our computer and communication systems with an emphasis on data protection and cybersecurity. All employees undergo annual and periodic training/updates to help ensure the security of our systems and communications.AndCo maintains a security policy that establishes rules for the collection, use and disclosure of confidential information and protects the confidentiality of that information and the privacy of individuals with respect to that information, while facilitating the effective provision of consulting services. AndCo’s carefully designed independent structure intentionally does not have access to individual retirement plan member information which eliminates the possibility of inadvertent disclosure of private information for individuals. Physical SecurityCommunication rooms are located in restricted areas that are only accessible by authorized individuals.Servers are housed in a locked server rack and are only accessible by authorized individuals.Authorized individuals include all IT personnel, CEO, CCO, and Executive Directors.Electronic SecurityA combination of security software and hardware are utilized to prevent unauthorized access. This combination includes resources for data encryption, antivirus, firewalls, active directory, and virtual private networks.An enforced password policy is in place to prevent unauthorized access and data theft. Password requirements are outlined on a subsequent slide.An extensive backup and data recovery procedure is in place to prevent data loss, destruction, or ransom.AndCo guests requiring internet access should only be granted access to our guest wireless network.AndCo carries a cyber liability insurance policy. For additional information contact the Chief Compliance Officer.AndCo does not outsource any of these services.ClientsPlease provide a representative list of your organization’s investment advisory clients of similar size.We have provided a client list, of similar size, as Exhibit 4.Please list your organization’s government public Pension system clients and the portfolio size for each.We have provided a governmental client list as Exhibit 5.Please complete the following table:As of 12/31/2019, AndCo advises over 690 clients across 885 plans representing approximately $100 billion in AUA, of which, 384 are pension plans representing approximately $67 billion in AUA. Size of Plan Assets # of Plans Total AssetsUNDER $100M704$17,699,535,375$100M TO $200M91$12,457,287,510$200M TO $300M33$8,126,518,732OVER $300M57$61,269,724,755TOTAL885$99,553,066,372 Size of Plan Assets # of Pension Plans* Total Pension Assets*UNDER $100M277$8,092,633,479$100M TO $200M52$7,106,096,122$200M TO $300M15$3,695,369,096OVER $300M40$48,231,655,015TOTAL384$67,125,753,712*Assets are approximate and as of 12/31/19. Pensions include ?public, corporate, Taft-Hartley, and non-profit client plans.Please list the number of clients that have terminated your organization’s services during the past three years, including their reasons for termination.3 Years (2017-2019)As of December 31, 2019, AndCo has lost 36 clients over the previous 3 years.? ?IMPORTANT: Please see Exhibit 1. As Exhibit 1 illustrates, only 5 clients in the referenced 3-year period have terminated AndCo due to service-related issues. All other client losses were due to factors outside of the services we provide.For purposes of this question, AndCo defines a “client” as an entity with which we have a retainer contract and a “loss” as an entity that we are no longer invoicing at the client’s request. Accordingly, the figure of lost clients provided encompasses broad categories of losses, including both service and non-service related. ?Please note there are certain circumstances which AndCo does not define as a loss, such as fund closures, our resignation, assets rolling into a new/existing AndCo client, and clients which re-engage our services within a limited period of time.? Along with the reasons for termination, we have also included the asset values of all terminated client relationships.AndCo works hard each day to exceed our clients’ expectations. This is revealed in our firm’s client retention rate of approximately 98% since our firm’s inception nearly 20 years ago.*Figures are to the best of our knowledge and certain numbers may be approximations. 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.Metropolitan Washington Airports AuthorityWilliam (Randy) CaldwellTwo Potomac Yard2733 Crystal DriveArlington, Virginia 22202 Phone: (703) 417-0501City of New Orleans Employees’ Retirement SystemMr. Jesse Evans, Jr.Director Employees’ Retirement System1300 Perdido Street, Rm 1E12New Orleans, LA 70112Phone: (504) 658-1863City of Annapolis Police and Fire Retirement PlanJoseph Semo Chairman of the Retirement PlanSEMO LAW GROUP1307 New Hampshire Ave., NW, Suite 400Washington, DC 20036Phone: (202) 833-7366National Retirement FundJoel Mueller (Director of Investments)Vice President, Investment & TreasuryAmalgamated Family of Companies333 Westchester AvenueWhite Plains, NY 10604Phone: (914) 367-5367ServicesGeneralPlease 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;Yes.advise the Board during these meetings on the investment impact of plan amendments that may be considered;Yes.provide oversight of all investment aspects of the Board’s operations;Yes.review and develop an investment policy statement and provide an analysis on the reasonableness of investment assumptions;Yes.advise the Board on the prudence and relative financial impact of various investments;Yes.review, develop and periodically rebalance asset allocation;Yes.recommend hiring, retention and termination of investment managers, mutual funds and other investment products;Yes.prepare 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).Yes.review and comment upon investment management agreements prepared by the Plan’s counsel;Yes.develop and monitor adherence to individualized investment guidelines, risk controls, proxy voting and adherence to proxy voting policies;Adherence to individualized investment guidelines and risk controls – YesProxy voting - AndCo does not vote proxies but we assist our clients with the selection of a proxy voting agent, if desired. monitor custody bank and assist in retention and replacement, as appropriate;Yes.supervise, monitor and verify transfer of assets in the event of change of investment manager;Yes.provide assistance required by audits or examinations conducted by governmental agencies;Yes.assist in reducing fiduciary liability insurance premiums and address special investment and other issues as they arise.Yes.Investment Policy Development & Portfolio DesignDescribe briefly the processes and tools your organization uses to help clients develop investment policies and objectives.At the outset of a client relationship, one of our first and most critical tasks with the client will be to review and suggest potential revisions and/or updates to their existing investment policy statement (IPS). Alternatively, if there is no current IPS, we will draft a new document for the client’s consideration. Regardless of the approach, we build/review IPS documents through a consistent framework of the appropriate portfolio “definitions” generally based on the following elements:Definition of the beneficiaries and/or purpose the portfolio’s assets ultimately serveDefinition and description of fiduciaries, their duties, and responsibilities, and those of interested partiesDefinition of any legal, statutory, or organizational constraints, as well as other unique conditions relevant to the portfolio or its administrationDefinition of portfolio investment objectives, risk tolerance, time horizon, and known liquidity requirementsDefinition of overall performance objectives and portfolio evaluation criteriaDefinition of the portfolio’s strategic target asset allocation structure and allowable ranges around the stated targetsDefinition of portfolio rebalancing conditions and/or distribution policiesDefinition of underlying investment guidelines (risk controls) for each target asset allocation segmentDefinition of the process for selecting, monitoring, and potentially replacing portfolio investment strategiesDefinition of the process for periodic IPS review, exception granting (if any), and future modificationsWhen approached thoughtfully with the client, each of these elements come together naturally as a cohesive, effective IPS for the portfolio. While the IPS represents a long-term strategic plan, it is not designed to be a static document. Since clients, their objectives and constraints, and capital markets evolve over time, the IPS should be viewed as a “living document” that requires ongoing maintenance in the form of updates and/or modifications over time as conditions change.How does your organization identify and understand the Plan’s financial and investment objectives?If AndCo is selected to serve as the Retirement Systems investment consultant, Ian Jones, Consultant will have primary responsibility in working with the Trustees and Staff. An ongoing and significant portion of their work will be the analysis of the System’s manager structure. When analyzing manager structure, our ongoing goals are as follows:To confirm that each manager is appropriate for the asset allocation segment to which they have been assigned.To confirm that the manager is performing consistent with the expectations for the manager’s specific strategy. We will assess each individual manager’s performance, risk, and characteristics since the inception of their relationship with the Retirement System. In addition, we will also periodically assess the manager’s success since the inception of the strategy during periods of rising and falling markets and over full market cycles.In addition to evaluating individual manager performance, it is critical to evaluate the composite performance of managers that reside within a specific asset allocation segment. For instance, if the Retirement System has multiple managers within the large cap segment, we will evaluate the managers independently but will also evaluate the composite performance of the managers together. The challenge is that each manager may be performing as you would expect them to perform, but when you combine them together their combined results may replicate or potentially trail a broad market benchmark.We will perform the same analysis as detailed in item 3 for the total of all equity managers and all fixed income managers vs. the most appropriate broad market equity and fixed income benchmarks. When evaluating a new manager, if necessary, we will assess the performance and modern portfolio theory statistics of potential new candidates relative to the client’s incumbent manager roster in order to identify managers that are the best fit with the incumbent roster.In addition, comment on your organization’s process for recommending modifications to investment guidelines.Consultants recommend changing a client’s asset allocation on a case by case basis. We review the asset allocation every quarter during our quarterly presentation with the Board. These reviews may also occur in conjunction with a study on plan objectives or spending policies. If asset values remain relatively constant, we normally recommend performing an asset allocation study once every two years. If the asset value grows or diminishes significantly, we recommend reviewing the asset allocation immediately following this event.Asset allocation policies should be appropriate for the long-term, and short-term changes to the market environment must not induce asset allocation policy changes. We design asset allocation policies with baseline benchmarks and ranges. This allows managers and the Board to take advantage of different asset classes without making wholesale changes to an asset allocation policy. This approach incorporates a prudently flexible asset allocation policy while also preserving Fund discipline. We review our long-term market expectations on an annual basis. Risk/return expectations for broad asset classes change over time. Market expectations are an important factor in our asset allocation analysis. As those expectations change, we view the various asset classes more or less favorably. A periodic asset allocation analysis can lead to a recommended change in the long-term asset allocation. Describe your firm’s philosophy and approach to using alternative investments, including:How you differentiate between traditional and alternative investments.We view any investment outside of publicly traded stocks, bonds, and cash equivalents as an alternative investment.Explain why you would use alternatives, i.e., risk reduction, alpha, non- correlated assets, etc.? Why would you not use them?Alternative investments can provide return enhancement to an institutional portfolio while also reducing the overall risk level of the portfolio due to the uncorrelated nature of the underlying returns. Alternative investments are typically associated with inefficient and illiquid markets. Investors typically seek higher returns for the risks associated with these characteristics which may lead to return-enhancing performance for investors. While potentially higher risk on an absolute basis, typically alternative investments perform in an uncorrelated fashion to that of their traditional counterparts, which, when paired with traditional investments, may result in a higher risk-adjusted return (Sharpe or Information Ratio) for the total portfolio. Each client is unique and has different preferences and requirements. Based on these needs and requirements, alternative investments are not appropriate for all clients. Alternative investments, specifically those with withdrawal restrictions or closed end funds with a finite life, may not be appropriate for some investors due to their illiquid nature and high degree of idiosyncratic risk. Furthermore, plans with significant cash flow needs may not like the return profile of alternative assets, which typically produce negative returns in early years (J-curve effect). Alternative portfolios often take years to generate a cash flow positive profile and are subject to consistent commitments at repeated intervals to maintain the target portfolio allocation.Alternative investments you currently utilize.We actively recommend strategies within the following alternative asset classes to our clients based on their particular needs and circumstances:Private Real Estate Infrastructure Private Equity Private Debt Hedge FundsWhile we do not actively recommend these asset classes to the majority of our clients, we research investments in the following alternative asset classes as well:MLPs / EnergyTimberCommoditiesTypical percentage of alternative investments, including hedge funds.Since each client’s goals, objectives, and portfolio constraints (i.e., risk tolerance, statutory, liquidity, etc.) can be unique, we go into each client relationship with an open mind and avoid the use of any default or standard target allocation strategy. We work with each client to understand what their objectives and constraints are, as well as how they work with managers, before we begin running asset allocation scenarios and work toward structuring potential strategic asset allocation recommendations. As a result of this thoughtful approach, portfolios across AndCo’s client base deploy a wide range of target asset allocations based on the specific objectives and constraints of their respective portfolios.? Outlined below are current ranges of the main asset classes our firm is generally recommending for our clients based on their unique goals and objectives: Domestic, International and Emerging Markets Equities (30%-70%): This tends to be the largest combined target allocation across both capitalization (Large/Mid/Small) and style (Growth/Core/Value). Typically, the only time the collective Domestic, International and Emerging Markets Equity allocation falls below 30% is in conservative portfolios where annual capital preservation is the main objective. Private Equity (5%-15%): The percentage allocation to this asset class has generally increased in client portfolios over the past decade due to the higher return potential (growth & illiquidity premium) relative to public equity markets.Private debt (5%-15%): The percentage allocation to this asset class has also increased over the past decade due to the persistently low yields available from high quality, traditional fixed income securities as well as to take advantage of opportunities that have been created by various market dislocations.Private Real Estate (5%-15%): The percentage allocated to this asset class has also increased over the past decade due to low fixed income yields, which has made real estate more attractive relative to traditional fixed income. These allocations are typically filled with a combination of core and value-add strategies using both open and closed-end vehicles.Other Alternative Asset Classes (5%-15%): This type of allocation could include Infrastructure, Hedge Funds, and/or GTAA (Global Tactical Asset Allocation) strategies that do not fit into one of the categories above.Fixed Income (5%-35%): As noted previously, allocations to traditional fixed income have been decreasing due to historically low yields available in investment grade securities and the resulting lower return expectations.? While traditional fixed income still plays a vital role as an overall portfolio risk (volatility) mitigation strategy and as a source of liquidity, where permissible, we have shifted allocations away from an exclusive reliance on traditional core and core plus strategies. Similar to equity portfolio structures, fixed income portfolios have become more segmented with allocations to strategies such as global bonds, emerging market debt, high yield, bank loans, and specialty credit.As stated previously, these allocation targets may not be appropriate for all clients based on their specific objectives and constraints. When they are appropriate, these target allocation recommendations occur over time based on evolving client needs, investment education, and market opportunities.Delivery structure(s) in use (i.e., mutual funds, ETFs, separate accounts, CITs, limited partnerships, MLPs, etc.)AndCo has exposure to separate account , mutual fund, commingled fund, limited partnerships, and limited liability company vehicles across our client base. However, we typically recommend our clients access alternative investments through private LP or LLC structures when possible due to the potential improved opportunity set associated with these types of vehicles.Describe your philosophy and approach to using factor weighted (Smart Beta) funds?Smart beta strategies represent index funds that are constructed and rebalanced in just about any way other than a traditional, passive market, capitalization-based index like the S&P 500. These rules-based, transparent strategies allow investors to allocate or tilt their portfolios to different investment factors, such as value, quality, momentum, etc., in a very cost-effective manner. While smart beta strategies are more expensive than traditional capitalization-based index funds, they do offer investors the ability to construct portfolios using many of the same factors that active investment managers use to build portfolios with much higher fees.This class of strategies is actually a very viable investment opportunity to consider for certain portfolios. The issue is the “smart” moniker this group of strategies just cannot seem to shake. “Smart” implies one thing: you are dumb if you do not invest in it, which is simply not true. Although there is ample research to support the viability of factor-based investing, all smart beta strategies are not smart, nor are they a panacea of portfolio construction. Smart beta’s vernacular now includes dozens of emotion-invoking names like “advanced” and “scientific,” to name just a few. The dual goal of these various iterations is a tale as old as time- -to imply superior differentiation and gather portfolio assets, or as we often disappointingly call it, another normal day in the financial markets.Smart beta is in its infancy and the story is still being written. Live, long-term track records make many of the strategies difficult to evaluate. Factors also go in and out of favor. For investors to exploit a factor, they must be willing to be patient. For instance, smart beta strategies with a capitalization factor have recently struggled. If an investor cannot remain committed to a factor that may struggle for an indeterminant amount of time, they should avoid smart beta strategies. In an increasingly complex world of investment opportunities with buzzword-worthy strategies, it is imperative that investors remain focused on the ultimate goal of achieving their investment objectives. Investors need to look past assumptive nomenclatures that are inextricably intertwined with investment opportunities. Investment decisions should always be based on a true understanding of the investment strategy and its specific role in the portfolio, along with normal considerations of structure, cost, risk, and return expectations.We have not utilized true “liquid alternatives” – long/short equity, arbitrage, equity market neutral – within client portfolios. Our clients have, however, begun to make use of liquid, multi asset class funds or “global allocation” funds. Typically, we see these funded in plans that are seeking additional return over what is available from traditional fixed income, while still seeking to manage return volatility. We have also utilized these vehicles as a parking space for capital call dollars into areas like value added real estate and direct lending. Our goal in the space has been to find managers that employ wide ranging portfolios, supported by significant research resources.Describe your firm’s philosophy and approach to development of asset allocation strategies, including:Methodology and approach used for asset allocation modeling, including linkage to asset/liability modeling and funding.Our philosophy is rooted in the belief that the long-term asset allocation should be guided by the plan’s assets and liabilities and is both informative and iterative. At its root, the goal of the asset allocation is to achieve the actuarial required rate of return while seeking to minimize risk and the potential for drawdowns. The approach is predicated on AndCo’s capital markets assumptions (CMAs) which forecast expected risk and return over a 10- to 15-year time horizon. Importantly, the asset allocation is guided by the plan’s unique policy constraints which results in a customized solution. AndCo recommends reviewing the asset allocation on a regular basis to ensure that the plan’s strategic objectives are being met in addition to dynamically rebalancing the portfolio to ensure the risk/return profile remains on target.Application of major variables (i.e., risk tolerance, return, correlation, skewness, kurtosis, etc.).AndCo conducts comprehensive asset allocation studies, and we work closely with clients through a framework tailored to reflect their portfolio’s unique investment objectives, risk tolerance and cash flow requirements (liquidity). The asset allocation process from “raw inputs” to “client output” consists of four broad steps:Determine Assumptions: We first define reasonable return, standard deviation (risk) and correlation input assumptions that focus the asset allocation study on asset classes (and proxies) suitable for the client’s portfolio. We select these asset classes using our own investment philosophy, the client’s investment policy statement, current portfolio allocations, and oral input from the client. While AndCo will work with clients if they prefer to utilize a different set of capital assumptions, we currently utilize J.P. Morgan’s long-term capital market assumptions for our asset allocation model inputs. The process of utilizing J.P. Morgan assumptions along with other institutional sources allows AndCo to effectively propose and build customized asset allocation structures for our unique, institutional clients that are backed by time tested methodologies and compared to alternative methods for reasonableness. AndCo’s base analysis model assumes a log-normal distribution based on expected return and variance for each asset class. While AndCo’s asset allocation modeling software does have the ability to incorporate assumptions for the third and fourth moments of skewness and kurtosis into our analysis (Johnson model), we do not maintain assumptions for these metrics as part of our standard asset allocation model inputs. However, the Monte Carlo simulations produces both skewness and kurtosis as model outputs that can be used in the evaluation of various asset mixes. Computer Modeling: Once asset classes and assumptions are set, we run a variety of range-based, mean-variance optimization scenarios. These scenarios allow us to review a number of potential asset mixes with the client and help determine the target asset class mix that most closely balances the client’s investment objectives, risk tolerance, and portfolio liquidity requirements. To further stress-test a potential target asset mix, we also perform Monte Carlo simulations on potential asset mixes. These simulations generate the probabilities of a given asset allocation’s expected return, standard deviation, skewness, and kurtosis achieving the client’s goals over time. These probability distributions are useful in evaluating potential outcomes and downside loss probabilities. The simulation tool also allows the application of inflation adjustments, expenses, and future cash flows for a more detailed review of potential outcomes. Qualitative Overlay: We believe that asset allocation models and simulations help create a useful framework for observing and understanding the statistical aspects of asset allocation scenarios. However, it is important to realize this framework does not contain the precognition to determine future results. After determining what appears to be an appropriate asset allocation using modeling and simulation, we assist our clients in reviewing and assessing qualitative, real-world factors related to the implementation requirements of potential asset mixes and underlying investment strategies with respect to the client’s portfolio objectives and risk tolerance.Report Formulation & Policy Update: The final step in the asset allocation process is to present a clear summary of the asset allocation study’s recommended findings along with the necessary investment policy statement updates to the client. Since the asset allocation process is about setting long-term portfolio goals and constraints, it is critical for the client to “buy into” the overall decision-making process. This level of client understanding will promote the strategic implementation and modification of asset allocation strategies over time and help to avoid reactive decision-making due to short-term capital market volatility.*These processes incorporate estimates and projections which are inherently speculative and subject to various uncertainties whereby actual outcomes or results could differ materially from those indicated. How frequently and under what circumstances do you believe asset allocation should be changed?Consultants recommend changing a client’s asset allocation on a case by case basis. We review the asset allocation every quarter during our quarterly presentation with the Board. These reviews may also occur in conjunction with a study on plan objectives or spending policies. If asset values remain relatively constant, we normally recommend performing an asset allocation study once every two years. If the asset value grows or diminishes significantly, we recommend reviewing the asset allocation immediately following this event.Asset allocation policies should be appropriate for the long-term, and short-term changes to the market environment must not induce asset allocation policy changes. We design asset allocation policies with baseline benchmarks and ranges. This allows managers and the Board to take advantage of different asset classes without making wholesale changes to an asset allocation policy. This approach incorporates a prudently flexible asset allocation policy while also preserving Fund discipline. We review our long-term market expectations on an annual basis. Risk/return expectations for broad asset classes change over time. Market expectations are an important factor in our asset allocation analysis. As those expectations change, we view the various asset classes more or less favorably. A periodic asset allocation analysis can lead to a recommended change in the long-term asset allocation. Does your firm employ a tactical allocation strategy? If yes, describe the parameters and the decision-making process.AndCo segments asset allocation decisions in client portfolios into three distinct categories: strategic, opportunistic (tactical), and dynamic trading based. We believe the first two types of asset allocation decisions are critical in designing and managing successful client portfolios over time. The third type of asset allocation decision (dynamic trading-based shifts), in its pure short-term, timing-based form, is not something we support or recommend in client portfolios. A more robust look at how we view the three types of asset allocation decisions is detailed below.Strategic asset allocation: AndCo’s definition of strategic asset allocation is the process of setting the long-term asset allocation targets for a client’s portfolio. The decisions made, and the targets established, are the outcome of a formal asset allocation study. These targets seek to represent the highest probability of achieving the portfolio’s objectives within the client’s stated risk tolerance (constraints). We believe each client’s long-term, strategic asset allocation structure is the dominant factor in determining the potential return and risk of the overall portfolio over time. Given its foundational structure, we dedicate significant time and resources to working with each client to develop and maintain prudent strategic asset allocation targets for their portfolios. This process is structured to result in a custom, diversified portfolio poised to weather multiple market environments. This process also includes the introduction of new, long-term asset classes to the portfolio’s strategic asset allocation structure over time as asset allocation studies are updated and capital markets evolve.Opportunistic asset allocation: AndCo’s definition of opportunistic asset allocation is decisions based on taking advantage of tactical, limited term (approximately 12 to 36 month) opportunities and/or dislocations that occur periodically across global capital markets. These opportunistic allocations are not short-term timing or trading-based decisions, rather these prospects develop over a period of time as a result of structural market shifts or other extraneous events. While each occasion is unique, the common theme is that a structural dislocation creates a limited window for potential investment allocation and the opportunity will mature and dissipate over time. Based on this definition, opportunistic asset allocation decisions are separate and distinct from long-term strategic asset allocation targets which are perennial allocations in a client’s portfolio. However, a well written investment policy statement can be structured to provide the flexibility necessary to take advantage of potential tactical asset allocation opportunities within the client’s broader strategic asset allocation and risk tolerance. Dynamic Trading-Based Asset Allocation: AndCo’s definition of dynamic trading-based asset allocation is simply “market timing” (i.e., short-term portfolio shifts in and out of asset classes) and we do not recommend trading-based asset allocation decision-making for client portfolios. Capital markets are not always efficient, and as a result, attempting to shift a portfolio’s asset allocation in anticipation of, or in reaction to, short-term market moves is a losing game. Further, due to the nature of dynamic trading-based asset allocation decisions, every shift requires two distinct portfolio decisions – “when to get in” and “when to get out” or vice-versa. Even if short-term market-timing calls worked consistently, which they do not, institutional client portfolios are simply not structured for dynamic trading-based asset allocation decision-making.Does your firm use alternative asset allocation methodology beyond Markowitz? Please explain.While our asset allocation process begins with the Capital Asset Pricing Model (CAPM), our model allows for probabilistic simulations, known as a Monte Carlo simulation, that seeks to provide an expected range of future outcomes. Further, given that our CMAs often deviate from expectations, we will seek to perform a reasonableness test based on the current market conditions which can influence decision-making over shorter time periods.Does your firm utilize liability driven methodology? Please explain.Yes. AndCo has the ability to incorporate and model liabilities as part of the asset allocation process. Plan liabilities are an important factor in the determination of an appropriate investment strategy for the Plan. Under normal circumstances, AndCo recommends conducting a formal asset allocation or asset/liability study in three-year increments from the previous study. While AndCo can construct a strategic asset allocation study with inputs from the client’s investment policy statement, we need to work with the client’s actuary to conduct an asset/liability study. Whether we consider the liability profile and funding ratio as important reference points in a strategic asset allocation study or we formally incorporate the liability stream in an asset/liability study, the potential asset allocation structures (mixes) we propose will factor in the client’s liabilities and cash flow requirements.Manager SelectionBriefly describe the process and methodology of choosing an investment manager and fund from initial screening through the development of your recommendation.Manager Search Process Overview Our manager search process is thorough, repeatable, and transparent. Initial Screens: We first filter managers through preliminary screens checking for baseline statistical qualities and appropriate style. Our research analysts distill the soundest strategies according to our databases’ extensive qualitative and quantitative data. We rely on data from proprietary and purchased manager databases, including eVestment Alliance, and Morningstar Direct.Due Diligence Process: Once a manager has passed the initial screening process, we then begin our comprehensive due diligence process. We customize our due diligence questionnaire to each asset class. This process fills in a quantitative framework with qualitative traits.Investment Policy Committee Approval: The Investment Policy Committee is comprised of four members. Three voting members and one non-voting member. The three voting members consist of our CEO, COO, and Executive Director of Consulting. In the event of a tie, our CEO carries a double vote to break the tie. The non-voting member is our Chief Compliance Officer. Our Chief Compliance Officer represents the interests of the firm and serves as the Secretary of the Investment Policy Committee.Research Report Formulation: Once the Research Group has a selection of approved managers, they prepare a comprehensive research presentation along with the lead consultant. The lead consultant then presents a list of suitable managers to the Board. The consultant will fully explain the advantages and disadvantages of each while allowing the Trustees to voice their input. The Trustees often select a sub-set of the managers to interview in person and then make their selection.Our process helps to ensure our clients only review appropriate managers for their objectives. Our clients can be confident we recommend managers only after a comprehensive process that incorporates our deep research capabilities, our broad experience, and the Board’s own sentiment.Due Diligence ProcessAll investment managers that are presented for our clients’ consideration must be approved by AndCo’s Investment Policy Committee. Our Research Group identifies potential investment managers using our database resources and investment industry network. Our due diligence process for selecting and monitoring investment managers is as follows: Identification: The first step in our due diligence process is identification of investment opportunities. Our firm’s process is unique because we maintain an open-door policy. This means that any investment manager that wants to participate in our due diligence process has the opportunity. Identification occurs from many approaches including:Database Screening/Research Team – we use several databases to search and review strategies including Investworks, eVestment, and Morningstar Direct in conjunction with our research team’s investment manager network.Consultant Sponsored – our consultants can identify and sponsor investment ideas. These ideas are then reviewed by the Research Team and eventually our Investment Policy Committee, if applicable.Client sponsored – many times our clients have great ideas and can request that we review them. Similar to our consultant requests, our Research Team will review them.Investment Manager Requested – we maintain an open-door policy for any manager wishing to be considered can request to enter our due diligence process.Preliminary Questions: After we have identified a potential manager, we ask the manager to complete our initial due diligence questionnaire (DDQ) to efficiently confirm that the manager meets specific minimum criteria with respect to their firm and the specific strategy, as follows:Does the strategy have a three-year institutional track record achieved by the same individual or team? Does the firm report strategy information, including performance and portfolio data, to the following databases: Morningstar Direct, Investworks and eVestment Alliance? What are the total AUM and total number of accounts for the firm and the strategy? Is the firm registered with the SEC? What is the effective date of the registration? ?If the firm is not registered with the SEC, please provide an explanation? Has the firm, or any of its employees, been involved in any litigation, or been the subject of any investigation or sanction by any state or federal regulatory agency or industry self- regulatory organization? ?If so, please explain the nature and outcome of the litigation, investigation, and/or sanction. Does the firm claim GIPS compliance? If so, has the claim of GIPS compliance been verified, when, and by whom? Does the firm utilize a third-party trading/portfolio management system? If so, provide the name of the system. Does the firm have a dedicated compliance officer? If so, how long has the individual been in this role at the firm? What is this person’s background in compliance? Will you acknowledge, in writing, your role as a delegated fiduciary to the plan? Will you accept legal venue in the client’s county and state? Do you have errors and omissions insurance? If so, what is the amount of coverage and by whom is it issued? ? Does the firm have a formal disaster recovery plan? ?When was the plan last tested and what were the results?Due Diligence Questionnaire: If the manager provides satisfactory answers to the above questions, we will send the manager our due diligence questionnaire. The due diligence questionnaire focuses on the investment management team, research process, manager’s ownership structure, legal standing, and investment strategy. The Research Group reviews the manager questionnaire and initiates a detailed analysis. Our questionnaire underlies our manager evaluation process and enables us to prepare adeptly for a manager meeting. Manager Interview: After receiving the completed due diligence questionnaire, the Research Group and/or a consultant will interview the strategy’s key decision makers. This allows the interviewer to crosscheck the information provided in the due diligence questionnaire and understand the firm’s qualitative underpinnings. Often, we will interview the key decision makers on multiple occasions and venues. We will go on-site as necessary, and we also invite investment managers into our offices for interviews. Once these interviews are completed, the Research Group compiles an internal research report for our Investment Policy Committee. Investment Policy Committee Review: Every investment manager strategy that is presented to our clients must be approved by AndCo’s Investment Policy Committee. The Investment Policy Committee reviews the Research Group’s analysis and recommendation and determines if the strategy is suitable for our clients’ consideration. The Investment Policy Committee is comprised of four members. Three voting members and one non-voting member. The three voting members consist of our CEO, COO, and Executive Director of Consulting. In the event of a tie, our CEO carries a double vote to break the tie. The non-voting member is our Chief Compliance Officer. Our Chief Compliance Officer represents the interests of the firm and serves as the Secretary of the Investment Policy Committee.Ongoing Review:? If the manager is approved, the research analyst or consultant that sponsored the manager will cover the manager going forward.? Each manager is required to provide quarterly compliance updates to AndCo, and the AndCo Investment Policy Committee reviews the approved manager list on a quarterly basis to identify exceptions that might require further due diligence. Indicate the source of information for investment manager candidates, CITs, funds, ETFs, etc.Gather – We subscribe to numerous industry databases such as eVestment, Morningstar, Bloomberg, Preqin, and Investworks to name a few. In addition, our research analysts make numerous information requests such as our initial questionnaire, due diligence questionnaire, quarterly questionnaire, as well as various other document requests such as ADV’s, pitchbooks, etc. In addition, our research analysts and consultants meet with managers in our offices located across the country as well as on-site visits at the investment managers office. We also gather information from managers and trustees at industry conferences.Verify – We verify information by cross referencing to ADVs, requiring GIPS compliance for performance numbers, checking with previous and existing clients regarding experience and visiting investment managers to conduct final operational due diligence to get comfortable with the information we are obtaining. Update – We update our information by regularly requesting updates, current versions of various documents, and meetings. We also continuously attend industry conferences to update information regarding the investment management community. Practically every day, AndCo is meeting with investment managers, Trustees and Service Providers. The information that we obtain from these meetings is updated in our system for review. Maintain – We utilize a proprietary internal database that all employees can access. When we have meetings with managers this information is populated in our internal database and can be reviewed by all employees. This allows our firm to have “real time” access to information regarding managers our firm is meeting with and getting updates on. 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?AndCo conducts on-site manager visits as part of new manager and ongoing due diligence. In 2019, we conducted approximately 148 on-site meetings, particularly for those managers facing termination or seeking approval. We believe on-site due diligence visits are appropriate under a number of circumstances. Before recommending a manager to our clients, a due diligence visit must occur. We also conduct due diligence visits when a manager has not met multiple performance criteria.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?AndCo classifies equity managers across multiple parameters. First, strategies are classified by domicile (domestic, international, emerging markets, frontier). Second, depending on the depth and breadth of the market, strategies may be further classified by capitalization (large, mid, small, micro), asset category (growth, core, value) and investment style (aggressive growth, traditional growth, GARP, core, relative value, traditional value, deep value). AndCo’s Research Group applies these classifications using a combination of quantitative holdings-based analysis coupled with a qualitative review of each manager’s philosophy and process.How does your organization verify the validity of limited partnership and separate account managers’ performance records?From a due diligence perspective, our primary method to validate track records is to replicate the performance record in-house. We ask managers to send us cash flow data, asset values at entry and exit and any reinvestments into preexisting assets in order to reconcile the performance record reported by the managers. In addition, as a complement to our internal work, we can use the audit opinion as a validation when audited financial statements exist. Finally, SEC registered firms are responsible for accurate performance reporting in their marketing materials. While we would never rely exclusively on the performance claims of SEC registered entities, we can use them as a reference point for the numbers we calculate internally. For separate account investments in public equity or fixed income strategies, we prefer investment management firms that are GIPS compliant and verified. When verifying performance on a current client investment, AndCo calculates performance in accordance with the GIPS and reconciles these returns against the manager provided performance records. We also request Quarterly Compliance Questionnaires from all our managers, for each of our clients. If any performance calculations differ, our Client Solutions Group works directly with the manager to identify the source of the discrepancy and arrive at a consensus on the correct performance return.What is your position relative to active and passive investing?Passive strategies can be an effective tool to manage asset allocation exposure through a low-cost investment in an efficient pocket of the overall capital market. Certain asset classes, such as domestic large cap equities, operate in highly efficient markets that could inhibit active managers from significantly outperforming their benchmarks. Substantial empirical evidence demonstrates that passive index funds can be significantly more cost-effective than active strategies in efficient market spaces over the long run. Additionally, the frequent buying and selling of active securities in efficient markets can generate substantial brokerage fees without increasing expected performance over the long run.AndCo views passive strategies as complimentary approaches and not total investment solutions. In more inefficient market spaces, such as domestic small cap equities and emerging market equities, active management could add significant value, even after management fees.When appropriate, we recommend a core-satellite approach. This philosophy calls for an allocation to an index fund, the “core” allocation and one or more active strategies. The benefit of this approach is twofold. First, the “core” allocation to an index fund can substantially reduce investment management fees since index funds often cost a fraction of what active strategies cost. Second, the active or “satellite” managers have greater flexibility to add value through significantly different security weightings than those of their benchmark, while the allocation still maintains its overall risk profile.Do you use multiple funds or managers for larger sleeves such as Large Growth, Core or Value?Within each client’s objectives and constraints, we seek to design and implement a portfolio structure that provides an appropriate level of diversification while maintaining reasonable costs and limiting non-beneficial complexity. This philosophy includes the maintenance of meaningful allocations to target asset classes of no less than 5% as well as splitting manager/strategy mandates, when necessary, to gain desired exposures (e.g., style, capitalization, quality, etc.). As a result, based on a portfolio’s size and allocation to a specific asset segment, it is possible we would recommend multiple investment managers for large portfolio allocations. However, our portfolios are typically built around a limited number of cost-effective investment strategies designed to gain core exposure to major asset classes, which we then supplement with alpha-generating ideas. This process seeks to create portfolio and manager structures that are understandable, have a higher probability to be successful, cost-effective, and not overly burdensome to administer.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:CITsMutual FundsETFsIndividual bondsIndividual stocksLimited PartnershipsSeparately Managed Accounts (SMA)Other (explain)For clients that are similar in size to the City of Burlington Employees Retirement Plan, we commonly use commingled investment vehicles as the primary manager allocations. ?Such vehicles include CITs, mutual funds, and limited partnerships.? Separately managed stock and bond portfolios are also used if a commingled investment vehicle of the same strategy with competitive fees is not available for use. The percentage allocation to such vehicles would be driven by the client’s asset allocation and manager structure.? However, it is not uncommon for such clients to have a majority of their assets allocated to such commingled investment vehicles. Performance Measurement and EvaluationDescribe 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.Our performance measurement system is provided by InvestmentMetrics PARis, a fully integrated investment analytics and client servicing platform that runs using Software as a Service (“SaaS”) technology. Its features allow us to create fully customized reports suitable for the specific needs of our clients.Client ServicingManager, asset allocation, and portfolio compliance trackingClient relationship management suitePRISM client web portal for remote report deliveryPerformance and investment analyticsComprehensive sponsor peer group database delimited by sponsor type and portfolio sizeInvestment strategy style peer groupsCapabilities to customize peer groupsCustom, hybrid, and traditional benchmarkingFull suite of investment industry measurement and statistical toolsInvestment strategy analysis through holdings and market capitalization analysisCustom manager and portfolio write-upsPrivate investment reporting specific to the unique nature of this asset classAccurate and appropriate benchmarks and universes are essential to effective portfolio measurement. We select and show benchmarks for individual managers, asset classes, and the whole portfolio.Investment strategy benchmarkingActive benchmarks: We research and identify active benchmarks consisting of actual returns of managers investing in a similar style. These are expressed as a percentile ranking in our performance reports. An example would include returns from only domestic large cap growth strategies.Passive indices: These are traditional benchmarks that directly compare a strategy’s return to the aggregate return from a passive portfolio of securities. We select an index that most closely conforms to the opportunity set of an investment manager. Examples include the S&P 500 Index and the Bloomberg Barclays Capital Aggregate Bond Market Index.Asset class benchmarkingAsset class benchmarks: Asset allocations should typically be benchmarked against an asset allocations broad opportunity set. We use broad market indices for this purpose. These include the Russell 3000 Index and the Bloomberg Barclays Aggregate Bond Market Index which track the complete domestic stock market and investment grade bond market, respectively. Custom hybrid indices: We can also create custom benchmarks based off the weighting of asset classes or investment styles within an overarching asset class. For example, a fixed income allocation with 80% in core strategy and 20% in a TIPS strategy should be compared to a benchmark that best represents this allocation. A hybrid benchmark consisting of 80% in the Bloomberg Barclays Capital Aggregate Bond Market Index and 20% in the Barclays Capital US TIPS Index.Total portfolio benchmarkingCustom hybrid benchmarking: Similar to the benchmarks we create for individual asset classes, custom portfolio benchmarks are weighted benchmark composites of a portfolio’s asset allocation.Institutional investor peer groups: We use predefined and customized peer group universes to provide percentile return rankings against similar institutional investors by type and peer group. These peer groups include public pensions, Taft-Hartley, Endowment and Foundation, and corporate pensions, among others. We can also create a custom peer group that more closely reflects a client’s peers. Performance data for most of our clients is since total fund inception.How often does your firm review an investment manager’s performance?Monthly, we gather our client’s custodial data (cash flows and market values) from either the custodian’s website (preferred method) or via monthly statements. Our Client Solutions Group enters the data into InvestmentMetrics PARis, our performance analytics and reporting system. At the end of the data entry process, the performance analyst checks the data for possible errors and inconsistencies.PARis is a fully integrated investment analytics and performance reporting system which allow us to create customized reports that are tailored to the specific analysis and reporting needs of our clients including but not limited to the following:Performance and risk analysis using return and holdings-based dataInvestment manager and investment policy statement guideline complianceInvestment strategy/style peer groups comparisonsCustom, hybrid, and traditional benchmarkingIn addition to PARis, we have access to a variety of analytical tools, as well as investment manager and mutual fund data through the following vendors: Investworks, eVestment Alliance, Bloomberg, and Morningstar Direct. Using these tools and data, we have the ability to perform detailed analysis which allows us to further evaluate the performance, risk, style, and guideline compliance of our client’s investment programs.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?We believe that regular interactions with investment managers, including portfolio reviews, are the best way to stay ahead of problems. ?To that end, we survey all recommended managers quarterly for an update on firm, strategy, and investment team changes (both actual and anticipated changes). ?If there have been any changes at the firm, strategy, or team level, we will investigate further, as these changes can sometimes foreshadow deterioration in performance, and we aim to avoid being late in making the decision to move on from a strategy.That said, we also review performance on a quarterly basis. ?But performance without context has limited utility. ?We?request portfolio holdings and characteristics so that we can evaluate whether the portfolio reflects our understanding of the manager's investment style. ?We then compare the quarterly results of the strategy against the portfolio characteristics to determine if the performance results make sense and conform with expectations.Stepping back from quarterly performance, we also look at longer time frames to flag concerning trends. ?We look for managers who have underperformed their benchmarks for four consecutive quarters, and we examine those strategies that have posted below benchmark results on an absolute and risk-adjusted basis over the trailing three years.Finally, our Research Group conducts a quarterly strategy review and presents their material findings to the Investment Policy Committee. ?We have created a strategy scorecard to highlight certain key metrics, including trailing performance (absolute, relative, and risk-adjusted), as well as changes at the firm, strategy, or team level. ?This scorecard applies a rules-based approach to flag deviations from the norm. ?Our Investment Policy Committee provides a thoughtful perspective and forces each analyst to make a compelling case to retain each manager. ?There are no automatic triggers that place a strategy on a Watch List. ?The collective judgment and experience of the analyst, the broader Research Group, and the Investment Policy Committee enable us to assess each situation independently.? We aim to make thoughtful, reasonable decisions in a timely manner. ?In this way, we have the benefits of a rules-based system with the flexibility to take history and context into account.When we recommend terminating a manager, it comes after closely monitoring the manager using a clear, understandable, and repeatable process. In each of our comprehensive quarterly reports, we provide checklists that monitor adherence to the various points of compliance detailed above.TerminationThree violations put the manager on “watch” status, and we present the Board three options:Monitor closely but no change. Review every quarter until issues are resolved or manager is terminated.Introduce alternative managers in a specific style to show the Board comparative risk/return profiles. Helps to reduce transition timeline if termination is necessary.Termination and manager search.If the manager violates any of these individual guidelines, we may recommend manager termination to the Board.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.AndCo monitors and analyzes investment performance by utilizing our performance measurement system, which is provided by Investment Metrics PARis, a fully integrated investment analytics and reporting service. PARis’ reporting attributes are as follows:Reports can be customized to the individual needs of a client. We can generate reports on a monthly and quarterly basis.Access to extensive performance and characteristic exhibits, including but not limited to the following:Total fund and investment manager performance vs. appropriate indices and peer groupsComposite/asset class level reporting—all equities reported together, all fixed income reported together, etc. vs. appropriate benchmarks Gross and net-of-fee performanceAnnualized and calendar year resultsRolling period analysisRisk/return analysisGrowth of a dollarReturns can be calculated using either time-weighted or dollar-weighted (IRR) calculationsAsset Allocation Charts and Investment Policy Compliance TableEquity and fixed income portfolio characteristicsFinancial reconciliation/cash flowsInvestment manager fee detailSpecialized alternative asset class reporting—such as hedge funds and private equity including relevant private equity ratios and public market equivalent calculationsRisk statistics such as standard deviation, beta, alpha, R2, Sharpe Ratio and up-down market capture ratiosDescribe 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? What is your organization’s typical turnaround time for the preparation of such analysis?Our performance reporting capabilities are vast and highly customizable. Specific time-period reporting can be tailored to each client. Our standard reports include QTD, YTD, FYTD, trailing 1, 3, and 5 years, trailing fiscal years, trailing calendar years, and since inception reporting. Returns for periods greater than one year are annualized.Our performance reports can include the following comparative data and risk measures based on the needs and preferences of each client relationship:An overview describing the drivers of performance for the global economy.Customized qualitative summaries of the Quarterly Performance Report.At the Total Fund and Asset Class Level:Comprehensive plan sponsor peer group database delimited by sponsor type and portfolio size. Further parameters are also available, such as asset allocation mix parameters.Custom benchmarks with percentage allocations to market indices that are consistent with the client’s historic asset allocation structureComposite/asset class level performance reporting—all equities reported together, all fixed income reported together, etc. vs. appropriate benchmarksAnnualized and calendar year returns or customized as desiredTotal Plan risk-based analysisTotal Plan performance attribution analysisCurrent portfolio adherence relative to the investment policy targetsAt the Manager Level:Broad and style-based market indicesStyle based peer group comparisonsGross and net-of-fee performanceMarket cycle analysisRolling period analysisGrowth of a dollarRisk/return scatterplotsTime-weighted using modified Dietz or dollar-weighted (IRR) return calculation methodologies Asset allocation chartsHoldings based analysis and attributionEquity and fixed income portfolio characteristicsFinancial reconciliation/cash flowsInvestment manager fee detail Public Market Equivalent and TVPI for private market investment managersAdditional specialized alternative asset class reporting for closed-end investment vehicles, such as J Curve, portfolio characteristics and allocation, and fund and partnership summariesRisk statistics including standard deviation, beta, alpha, R2, Sharpe Ratio and up-down market capture ratiosIf a current market value or reliable estimate from the investment manager is not available, which is typically more common when reporting private investment performance, our Client Solutions Group (CSG) will carry the most recent portfolio value forward to the current period – resulting in a 0% return for periods with a reporting lag. AndCo does not attempt to adjust the market value to compensate for the lag. Any lag in performance reporting for private investments results from a delay in valuations from the investment manager and will vary from investment to investment. Upon receipt of final capital statements, CSG inputs updated valuations as of the manager’s statement date, ensuring that the most up-to-date valuation is represented in all client reports. . We can accommodate client-specific requests on timing of valuation updates as it relates to fiscal year end reporting requirements.Are rates of return routinely presented on a net of fee basis?We calculate manager returns both net-of-fees and gross-of-fees.Databases:Please describe the databases your firm uses.Is the database proprietary to your firm or purchased?If purchased, how many do you use and for what purposes?How many investment managers are in your database(s)?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.Describe your screening process and capabilities.How many managers are actively monitored?AndCo employs some of the most robust and deep databases available to investment consultants. Our distinct advantage is that our clients receive transparent, comprehensive, and repeatable manager searches. This helps to protect our clients from conflicts of interest and identify managers suited for their unique investment objectives. Most importantly, we neither sell our internal database nor do managers pay to be included in our databases. AndCo currently purchases access to the following databases:InvestmentMetrics InvestworksInvestworks provides a comprehensive link between our performance analytics and research systems. In addition to having access to all our applicable benchmarks, peer groups, and manager performance feeds, it allows our researchers to compile a custom database that can incorporate this quantitative data and the qualitative data we gather from managers, such as strategy commentary and analyst expectations. The system has over 36,000 products. Additionally, it allows our researchers to design and automatically produce tailored research reports for our consultants. eVestment AllianceeVestment Alliance is one of the largest institutional investment manager databases. We can access 2,500 quantitative and qualitative data fields on 18,125 investment managers. It provides an excellent first look at the entire institutional investment manager spectrum. It details strategy performance, quantitative characteristics, assets under management, fee structures, strategy narratives, and portfolio holdings. eVestment Alliance also provides customized manager reports and side-by-side manager comparisons. Morningstar DirectMorningstar Direct is a comprehensive online manager research platform that complements the capabilities of our other databases. The Morningstar database contains over 350,000 investment offerings, including 131,000 open-end funds, 14,000 closed-end funds, 9,300 separate accounts, 8,200 hedge funds, 3,500 ETFs, etc. Through Morningstar, we gain access to the Morningstar database which includes comprehensive qualitative and quantitative data. We use this data to supplement our performance reports and research process, as well as supplement the data we gather on managers via our proprietary due diligence questionnaire (DDQs). PreqinPreqin is a leading provider for data and intelligence on alternative assets, including private equity, real estate, infrastructure, hedge funds, and private debt strategies. The global database contains information on over 19,800 private equity, 5,700 real estate, 1,000 infrastructures, 21,000 hedge funds, and 2,000 private debt funds. This database allows us to research funds currently in the market, find new funds, and check performance on past funds. Preqin also frequently provides robust market research and investor surveys across the various alternative asset classes. We use all of these tools to help clients build a comprehensive portfolio of alternative investment strategies.Bloomberg TerminalThe Bloomberg Terminal enables professionals in the financial service sector and other industries to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data. The system also provides news, price quotes, and messaging across its proprietary secure network.CAMBAKThis is our proprietary relationship management system. AndCo has invested significant thought and resources, including the hiring of one full-time, 100% dedicated technology programmer to build out this proprietary system. CAMBAK allows all parts of the consulting team to access appropriate client information quickly, efficiently, and safely.Proprietary Internal DatabaseEvery investment manager that is presented for our clients’ consideration is subjected to AndCo‘s due diligence process which includes the completion of a comprehensive due diligence questionnaire, submission of various required documents as well as in-person and telephone meetings. All quantitative and qualitative data gathered via the due diligence process is housed in AndCo’s proprietary relationship management database, CAMBAK. This data includes but is not limited to the following:ADV FormsPitch booksAndCo research notesAndCo approved statusAndCo profile material on the managers and approved strategiesBeyond manager specific data, CAMBAK houses all other data and material related to every aspect of AndCo’s client relationships. AndCo has invested and continues to invest significant resources to the development of CAMBAK, including one full-time technology programmer whose sole focus is the development and maintenance of this proprietary system. CAMBAK is a unique and leading-edge management tool which we believe is unmatched in the investment consulting industry. Managers do not pay to be included in our internal data base and we do not sell our internal database to third parties.We have access to thousands of managers for inclusion in our initial screens and quantitative work but focus closely on about 390 strategies that we’ve identified as the best available in the marketplace (relative to their peers based on industry metrics such as performance, fees, risk and manager continuity). Approved strategies are the team’s highest conviction ideas and are used in the majority of searches. The team maintains an open-door policy and engages in due diligence with any manager that meets the team’s minimum requirements established by an internally derived pre-screening methodology.Risk ControlDoes 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.Yes. We have included a sample Investment Policy Statement as Exhibit 6, which includes guidelines for separate equity and fixed income managers.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.While a client’s strategic asset allocation targets represent the core foundation of its portfolio structure, the individual managers and strategies utilized are the building blocks of the investment program. As a result, managers and strategies need to be evaluated both in isolation and how they fit within the overall client’s asset allocation structure. We seek to build and maintain an appropriate roster of managers for each client portfolio that employ heterogenous strategies that are not highly correlated with one another. To do this effectively, it is essential to understand the factors driving a strategy’s performance and risk profile over time by evaluating various financial and risk characteristics, including, but not limited to, the following:MPT statistics: Alpha, Batting Average, Beta, Correlation, Downside/Upside Market Capture Ratios, Down/Up Market Returns, Downside Risk, Information Ratio, Maximum Drawdown, Number of Negative/Positive Periods, R-Squared, Sharpe Ratio, Sortino Ratio, Standard Deviation, Treynor Ratio, Tracking Error, etc.Portfolio Characteristics: Price/Earnings Ratio, Price/Book Ratio, Price/Cash Flow Ratio, Dividend Yield, Earnings Growth Rate, etc.Annual portfolio turnoverPortfolio concentration/number of holdingsSector/country allocationsHoldings and returns-based style analysisHoldings-based attributionCross holdings analysis between strategiesOur evaluation and assessment processes and techniques are ongoing for each client portfolio. This allows us to observe risk metrics at the overall portfolio and manager levels through time and to judge if these risks are appropriate within the client’s portfolio structure.How do you manage for extreme left-tail risk? Do you consider Value at Risk (VaR) or Conditional Value at Risk (CVaR)?AndCo calculates Value at Risk (VaR) at the portfolio and asset class level using the historical, variance-covariance and Monte Carlo methods as well as a Conditional Value at Risk (CVaR) as part of the asset allocation process. In addition, we have the ability to calculate VaR at the total fund, composite and investment manager level using the historical and variance-covariance methods. AndCo continuously monitors client risk factors from a variety of qualitative and quantitative perspectives. Left-tail risk can be managed through a more conservative asset allocation, the retention of investment managers with a focus on downside protection or a combination of both. We believe it important that clients maintain awareness of their portfolio’s potential downside risk potential, but this is just one of many factors that should be considered when making portfolio decisions. Through the utilization of our asset allocation and asset liability review capabilities we provide a framework for various plan risk analysis and testing. We utilize historical returns, back-tested models, and simulations as well as incorporate liabilities and cash flow analysis to assist the client with decisions regarding asset mixes and future changes to asset mixes. The disadvantages, as with every modeling scenario, is that models may not effectively account for fat-tail events, regulatory policy changes, and other non-quantifiable variables that occur within the capital markets. To help capture the quantifiable aspects of fat-tail events as identified in the question of Value at Risk (VaR) or Conditional Value at Risk (CVaR) our Monte Carlo model simulates results that can be reviewed and discussed with the client at the total portfolio level through the asset allocation process. The underlying portfolio construction (manager implementation) will also be engineered to address the client’s risk posture and help ensure consistency with the portfolio’s objectives.How do you define risk for a defined benefit plan? How do you help sponsors mitigate that risk?The main objective in managing a defined benefit plan portfolio is to meet or exceed the plan’s actuarial return assumption so the plan is sufficiently funded and can pay it is benefit promises. Therefore, the key risk to measure for a defined benefit pension plan is the risk of falling short of the plan’s actuarial return assumption and failing to meet the plan’s ongoing distribution obligations. AndCo assists clients in managing that risk by providing independent, customized portfolio advice based on each client’s particular needs and circumstances. We define the risk for a defined benefit plan in a multitude of ways, including the identification of absolute and relative risks which occur at various levels of the portfolio. We work closely with our clients to identify and outline these risks and assess plan dynamics, liabilities, and liquidity needs to appropriately assess these key components of the plan’s risk tolerance: Performance shortfallPortfolio volatilityLiquidity Beyond these portfolio specific issues there are numerous other risks to consider including: interest rate, social/legislative, business, credit, operational, inflationary, valuation, headline, and market-related systematic risks.We work with the client to mitigate these risks in various ways at the total portfolio, asset class, and investment manager level. At the broad asset allocation level, we conduct various elements of asset allocation and ALM analysis to help determine what asset mixes over time have the largest probability of helping the client achieve their goals. At a manager level, in addition to the investment strategy due diligence process conducted by our Research Group and Investment Policy Committee, AndCo also conducts operational due diligence at the firm level to further evaluate elements of an investment manager’s operations to help protect our client’s assets from risks of major capital impairment including compliance, fraud, or technology issues.What do you consider the critical success factors for a de-risking strategy?Before embarking on a de-risking strategy, we believe it is paramount to conduct a thorough analysis of the client’s objectives and develop an understanding of the portfolio’s actuarial rate of return, funding status, projected liabilities, plan structure, demographics, Investment Policy limitations, and the tolerance for funding risks. Through this process, and working with the client’s actuary, AndCo will develop an understanding of the portfolio’s characteristics and use these inputs as a basis for the construction of an asset/liability study (ALM) to review with the client. This collaboration and evolution of the ALM analysis are the most critical factors in the success of a de-risking strategy.The ALM analysis will provide the framework for the creation of a de-risking strategy and glidepath that would be implemented within the investment policy guidelines of the portfolio. AndCo’s role would then be to continually monitor the compliance of the portfolio within this framework and report variances along with recommendations for modification at the regular client meetings. Describe the optimization or risk management techniques used in the portfolio construction process. Detail strategies employed to prevent excessive volatility.AndCo provides truly customized investment solutions to our clients. As a result of this process, our efforts to focus on risk management will be tailored to the specific needs of the client’s investment program, performance objectives, risk posture, and the nature of their liabilities. Through our asset allocation and asset/liability (ALM) processes and through our continued implementation of investment strategies, we review the total portfolio’s risk on an absolute basis, by asset segment, and on each investment manager. We will assist the client to define the appropriate risk level for their portfolio within the Investment Policy Statement (IPS). The IPS will spell out professional responsibilities for various portfolio activities, asset class targets and the acceptable ranges around those targets, liquidity requirements and any specific security and/or quality limitations. Since capital markets cannot be controlled, monitoring, executing, and adjusting the portfolio based on the principal elements of the IPS on an ongoing basis is the best form of risk control and downside protection. Our analysts and consultants continually review each client’s portfolio and underlying investment managers to help ensure allocations stay consistent to target weights, that performance bogeys and style integrity is maintained, and that compliance with the IPS is maintained. We analyze the portfolio and investment manager risk-adjusted performance relative to index benchmarks and peer groups. In addition, to the performance and investment risks, we provide an additional layer of operational due diligence on investment managers to assess any other potential areas of operational concern including compliance, regulatory, or technological issues that may exist at an investment firm.How does your approach differ for plans that are closed versus active?How do you propose meeting periodic cash flow needs?Periodic cash flow requirements are always considered when designing an investment strategy for the Plan. In a more general framework, to create an effective strategy around a client’s liquidity requirements (incoming and outgoing), we build a three-step model based on a financial analysis of the portfolio and supplemental client input.We gather and analyze monthly cash flow information on the portfolio to determine its historical monthly cash flow patterns, including seasonal fluctuations, to build a base model for cash flow needs. Using this historical model, we then factor in how changes in the portfolio’s underlying management structure over time impact the accuracy of the base cash flow model and make necessary adjustments. Finally, we review the preliminary model with the client and work with them to determine what factors, if any, are not captured in the historical financial cash flow model. We can then adjust the model to account for the client’s known cash flow needs, resulting in a robust cash flow model for the portfolio.This detailed cash flow model, coupled with the objectives and risk tolerance contained in the client’s investment policy statement, will allow AndCo to recommend an asset class and management structure that is built to maintain sufficient and efficient liquidity for the client’s portfolio. Finally, this is not a static process, the maintenance of the cash flow model will remain an ongoing operational process as the liquidity requirements of the client, the portfolio’s structure and capital markets evolve. In the case of a closed plan, while the process for assessing liquidity needs is largely the same, the cash flow requirements are typically more clearly defined. This definition allows for more precise planning relative to that of an active plan whose liabilities are still changing and growing. A well-funded closed plan can typically take on a lower degree of portfolio risk, and in doing so, maintain a greater degree of readily available liquidity.Transition ManagementIn light of the five LPs in the current Plan, describe how you would transition the assets to your recommended portfolio and custodian?AndCo Consulting does not have a recommended portfolio structure or preferred custodian. Each client portfolio is built to meet the unique needs of the individual client. ?If AndCo was retained by the Retirement Plan, we would assess the Plan's asset allocation and manager structure to determine if changes where appropriate based on the goals and objectives of the Retirement Plan. AndCo would also assess the Retirement Plan’s current custodial relationship with U.S. Bank to determine if the services provided were meeting the needs of the investment program as well as the administrative needs of the Retirement Plan with competitive fee.? If necessary, AndCo would perform a fee benchmarking study to assess the current level of fees being paid.? If it was determined that the Retirement Plan's assets should be transferred to a new custodian, AndCo would assist with the transition which would be done in a timely and efficient manner with no associated cost. Limited Partnership Investments:With respect to the three Hamilton Lane private equity funds, we would recommend that the Retirement Plan should continue to hold these vehicles as they are close to the end of their respective investment terms.With respect to the UBS Trumbull Property Fund (TPF), we have recommended to our clients who are invested in this vehicle to request a full redemption due to challenging historic and prospective performance. ?Unfortunately, TPF has a significant redemption queue and it will take many years for the current redemption queue to be satisfied.? As such, we are closely monitoring the redemption queue as well as TPF’s performance and strategy to help our clients better understand the status of this asset. ???With respect to the Molpus Sustainable Woodlands Fund II, LP, we do not have any clients invested in this vehicle. If retained by the Retirement Plan, we would meet with Molpus to educate ourselves on their timber investment strategy and the specific status of Fund II. ?With such detail, we would then help the Retirement Plan board in making strategic decisions with respect to this manager allocation. What extra costs would be involved?No extra costs would be incurred to provide the above services.? All of AndCo services are covered by a single retainer puter and Technical CapabilitiesDescribe the software and hardware that will be used to support the proposed work plan.All AndCo employees use the Microsoft Office 365 suite of word processing, graphic design, and email tools, as well as Adobe Acrobat and Skype for Business. We built our technology platform with the objective of servicing a nationally oriented clientele who are serviced by consultants located in the same regions as our clients. Subsequently, our IT infrastructure is predominantly composed of hosted (cloud) solutions that have far superior redundancy, backup, and disaster recovery capabilities than a proprietary, in-house solution. Our infrastructure makes it possible for our users to work from any location with an internet connection. We can connect our Hewlett Packard Desktop PCs remotely to Microsoft Office 365 through a password protected channel via the internet.Our file server is stored in Microsoft Azure with regionally dispersed redundant storage.?? All files are monitored and backed up every 15 minutes to a separate off-site third-party partner.? In addition, our on-site IT Director performs snapshots of our server throughout the day.? Our server holds client files such as investment policy statements, client contracts, client performance reports, manager search profiles and reports, call reports, etc.? Client investment account data is held at Investment Metrics (detail below). Files that are backed up at our third-party off-site partner can be accessed remotely via the internet.We use a voice over internet phone service provided by ShoreTel. Our phone service can be used at any remote location with an internet connection. In addition, all users have the ability to login into a portal to forward their phone calls to their cell phone and/or home phones.We have outlined our robust suite of manager databases in question g above.Describe your catastrophic data recovery plans. How often do you test your recovery system?We have implemented several security measures and compliance procedures, in the form of a Business Continuity Plan, to help ensure our business would run seamlessly if a disaster were to take place. If a major disaster happened at our headquarters in Orlando Florida, every employee would be able to work remotely with full access to the third-party core applications that we use to run our business. Below is a brief description of our procedures and protocols: In the event of a disaster that would preclude our headquarters’ staff from occupying our Orlando office, our Chief Operating Officer would communicate with our staff via email or telephone regarding the need to perform their job duties from their home or other remote location. All of the core programs that we use to deliver our investment consulting services are provided by third party vendors Investment Metrics, eVestment Alliance, Zephyr and Morningstar Direct. These programs are Windows based and can be accessed remotely through a secure internet connection. Prior to establishing a relationship with any key vendor, we assess the security of the vendor’s systems as well as the vendor’s disaster recovery plan to help ensure the vendor has suitable safeguards in place in the event of a disaster.Our file server is stored in Microsoft Azure with regionally dispersed redundant storage.?? All files are monitored and backed up every 15 minutes to a separate off-site third-party partner.? In addition, our on-site IT Director performs snapshots of our server throughout the day.? Our server holds client files such as investment policy statements, client contracts, client performance reports, manager search profiles and reports, call reports, etc.? Client investment account data is held at Investment Metrics (detail below). Files that are backed up at our third-party off-site partner can be accessed remotely via the internet.All historic client reports can be regenerated on demand through Investment Metrics—our investment reporting software and database. All client reporting data is stored at Investment Metrics which has a detailed and redundant disaster recovery plan. If desired, we are happy to provide additional documentation on the Investment Metrics disaster recovery plan.We use the Microsoft Office 365 suite of word processing, graphic design, and email tools. We can connect remotely to Microsoft Office 365 through a password protected channel via the internet.We use a voice over internet phone service provided by ShoreTel. Our phone service can be used at any remote location with an internet connection. In addition, all users have the ability to login into a portal to forward their phone calls to their cell phone and/or home phones.We built our technology platform with the objective of servicing a nationally oriented clientele who are serviced by consultants located in the same regions as our clients. Subsequently, our IT infrastructure is predominantly hosted solutions that have far superior redundancy, backup, and disaster recovery capabilities than a proprietary, in house solution. Our infrastructure makes it possible for our users to work from any location with an internet connection.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?Our information technology is managed by our Director of Information Technology, Jason Purdy. Jason has 25 years of experience and prior to joining AndCo he worked for one of the area’s largest hospital systems. Jason is supported by an I.T. Systems Administrator, Jamie Utt. AndCo maintains a privacy policy that establishes rules for the collection, use and disclosure of confidential information and protects the confidentiality of that information and the privacy of individuals with respect to that information, while facilitating the effective provision of consulting services. A combination of electronic and physical security is utilized to protect AndCo and the information we hold on behalf of our clients from internal and external IT security threats. AndCo’s new employees are trained on our computer and communication systems with an emphasis on data protection and cybersecurity. All employees undergo annual and periodic training/updates to help ensure the security of our systems and communications.AndCo maintains a security policy that establishes rules for the collection, use and disclosure of confidential information and protects the confidentiality of that information and the privacy of individuals with respect to that information, while facilitating the effective provision of consulting services. AndCo’s carefully designed independent structure intentionally does not have access to individual retirement plan member information which eliminates the possibility of inadvertent disclosure of private information for individuals. Physical SecurityCommunication rooms are located in restricted areas that are only accessible by authorized individuals.Servers are housed in a locked server rack and are only accessible by authorized individuals.Authorized individuals include all IT personnel, CEO, CCO, and Executive Directors.Electronic SecurityA combination of security software and hardware are utilized to prevent unauthorized access. This combination includes resources for data encryption, antivirus, firewalls, active directory, and virtual private networks.An enforced password policy is in place to prevent unauthorized access and data theft. Password requirements are outlined on a subsequent slide.An extensive backup and data recovery procedure is in place to prevent data loss, destruction, or ransom.AndCo guests requiring internet access should only be granted access to our guest wireless network.AndCo carries a cyber liability insurance policy. For additional information contact the Chief Compliance Officer.Describe how any database(s) can be accessed by the Burlington Employees’ Retirement System Board staff.AndCo cannot make external analytical tools available directly to our clients due to language in our contracts with these external providers that specifically prohibits direct use by parties outside of our firm (unlicensed users). As part of our hard dollar fee arrangement, AndCo would offer to directly assist the City of Burlington staff in evaluating their own potential licensing of various tools based on the City’s unique needs and platform. FeesPlease 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.Investment Consulting ServicesYear of ServiceProposed FeeFirst Year$115,000Second Year$115,000Third Year$115,000We provide each of our defined benefit clients all services offered by our firm for our base fee. This allows the peace of mind to know you will never have to choose between cost and your fiduciary duties. We have highlighted some of our All-Inclusive Services below:All-Inclusive ServicesInvestment Policy Development??Investment Policy Statement development / review / maintenanceAsset allocation consulting?Efficient frontier modeling and optimization?Manager Research??Comprehensive manager searches?Alternative investment searches?Style analysis?Fee negotiation with investment managers and custodiansOn-going Monitoring and Trustee Education?Comprehensive quarterly performance reports?Monthly flash reports?Meeting attendance as requested?Trustee educational sessions?Fee audits?Travel / out-of-pocket expenses??There will be no additional fees. Our proposed fee is for a full-service relationship. We do not provide unbundled or a la carte pricing options because we believe such arrangements can lead to counterproductive investment decisions. We have found that these arrangements often cause Trustees to withhold decision making (e.g. manager searches, asset allocation studies, etc.) because of the additional cost. We attempt to avoid such conflicts by using all-inclusive fees. Our proposed fee also includes travel expenses. Important Note: Should the Board be displeased with our service for any reason during the first year of our engagement, AndCo would refund in full all fees collected.Please indicate the number of years for which your organization would be willing to guarantee its fees.Our fee is guaranteed for three years.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).There are no miscellaneous fees or expenses to disclose.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.AndCo believes providing our clients with assistance in fee negotiations is critical. AndCo has three primary competitive advantages when securing favorable pricing and/or terms for client investment mandates. The first is the collective experience of our entire team. We have deep relationships within the investment industry, and have extensive experience negotiating favorable terms for our clients. Secondly, the diversity of our client relationships and asset base has historically led to better pricing and terms. With over 690 client relationships, AndCo’s clients range from $5 million to more than $17 billion in size. Our breadth of clients provides us additional leverage when negotiating fees for our clients.What are the anticipated fund, limited partnerships, separate account, CITs, ETF, etc., fees and expenses?The fees and expenses of a client’s investment manager relationships is specific to the types of managers and strategies that are embraced by a specific client relationship. Based on the retirement plans current manager allocations, investment management fees are approximate as follows: Large Cap Equity Index: 2 basis points +/-Smid Cap Equity Index: 2 basis points +/-International Equity Index – Developed: 3-4 basis pointsInternational Emerging Mkts Equity Index: 6-7 basis pointsCore Fixed Income: 25 – 30 basis pointsCore Plus Fixed Income: 40 – 60 basis pointsPrivate Equity:Fund of Funds: 50 to 75 basis point management fee plus 5 to 10% carried interestDirect Limited Partnerships: 1.5 – 2.0% management fee plus 15 to 20% carried interestReal Assets: 1% +/- management fee and possibly 5 to 10% incentive feeWhat are the estimated fees and expenses charged by your Custodian/Trustee?Custodian/trustee fees will be dependent upon the specific services provided by the custodian/trustee. Over the past 10 years custodian and trustee fees have dropped significantly. Below is an example of custody/trustee fees that are the result of a custodian/trustee search for a Retirement Plan with $175 million in assets:Sample provided for strictly illustrative purposes only.? Fees cannot be guaranteed.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?No.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?No.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.AndCo is compensated in hard dollars only. We do not use brokerage commissions and do not accept soft dollar payments. We believe this type of relationship clouds objectivity and opens the door for potential conflicts.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.Not applicable.*A confirmation of fees will be required.MiscellaneousPlease 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.AndCo confirms it is willing and available to commence work immediately upon selection and will devote sufficient resources to perform any and all services.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.Confirmed.Any other information you feel will be beneficial to support your proposal.Our sole purpose as a firm is to provide objective and value-added investment consulting services to our clients. To deliver such services we have built an organization that adheres to the following core beliefs:Independence & ObjectivityListen & UnderstandAsset Allocation & Manager StructureFlexibility, Conviction & SimplicityService CultureAccountable Independence & Objectivity: We are a 100% employee owned company whose sole line of business is general investment consulting.? We are compensated 100% by our consulting clients.? Such independence is critical in delivering objective guidance and advice. Our independent structure allows our team to recommend solutions that are tailored to each client’s unique needs, not what could potentially benefit our firm.? No employee in our firm has a license to sell a product for a commission. AndCo ownership offers their personal and professional tax returns to our client’s auditors for full transparency and to ensure the only compensation our firm receives is from the invoices we send our clients on a quarterly basis. Listen & Understand: Before we can guide our clients, we must understand them, which requires us to listen. Listening is not a onetime event. It is an ongoing and essential ingredient to a long term and successful relationship.Asset Allocation & Manager Structure: Asset allocation is the primary driver of long-term returns and portfolio volatility.? We focus on getting the allocation decision right and then filling the various asset allocation segments with investment managers that we’ve identified as the best available in the marketplace (relative to their peers based on industry metrics such as performance, fees, risk and manager continuity).? We also believe in core allocations to passive strategies in efficient areas of the capital markets.Flexibility, Conviction & Simplicity: Because of the constantly changing investment landscape, we believe that an investment program must be flexible enough to take advantage of special investment opportunities in high conviction strategies and during opportune time-periods within the capital markets. However, our overriding objective is to communicate these opportunities with timely education and in a simple manner.? As such, we examine new investment strategies carefully, focusing on those that we believe are likely to produce the most prudent risk adjusted returns and communicate the value proposition and investment opportunity in a straightforward manner.Service Culture: In addition to building effective investment programs, our clients benefit tremendously from our service-oriented culture. From assistance with day to day investment administration, to the delivery of our customized quarterly and ad-hoc reports, our consultant teams are keenly focused on the unique needs of each client relationship.Accountable: We do not shy away from responsibility and ownership. At the end of the day we understand our fingerprints are all over the total fund performance. If the results are below the index or below absolute returns, we hold ourselves accountable. We also understand our clients view us as an extension of their staff. If we do not meet their daily needs and fail to help administer the fund from an investment standpoint, we have failed. We expect to be held accountable to help ensure the best service. DisclosureImportant Disclosure InformationThis document was created solely for the named recipient and is not intended to be reproduced or distributed to outside parties or the public. It is being provided for informational purposes and should not be regarded as investment advice or as a recommendation regarding any particular course of action. Additionally, it is not intended to provide, and should not be relied upon, for legal or tax advice. Certain information is based on sources and data believed to be reliable, but AndCo cannot guarantee the accuracy, adequacy, or completeness of the information. Presented data is correct to the best of our knowledge, however due to market movements, the data presented may be different than the most current data. Past performance is not a guarantee of future results. The source for all data, charts and graphs is AndCo Consulting unless otherwise stated. Some photographs in this presentation are redistributable under the Creative Commons license, while some are the property of AndCo. All assets under advisement (“AUA”) indicated throughout this report are approximate and as of December 31, 2019. All other information and figures are valid as of the date of distribution, unless otherwise indicated, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after such date.AndCo Consulting is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not constitute an endorsement for the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability. ................
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