Fixed Income - Public School Teachers` Pension and Retirement

Report
Chicago Teachers’ Pension
Fund Annual Report
Diversity and Inclusion
Presented to Governor Pat Quinn
December, 2013
1
Commitment To Diversity
Chicago Teachers’ Pension Fund (CTPF) provides retirement benefits
for a diverse ethnic population of approximately 34,000 active and
27,500 retired Public School Teachers.
Since the early 1990’s, CTPF is proud to be at the forefront of pension
and retirement systems throughout the United States to ensure that
minorities, women and persons with disabilities have access to the
many opportunities to conduct business with CTPF. CTPF continues
to encourage diversity and equality among our employees, vendors,
and investment professionals.
On behalf of the CTPF Fund and our Board of Trustees, we present to
Governor Pat Quinn CTPF’s annual Diversity Report for 2013.
2
Changes to the Fund’s Portfolio
during Fiscal Year 2013
• Equity
Hired Earnest Partners ($50M), an African American-owned firm, and DuPont
($150M) for an emerging markets allocation
Reduced assets by $100M from a Latino-owned firm, Lombardia, due to
performance, to fund an emerging markets allocation
Terminated an African American-owned firm, Credo, due to performance and
organizational concerns, to fund an emerging markets allocation
Terminated an African American-owned firm, Piedmont, due to performance to
fund CTPF benefits
• Fixed Income
Reduced assets of Western Asset Management by $105M to fund CTPF benefits
and increase the mandate of a minority-owned firm
Increased allocation to LM Capital, a Latino-owned firm, by $50M and refocused
their mandate to Core Plus
• Real Estate
Funded Newport Capital Partners ($5M), a Disabled-owned firm
3
Since Public Act 096-0006…
CTPF Enhanced our MWDBE Diversity Goals:
20% of Total Fund Assets will be invested with MWDBE firms
25% of actively managed assets will be invested with MWDBE
firms
Additionally:
30% of all equity assets will be invested with MWDBE firms
25% being managed by Minority owned firms
5% being managed by Women owned firms
15% of all fixed income assets will be invested with MWDBE
firms
12% being managed by Minority owned firms
3% being managed by Women owned firms
10% of all alternative assets will be invested with MWDBE firms
10% being managed by Minority owned firms
Best efforts for Women owned firms
4
Since Public Act 096-0006…
CTPF Enhanced our MWDBE Diversity Goals: (continued)
Trades are to be executed with CTPF approved MWDBE brokers.
Non-direct trading is not allowed to meet the Fund’s goals.
CTPF Brokerage goals:
50% of Domestic Equity trades: Active Large, All cap, and MoM’s
35% of Domestic Equity trades: Active Small Cap and Passive
25% of International Equity trades: Active & Passive Large, All Cap, and MoM’s
5% of International Equity trades: Active Small Cap
25% of all Fixed Income Volume
10% Active REIT Managers
5
Total MWDBE % Growth Since 1993
CTPF began investing with MWDBE firms in the early 1990’s.
Some of CTPF’s earliest MWDBE dollars were invested with
firms such as Ariel Investment (African American),
Zevenbergen (Women) and Taplin, Habatch & Canida (Latino)
As of September 2013, the Fund invested $3.2B or 32% of total
Fund assets with MWDBE firms
6
Total MWDBE % Growth Since 1993
33.0%
31.6%
31.2%
30.8%
31.6%
27.5%
23.2% 23.6%
12.7% 12.8%
5.8%
FY 93
7.9%
6.7%
6.1%
FY 95
6.3%6.3%
5.2%5.4% 5.7% 5.8%
FY 97
FY 99
FY 01
9.2%
7.3%
FY 03
FY 05
FY 07
FY 09
FY 11
FY 13
Sep-13
7
Total Fund MWDBE Assets
CTPF had $3.2B of the
Fund’s total assets
invested with MWDBE
firms
MWDBE goal for total
assets is 20%; actual Fund
assets are 32%
34%
32%
25%
35%
20%
30%
25%
CTPF had $2.3B of the
Fund’s active assets
invested with MWDBE
firms
MWDBE goal for active
assets is 25%; actual Fund
assets are 34%
20%
15%
10%
5%
0%
Total Fund Assets
Total Fund Active
Assets
Actual
As of 9/30/13
Goal
8
Fund Breakdown by MWDBE Status
$1.24B was
managed by African
6.4%
American owned
Latino
firms
$1.17B was
managed by
Women owned
firms
$639.2M was
managed by Latino
owned firms
$75.0M was
managed by Asian
American owned
firms
12.5%
$8.4M was
managed by a
African American
Person with a
Disability owned
firms
As of 9/30/13
0.8%
Asian American
11.7%
Women
0.1%
Person with
a Disability
9
MWDBE Equity Managers
For domestic and
international equity
assets, CTPF had
$2.6B assets invested
with MWDBE firms. 45%
41%
30%
40%
41% of all equity
35%
assets were
managed by MWDBE 30%
25%
firms
24% of these assets 20%
were managed by
15%
minority owned
10%
firms
17% of these assets 5%
0%
were managed by
women owned firms
24% 25%
17%
5%
MWDBE Equity
Assets
Minority
Owned Equity
Firms
Women Owned
Equity Firms
Actual
As of 9/30/13
Goal
10
MWDBE Fixed Income Managers
For fixed income
assets, CTPF had
$328.6M invested
with MWDBE firms.
19% of all fixed
income assets were
managed by
MWDBE firms
15% of these assets
were managed by
minority owned
firms
5% of these assets
were managed by
women owned
firms
As of 9/30/13
19%
15%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
15%
12%
5%
MWDBE Fixed
Income Assets
Minority
Owned Fixed
Income Firms
3%
Women Owned
Fixed Income
Firms
Actual
Goal
11
MWDBE Alternative Managers
For alternative
assets, CTPF had
$210.9M invested
with MWDBE firms.
12%
14%
10%
11%
10%
12%
12% of all alternative
assets were managed
by MWDBE firms
11% of these assets
were managed by
minority owned
firms
2% of these assets
were managed by
women owned firms
.1% of these assets
were managed by
disabled owned firms
As of 9/30/13
10%
8%
6%
2%
4%
0%
2%
0%
MWDBE
Alternative
Assets
Minority
Owned
Alternative
Firms
Women Owned
Alternative
Firms
Actual
Goal
12
How We Invest In Minority Managers
CTPF invests in MWDBE firms in four ways:
Direct Mandates
The Fund has direct relationships with 26 MWDBE firms in the public markets and
alternative investments area
Manager of Managers (MoM)
The Fund has two domestic equity (both African American) and one international
equity (Asian American) Manager of Manager programs
Through the MoM program the Fund has relationships with 20 MWDBE firms via
26 investment portfolios
Graduation Program
Since the inception of the Fund’s MoM program, six firms graduated to direct
mandates with the Fund
Fund of Funds (FoF)
The Fund is a Limited Partner in two minority focused Private Equity Funds. The
General Partner is African American-owned
The Fund is a Limited Partner in a minority focused Private Real Estate Fund
As of 9/30/13
13
CTPF Outreach
CTPF’s First Friday Meeting
Occurs the first Friday of each month. Provides opportunities for
Emerging and MWDBE manager firms to meet with CTPF’s
Investment Consultant, CTPF Trustees, CTPF Investment Staff and
Executive Director to highlight their firms products and
accomplishments
Manager of Managers (MoM) Programs
Emerging managers have opportunities to manage CTPF assets. Due
to their size, these opportunities would not be available to small
firms without the Manager of Managers program
Publications
Emerging Manager Monthly
Fund Fire
Pensions & Investments
14
CTPF Outreach - continued
Organizations and Involvement (continued)
Robert Toigo Foundation
Rising Farmworker Dream Fund
Women Investment Professionals
Council of Institutional Investors (November, 2013)
Pension Real Estate Association (PREA)
Institutional Limited Partners Association (ILPA) (January, 2014)
Institutional Financial Services Days
A 2-day educational program initiated and designed by CTPF to expose
underrepresented students to the institutional financial services
industry
Conferences
Emerging Manager Conferences (Opal, IMN)
Groundbreakers Summit – Women in Leadership (Toigo Foundation)
MBDA: Minority Investment Management Forum
National Association of Securities Professionals
New America Alliance
15
Brokerage Commissions for 2012
In calendar year 2012,
the Fund paid over
$4.5M in domestic 60%
50%
equity and
international equity 40%
commissions and
30%
$1.9M was directed to
MWDBE brokers. 20%
59%
50%
52%
35%
30%
25%
30%
25%
10%
In 2012, the Fund had
9.0B in fixed income
volume and 2.6B was
directed MWDBE
brokerage firms
0%
Domestic
Domestic
Equity Large
Equity Small
Cap & Mid Cap Cap & Passive
Large Cap
Fixed Income
International
Equity
Total Paid
Goal
16
CTPF’S MWDBE Brokerage Programs
CTPF maintains a list of approved MWDBE brokerage firms.
To be an approved MWDBE broker with CTPF, the following
qualifications must be met:
Certified MWDBE brokerage firm
Registered with FINRA (Financial Industry Regulatory authority)
for a minimum of 1 year
Have a Chicago or metro area office with at least one dedicated
full time staff person that holds a Series 7 license
17
The Chicago Teachers’ Pension Fund Board of Trustees
Jay Rehak
President
Lois Ashford
Vice President
James Ward
Recording Secretary
Carlos Azcoitia
Mary S. Reilly
As of 9/30/13
Tina Padilla
Financial Secretary
Jeffrey Blackwell
Jerry Travlos
Bernie Eshoo
Raymond Wohl
Walter Pilditch
Andrea Zopp
18
Diversity Of The CTPF Board
7
7
7
6
5
Men
5
Women
4
African American
3
3
Caucasian
2
Latino
2
Asian American
1
0
0
42%
58%
25%
58%
17%
CTPF Total Board of Trustees
As of 9/30/13
19
Diversity Of The CTPF Fund Staff
60
53
Men
Women
50
African American
40
Caucasian
30
20
22
26
Latino
Asian American
15
11
9
10
0
22%
78%
32%
38%
CTPF Total Staff
FT Employees
As of 9/30/13
16%
13%
20
CTPF Investment Management Department
Employee Diversity
The CTPF Investment
Management Staff
has 6 employees
6
6
5
4
6 are Women
3
2 are African American
2
2 are Latino
2
2
33%
33%
2
1
100%
0
33%
CTPF Investment Mgmt Staff
Women
African American
Caucasian
Latino
21
As of 9/30/13
CTPF’S METROPOLITAN CHICAGO
RECRUITING AREA
CTPF’s goal is to
develop a workforce
that more closely
reflects the minority
and women
demographics of the
CTPF’s metropolitan
Chicago recruiting
area
The metropolitan
recruiting area
includes Cook,
DuPage, Lake, and
Will counties in
Illinois
CTPF Current
Headcount
Metro Recruiting
Ratio
Area Ratio
African
American
22
32%
17.8%
Asian
American
9
13%
6.0%
Caucasian
25
37%
56.6%
Latino
11
16%
19.7%
Women
53
78%
51.3%
Men
15
22%
48.7%
Data as of October 1, 2013
Metro Data – 2010 U.S. Census
22
Staff Diversity Recruitment Guidelines
Management is directed to pursue diversity in the recruitment of staff that
reflects our area demographics
The Board of Trustees recognizes that knowledge and understanding of
diversity is the cornerstone of a successful diversity strategy. It is the policy of
the Fund to provide Diversity Training to Human Resources and management
staff
The Board of Trustees recognizes that achievement of the Fund’s diversity
goals is contingent upon the Fund gaining exposure to a large and broad pool
of qualified candidates
When no internal candidate applies for, and/or no internal candidate is
identified as the best candidate for a position, CTPF shall expand the pool of
candidates on the Fund’s website
In all cases, CTPF will seek to hire the best qualified candidate for each
position
When two or more candidates have comparable qualifications for a position,
CTPF will seek to hire the qualified candidate that lends to achievement of the
State of Illinois’ public policy goals and the Fund’s diversity goals
23
Diversity Procurement and Purchasing Policy
CTPF fully supports the public policy considerations of SB364 (Public Act
96-0006) which among other provisions, mandates the establishment of
procurement policies by all major public pension funds in Illinois that
promotes inclusion and diversity. The law also mandates establishment of
incremental goals for the inclusion of minorities, women, and disabled
persons when pension funds seek fiduciaries and services.
24
Policy Objectives
The primary objective of the CTPF diversity policy is to ensure that
minorities, women and disabled persons are provided an equal
opportunity to provide services to and do business with CTPF.
Diversity Policy Objectives promote and ensure:
Prospective service providers have an equal opportunity to compete
and have access to information regarding the search parameters;
Fair competition among qualified fiduciaries and service providers;
Communications related to the selection of service providers are
accessible, consistent and accurate;
The process of selecting service providers is efficient, diligent, and
fair;
Transparency in the process of selection and retention of service
providers.
25
Fiduciaries and Service Providers
Service
Expense
MWDBE Status and Allocation
Actuarial Services
164,753
Independent Auditor
210,750
Investment Consulting and Services
Master Custodian
501,250
Investment Consulting
374,814
Real Estate Investment Consulting
166,598
Health Insurance Consulting
50,000
Legal Services
164,800
Information Services Consulting
947,196
Communications and Publications
316,979
MWDBE
214,047
(6%)
Document Processing and Mailing
194,384
MWDBE
153,939
(4%)
Election Administration
197,117
Legislative Lobbyists
164,800
MWDBE
61,800
(2%)
Total
$3,453,441
Total MWDBE Participation
429,786.00
Total Investment Manager Fees
Total Investment Fees Paid to
MWDBE managers.
Table data as of June 30, 2013
12%
$39,317,322.00
$12,478,563.54
32%
In fiscal year 2013,
minorities and
women-owned
businesses
received:
• 12% of the
business
expenditures
made by the
fund for goods
and services
• 32% of the
expenditures
made to
investment
managers.
26
Goal
It is CTPF’s goal is to have a minimum of 20% of all fund expenditures for
fiduciaries, suppliers, consultants and service providers paid to firms
owned by minorities, women and persons with disabilities. This goal is
comparable to the percentage of investment related allocations to
MWDBE investment professionals.
27
Formal Bid Process
The Policy Guidelines below apply to the selection of all fiduciaries
and service providers.
Procurement of all goods and services budgeted or proposed individually
or in the annual aggregate for an amount in excess of $25,000, shall be
subject to a formal bid process including:
Announcement of issuance of a Request for Proposal in appropriate trade journals and
periodicals as applicable
Issuance of a formal Request for Proposal in the format appropriate for the goods or
services being sought and including all selection criteria to be considered in the
evaluation of the proposal
A Proposal Evaluation Committee, made up of organizational stakeholders for the
goods or services being sought , who shall develop criteria and an objective tool for
proposal evaluation
Posting of the formal Request for Proposals on the Fund’s website
28
Formal Bid Process - continued
Observance of a quiet period during which communications with potential providers is
limited
A quiet period will commence upon the initiation of a search for goods or services and end once a selection
has been made by the Board and accepted by the service provider
Initiation, continuation and conclusion of the quiet period shall be publicly communicated to prevent
inadvertent violations
All Board members, and Staff not directly involved in the search process, shall refrain from communicating
with provider candidates regarding any product or service related to the search offered by the candidate
throughout the quiet period and shall refrain from accepting meals, travel, hotel, or other value from the
candidates
Throughout the quiet period, if any Board member is contacted by a candidate, the Board member shall refer
the candidate to CTPF Staff directly involved in the search process
Authority related to the search process shall not be exercised by management or by individual staff
members, but shall be exercised solely by the bid evaluation committee
All information related to the search process shall be communicated by Staff to the relevant Committee as a
whole, and not to individual staff members
The quiet period does not prevent due diligence, or communications with an existing service provider that
happens to be a candidate in the ordinary course of services provided by such service provider; however,
discussions related to the pending selection shall be avoided during those activities
The provisions of this policy will apply to service provider candidates throughout the quiet period and shall
be communicated to candidates in conjunction with any Request For Proposal or Request For Information
A service provider may be disqualified from a search process for a knowing violation of this policy
29
Formal Bid Process - continued
Evaluation of submitted bids by the Proposal Evaluation Committee using of an objective
evaluation tool
Submission of a statement of due diligence and recommendation to the Board of
Trustees by CTPF management and staff
Approval of selected service provider by the Board of Trustees
Retention in the organizational archives of all materials distributed, created, collected
and evaluated in the search process for a period of at least 5 years
30
Informal Bid Process
Procurement of all goods and services budgeted or anticipated
individually for an amount between $10,000 and $24,999 shall be
subject to an informal bid process including but not limited to:
Development of a Needs, Requirements and Evaluative Criteria document prior to the
initiation of discussion with potential providers or issuance of a request for information
Posting of a Request for Information on the fund website
Documentation of the need for services, criteria used in the evaluative process, and basis
for selection of a particular vendor or service provider
Retention in the purchasing records of CTPF of all written materials for a period of at least 5
years
31

similar documents