Just because an RFP sets out precise criteria for qualifying in the bidding process doesn't mean money managers won't try to squeeze through the eligibility screening.
The $23 billion Iowa Public Employees' Retirement System"s current search for high-yield managers offers a case in point. Prospective managers asked the Des Moines-based system for “clarifications” on the criteria laid out in an RFP, issued July 1.
A few sample inquiries:
Question: “Is there any flexibility regarding the requirement to outperform the benchmark by 100 basis points, annualized on a net of fee basis? We believe that our ability to achieve this performance target may be related to portfolio guidelines and allowable investments, which have not been determined. How should we approach this?”
Answer: “No. If your firm does not believe it can produce 100 bps net then it should not submit a proposal.”
Question: “I represent a firm that has a 21-year track record of managing high-yield debt only, their current AUM stands at $1.2 (billion). In reading through the selection criteria, you mentioned that firms have $1.6 (billion) under management. Is there any consideration given for manager tenure/experience, in addition to a higher quality bias in high yield that would override the minimum AUM requirement?
Answer: “No.”
Question: “Our composite is not benchmarked against the Citigroup High Yield Cash Pay Capped Index. Can we satisfy minimum requirement if the comparison has an average information ratio of at least 0.30 against the Barclays Capital U.S. High-Yield 2% Issuer Capped Bond Index?
Answer: “No.”
