CHICAGO - The Public School Teachers' Pension and Retirement Fund of Chicago is issuing requests for proposals for an investment consultant, reviewing investment policy and hiring a new chief financial officer.
At the Nov. 17 board meeting, trustees approved a formal search for an investment consultant after an informal survey of five consulting firms done by Mike Nehf, executive director of the $9 billion fund. Trustees agreed that after 10 years with Chicago-based Mercer Investment Consulting, it was time to look again and get a feel for what's in the marketplace.
Mercer will be allowed to rebid.
The board approved retaining Mercer for another year under the current fee structure, with a provision in the contract allowing the board to terminate Mercer with 60 days' written notice.
RFPs will be advertised and issued soon, allowing firms 30 days to respond, Mr. Nehf told trustees. The search is expected to take at least six months.
In addition to service, fees are important to trustees. Most firms that returned Mr. Nehf's questionnaires had fees ranging from $200,000 to $300,000 per year. Mercer received almost $60,000 in fees from the fund May 1 through July 31, board minutes say. The firm also was paid $10,800 for its work on a midcap equity search.
Trustees will also review investment policy. The board will vote on the proposal Dec. 15. Mercer and actuarial firm Goldstein & Associates, Chicago, will assist the fund in evaluating its asset allocation and liabilities vs. risk posturing.
The current policy targets are: 16% large-cap index equity; 7.5% large-cap growth equity; 7.5% large-cap value equity; 10% small-cap equity; 7.5% international equity; 2.5% emerging markets; 20% indexed fixed income; 20% core active fixed income; 5% direct real estate investments; 2% real estate investment trusts; and 2% cash.
Board members also will discuss the fixed-income component at the Dec. 15 meeting. Members will consider expanding indexing, consolidating managers, and/or increasing the "augmented" component of the portfolio, which includes high-yield and mortgage-backed securities.
The indexed fixed-income manager involved is Northern Trust Quantitative Advisors, Chicago. The core active fixed-income managers are Bank of America, Chicago; Lincoln Capital Management, Chicago; MDL Capital Management, Pittsburgh; and Smith Graham & Co. Asset Managers LP, Houston. The augmented fixed-income managers involved are Miller Anderson & Sherrerd, West Conshohocken, Pa., and Wellington Management Co., Boston.
The managers are meeting their benchmark returns, and it is a good time for the board to review goals and eliminate redundancy, Consultant Anita Andren told trustees.
Small-cap equity manager and international equity manager due diligence, expected to be routine, is also scheduled for the next meeting.
A new chief financial officer is expected to join the fund in January. Kevin Huber has been an audit manager with KPMG Peat Marwick, Chicago, for more than eight years.
The board this fall hired three midcap equity managers and three venture capital fund managers. William Blair & Co., Chicago, and Iridian Asset Management, Westport, Conn., were hired as midcap managers. Each get 1% of total fund assets. NTQA was also hired as a midcap index manager. The money will come from an overweighted large-cap index equity portfolio.
It committed money to three private equity fund of funds: HarbourVest Partners LLC, Boston, $100 million; Pantheon Ventures Inc., San Francisco, $35 million; Mesirow Financial, Chicago, $25 million, all subject to contract negotiations.
