The Missouri State Employees’ Retirement System(MOSERS), located in Jefferson City, Missouri, is seeking proposals from investment consulting firms in its search for a specialty consultant for public markets (SC-PM), according to an October 4 announcement on its website. The SC-PM will assist Seth Kelly, chief investment officer (CIO), Shannon Davidson, deputy CIO, and the rest of the investment staff with investment manager research, due diligence, and oversight in the public markets asset classes. Management consultant Cortex Applied Research is assisting MOSERS in the consultant search process.
MOSERS does not currently have a separate consultant for private markets, but plans to issue a separate request for proposal (RFP) for the role by the end of the year, Candace Albers Smith, public information officer for the fund, told IA. “We will eventually look for a consultant in the illiquid alternatives space, and also a consultant for liquid alternatives, which includes smart beta and hedge funds,” added Kelly, who has been CIO at the fund since May 2016 and with the fund since 2004.
“There is no incumbent SC-PM,” states the RFP. “MOSERS is transitioning to a different consulting arrangement. The CIO expects to hire specialty consultants to assist the CIO and Staff with manager selection, research, and due diligence.”
The fund’s previous consultant was Summit Strategies Group. “MOSERS’ relationship with Summit Strategies ended due to their acquisition by Mercer,” Smith said. “The RFP we just issued for public markets consulting is a result of the sale of Summit Strategies,” he added.
We will eventually look for a consultant in the illiquid alternatives space, and also a consultant for liquid alternatives, which includes smart beta and hedge funds.
As of June 30, 2018, MOSERS had $8.2 billion in assets under management (AUM). See table below for asset allocation breakdown, per a recent decision by the board to adopt a new policy portfolio, beginning in 2019.
Consultant firms submitting RFPs must agree to a written contract and to act as a fiduciary to MOSERS, and though the SC-PM will not be expected to attend all board meetings, the expectation will be for attendance at least three meetings per year. The SC-PM will be selected by and report to the CIO, the announcement stated. Kelly intends for the contract resulting from the RFP to last three years, though either party can terminate the contract with 10 days’ notice. The fund declined to disclose the fee amount currently being paid to the incumbent advisor.
The proposal must be received by 4:30 p.m. Central time on November 1, 2018 in order to be considered. MOSERS staff will identify finalists and share their results with Cortex on November 30. Interviews with the finalists will be conducted in December. A contract is expected to be finalized with the winning consultant hired by January 2019.
The RFP requires that any prospective consultants submit a sample investment manager operational due diligence report provided to a current client, as well as an analysis of a traditional asset class that could be used to select a manager and an analysis of a traditional asset class that could be used to make tactical overweight or underweight decisions versus the policy asset allocation.
As reported in IA, MOSERS established the role of a board investment consultant in February of this year to provide investment advisory and oversight services directly to the fund’s board of trustees. The board investment consultant selected in May, Verus Investments, assists the MOSERS board in overseeing the system’s investment management functions and developing investment policy, Smith noted. “The creation of the board investment consultant role came about as an initiative from our board,” she said.
The new board investment consultant position was created to essentially hold the fund’s CIO accountable for certain aspects of the fund’s performance, Kelly told IA. “Verus helps the Board with asset allocation—which the Board has the final say on—and ensuring that the information reported to the Board is adequate to assess the performance of the investment program,” he said. “The Board wants to create a clear line of responsibility—if a manager gives the CIO bad advice, that’s the CIO’s responsibility. In the past, the Board had the impression that the services required from the consultant could appear conflicted and, therefore, result in advice that may not be impartial because the only consultant served both the Board and staff—I believe the Board has achieved what they desired with the current setup.”