May 2014 Proposal of Outsourced Chief Investment Officer...
Transcript of May 2014 Proposal of Outsourced Chief Investment Officer...
May 2014
Proposal of Outsourced Chief
Investment Officer Services for
Concordia University
Submitted by: Jane Kerr
610.676.1227 I [email protected]
Executive Summary 3
I. Organizational Background and Personnel 5
II. Client Services 10
III. Investment Philosophy and Process 14
IV. Investment Manager Research and Selection 24
V. Risk Management 30
VI. Performance Evaluation and Reporting 32
VII. Client Base 35
VIII. Code of Ethics & Conflicts of Interest 37
IX. Fees 40
X. Additional Information 43
Important Information 45
Appendix Items
A. Biographies
B. Form ADV
C. Thought Leadership Samples
D. Sample Manager Thesis
E. Sample Client Report
SEI Investments Management Corporation, itself and/or including its affiliated entities (collectively,
―SEI‖), are providing you, solely for the purpose of your review of the response to this RFP, certain
confidential information which includes, but is not limited to, any and all information that relates to
the business and products of SEI with respect to which SEI has taken reasonable steps to prevent
the unrestricted disclosure (―Confidential Information‖). SEI’s provision of information to you will
not transfer, grant or confer to or upon you, any rights, licenses or rights in or to such Confidential
Information SEI provides to you. In maintaining strict confidentiality under this Agreement and
pursuant to your receipt of such Confidential Information, you agree that you may not, without
first obtaining SEI’s written consent, disclose or make available to any person, business, or
entity, reproduce or transmit, use (directly or indirectly), sell, distribute or communicate for
your own benefit or the benefit of others, any Confidential Information provided herein.
Proposal of Services for Concordia University | Page 3
EXECUTIVE SUMMARY
Due to an increasingly complex investment environment, many Investment Committees are
looking beyond traditional consulting providers and evaluating the benefits of discretionary
solutions. SEI is recognized as a leading provider of discretionary fiduciary management
solutions, also known as an Outsourced Chief Investment Officer (OCIO), dedicated to
customizing and executing timely investment strategies and ideas.
SEI’s OCIO Solution
SEI is one of the largest providers of OCIO services worldwide. For 20 years, we have
implemented a nonprofit solution designed for our clients to focus on their strategic decisions.
We have taken the limited, traditional role of an investment consultant or investment manager
and expanded it to meet a range of client needs. Our comprehensive solution offers:
Investment Function Operations and Administrative Function
Investment policy advice with asset
allocation and capital market research
Active portfolio design, projections and
education
Active manager search, selection and
monitoring
Active portfolio monitoring and risk
management
Depth of resources and experience
Investment Policy Statement documentation
Comprehensive reporting
Affiliate relationship support
Portfolio operations and treasury services
Measurement, reporting and custody services
Economies of scale and manager
diversification from $239 billion in assets under
management as of March 31, 2014
Non-SEI assets oversight and reporting
SEI remains a leading provider of manager research, selection and monitoring. We identify
managers with clearly differentiated investment processes and combine them to achieve
maximum diversification. Unlike a traditional approach in which the Investment Committee
chooses managers, our professionals take responsibility for these functions. This allows clients
to have additional time and resources to complement their staff and operations.
The foundation of our approach is active management, and client portfolios are designed to
capture opportunities over the short and long term. Our strategic Advice Process is an integral
component of our offering and combines in-depth analysis of your goals and objectives with our
proprietary modeling technology to design a custom investment portfolio. SEI’s solution also
includes custody and donor administration.
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Concluding Remarks
Thank you for considering SEI to be the OCIO for Concordia University (the University). As a
demonstration of our qualifications, this proposal includes information on our investment
philosophy and approach, an explanation of how we customize portfolio management and a
breakdown of our fees for providing these services.
Kind regards,
Jane Kerr
Regional Director
SEI’s Institutional Group
Proposal of Services for Concordia University | Page 5
I. ORGANIZATIONAL BACKGROUND AND PERSONNEL
A. Provide a brief summary and history of your firm, including year of inception,
ownership structure, affiliated and subsidiary companies and relationships, joint
ventures, business partners, number and location of offices, and number of
professional consultants. Indicate which office would service our account.
History
SEI Investments Company
SEI Investments Company (SEIC) was founded in 1968 by the current Chairman and CEO,
Alfred P. West Jr. Today, SEIC is a leading global provider of investment management
solutions to endowments, foundations, corporations, healthcare organizations, private banks
and financial advisors with $239 billion in assets under management as of March 31, 2014.
We have over 2,700 employees worldwide and operate from 11 offices around the world.
Your Client Portfolio Manager, Mark Morgan, CFA, will be based in our Chicago office with
all other team members supporting the University account based in SEI’s headquarters in
Oaks, Pennsylvania. This includes relationship management, investment management,
research, advisory, administration and custody. More than 300 employees are involved in
supporting the delivery of these services to our institutional clients.
SEI Investments Company has 10 additional offices worldwide located in:
Global Offices
Benelux, The Netherlands
Chicago, Illinois
Dubai, United Arab Emirates
Dublin, Ireland
Hong Kong, China
Johannesburg, South Africa
London, England
New York, New York
San Francisco, California
Toronto, Ontario
SEI’s Institutional Group
SEI’s Institutional Group is one of the largest fiduciary management providers to institutional
clients with 474 client accounts worldwide. We have continually evolved our solution and
services to address the needs of our clients by integrating advice with investment
management, risk management, custody and administrative services.
SEI’s Institutional Group was one of the largest institutional consultants to clients in both the
U.S. and Canada by the late 1980s. Capitalizing on the knowledge and experience gained
from providing manager search services in the consulting business, we began to offer a
multimanager investment implementation in 1990. In 1992, we introduced the industry’s first
comprehensive and fully integrated Fiduciary Management Solution. Recognizing the
conflicts of interest inherent in providing both a consultant-based model and a fiduciary
management model, we divested the consulting business in 1994 to focus solely on
providing institutional clients with an OCIO model.
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Ownership
SEI Investments Company (NASDAQ: SEIC) is a publicly traded, diversified financial
services firm headquartered in Oaks, Pennsylvania, a suburb of Philadelphia. SEIC is a
Pennsylvania corporation that was incorporated in 1969 and launched its initial public
offering in 1981. Approximately 17% of outstanding SEIC shares are held by employees,
officers and directors of the company (as of March 15, 2013).
SEIC has a number of wholly owned subsidiaries that are regulated by government authority
and self-regulatory organizations. These subsidiaries include:
SEI Investments Management Corporation (SEI) provides investment management
and advisory services and is a federally registered investment adviser with the
Securities and Exchange Commission (SEC) under the Investment Advisers Act of
1940.
The SEI Institutional Group provides investment management and advisory services,
the core of this proposal, through SEI Investments Management Corporation.
SEI Private Trust Company (SPTC) provides trust and custody services and is a
limited purpose federal savings association regulated by the Office of the Comptroller
of the Currency (OCC).
SEI Investments Distribution Co. (SIDCO) provides broker-dealer services, is
registered with the SEC and is a member of the Financial Industry Regulatory
Authority (FINRA).
SEI Trust Company (STC) provides services for bank-maintained collective
investment trusts and is a state-chartered bank subject to oversight by the
Pennsylvania Department of Banking.
Affiliate
SEIC has a minority ownership interest (39.3% as of March 31, 2014) in LSV Asset
Management (LSV), which also serves as a manager in a small number of SEI’s investment
strategies. In 1994, SEIC provided seed capital to help LSV commence operations and
entered a relationship with an ownership interest that has generally declined over time. As a
manager within some of our vehicles, LSV is subject to the same diligent monitoring,
oversight and selection criteria as other managers.
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B. Provide the names, titles, home office locations and biographies of key individuals
who would be directly responsible for providing services to our account. Include the
year each individual joined your firm, current responsibilities, area of expertise,
experience, education, professional designations and memberships. Detail their roles
and the scope of their involvement for this assignment.
SEI Team Supporting the Concordia University Relationship
Your Client Portfolio Manager, Mark Morgan, CFA, is your primary contact and will be
familiar with your organization, goals and objectives. Mark will be responsible for
communicating SEI’s investment point of view and overseeing the management of your
assets. In addition, Mark is fully accountable for coordinating the services provided by SEI
and partners with a Client Service Director, Lisa Herzog, CAIA, who is directly involved with
all aspects of the relationship and serves as a secondary point of contact. MJ Bobyock,
CFA, will implement advisory and asset allocation services and work with Mark and Lisa.
You will also be assigned a Transition Manager, Chuck Esposito, to see the entire initial
transition process through to completion in conjunction with Jane Kerr.
SEI’s environment is team-based at every level to provide comprehensive account
coverage, flexibility and experienced resources for our clients that can vary according to
account needs. Mark, as your dedicated Client Portfolio Manager, will work regularly with
our experts across several account areas such as strategic advice, finance and investment
strategy. Depending upon your needs, we have the capability to leverage knowledge and
resources across our firm in addition to your Client Portfolio Management Team members.
Please see Appendix A for the biographies of the key individuals.
MANAGER RESEARCH &
SELECTION
CUSTODY /
ADMINISTRATION
ASSET ALLOCATION /
RISK MANAGEMENT
• Portfolio construction
• Alpha source identification
• Equity, fixed income, alternative
investments manager selection
• Dynamic asset allocation
• Ongoing manager oversight
• Capital market assumptions
• Portfolio modeling
• Stress testing
• Active investment management
• Alpha source and tracking error
analysis
• Custody services
• Unitized sub-accounting
• Rebalancing services
• Integrated technology /
performance reporting
• Audit assistance
• Regular portfolio and manager reviews
• Strategy designed to meet alpha objectives
and portfolio goals
• Active point of view on global investment
markets, asset classes, managers and
investment vehicles
• Risk management
• Strategy and investment oversight
• Collaborates with asset allocation and
manager research specialists
• Spending studies
• Liquidity analysis
• Asset allocation
• Capital markets review
• Market / industry research
• Committee education & training
• Plan giving strategy
• Investment policy formulation
Nonprofit Advisory DirectorClient Portfolio Manager
MJ Bobyock,
CFA
Mark Morgan,
CFA
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C. Does your firm have any ownership or financial relationships with any other financial
firms, including asset management, broker/dealer, banking, insurance or actuarial
firms?
Please see question A for all subsidiary and affiliation relationships.
D. Is your firm, its parent or affiliate(s) a registered investment advisor with the SEC
under the Investment Advisors Act of 1940? If not, what is your fiduciary
classification? Please provide a copy of your most recent SEC Form ADV Part II.
Yes. SEI Investments Management Corporation (SEI) is a registered investment adviser
with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of
1940, as amended. SEI first registered with the SEC on June 27, 1985. SEI is a wholly
owned subsidiary of SEI Investments Company, a publicly listed company (NASDAQ:
SEIC). A copy of SEI’s Form ADV Part 2A and B is attached in Appendix B.
E. Within the last five years has your organization or an officer or principal been involved
in any business litigation or other legal proceedings relating to your investment
advisory and/or consulting services? If so, provide an explanation and indicate the
current status or disposition.
SEI’s parent company, SEI Investments Company (SEIC), is a large international financial
services firm and several of its subsidiaries are subject to extensive regulation and
examination by regulatory authorities and self-regulatory organizations in the U.S. and in
other countries around the world. These authorities and organizations in the U.S. include:
the Office of the Comptroller of Currency, the Securities and Exchange Commission and the
Financial Industry Regulatory Authority. In other countries the authorities include: the UK
Financial Conduct Authority, the Central Bank of Ireland, the Ontario Securities Commission
and other agencies and authorities.
As a result of the examination, investigation and enforcement activities of these agencies,
authorities and organizations, various SEIC entities are constantly in communication with
regulatory agencies about examinations, inquiries, investigations and other proceedings. As
a publicly traded corporation, SEIC is also subject to federal securities laws and required to
file annual and quarterly reports with the Securities and Exchange Commission on Forms
10-K (Part I, Item 3. Legal Proceedings, Related Notes to the Financial Statements, etc.)
and 10-Q (Part II, Item 1. Legal Proceedings, Related Notes to the Financial Statements,
etc.). To the extent that any such regulatory or litigation matters are material and required to
be publicly disclosed, SEIC discloses such matters and any other regulatory considerations
in those filings which are available online at www.seic.com.
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F. What protection does your firm offer its clients from negligence or willful acts of
omission? Acts of fraud? Describe any insurance coverage your firm may have that is
applicable in this area.
SEIC’s insurance coverage is detailed below:
Errors and Omissions Professional Liability (Professional Indemnity) Policy
The policy has a limit of liability of $80,000,000 per occurrence and in the aggregate. The
policy provides worldwide coverage for all insured’s business activities and is broader than
normally available in the marketplace. The policy is designed to respond to a claim made
against an insured in the conduct of any professional services by or on behalf of an insured
that an insured is legally obligated to pay. Professional services are defined as services
rendered or which ought to have been rendered for or on behalf of a customer or client of an
insured for a fee, commission or other remuneration or consideration that inures to the
benefit of an insured. The policy’s limit of liability and retention is continually reviewed using
peer study data and qualitative factors in order to ensure that proper coverage is
maintained. The lead insurance carrier for the policy is CNA (Continental Casualty
Company). All insurers participating in the policy have an A.M. Best rating of at least ―A‖.
Fidelity Bond
The bond provides insurance coverage for losses sustained by SEIC arising out of
employee dishonesty and includes forgery or alteration, on premises, in transit, counterfeit
currency, computer systems fraud and ten (10) other causes of loss. The bond was
manuscript to provide the broadest coverage available in the insurance marketplace. The
bond coverage limit is $60,000,000 per occurrence and $120,000,000 in the aggregate. The
lead insurance carrier for this bond is CNA (Continental Casualty Company). All insurers
participating in the bond have an A.M. Best rating of at least ―A‖.
Other Insurance
SEIC carries other insurance typical of a large publicly held corporation including but not
limited to property, general/excess liability, automobile, workers’ compensation, employers
liability, directors’ and officers’ liability and miscellaneous bonds.
SEIC will provide clients with evidence of insurance (i.e. certificates of insurance) as
required by the business agreement.
This summary does not take place of or alter any of the conditions, exclusions and other terms of the
policies herein summarized. It is merely a short descriptive guide to the policies for convenient
reference. The information contained within this summary should be treated as confidential and
proprietary to SEIC and its distribution limited solely to furthering SEIC’s business relationship with
current and prospective clients.
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II. CLIENT SERVICES
A. Describe your firm’s client service philosophy in regards to the OCIO services model.
If you provide traditional consulting services, how do your OCIO services differ?
Client Service Philosophy
Client service is an integral part of the culture at SEI. We take a focused approach that
delivers three key themes:
Become partners with our clients - To help you succeed, we must have an in-depth
understanding of your situation and goals and how you define success. Our Client
Portfolio Management and Advisory professionals maintain close contact in order to
make sure our solution continues to meet your needs, however and whenever they
change.
Always be available and exceed expectations - Our collaborative environment and
entrepreneurial spirit help us attract and keep high-quality professionals who
genuinely care about the well-being of our clients.
Empower clients through communication and education - Our solution is
designed to reduce your day-to-day burden so you can focus on key strategic
decisions such as asset allocation and evaluating new asset classes. In addition to our
in-person meetings, we offer a variety of programs to support you. Prudent decisions
require that you understand issues impacting your program.
OCIO Services Model
We work as a strategic partner with our clients to incorporate strategic advice, investment
management and risk management into a portfolio management solution that is customized
to their unique financial goals and objectives and assists them in satisfying their fiduciary
responsibilities.
SEI takes a comprehensive approach to active asset management when acting as an OCIO
for our clients. This approach includes manager selection, security selection by money
managers, allocations to money managers, risk management across portfolios and client
portfolio allocation across asset classes.
We view the role of the Investment Committee as a governing fiduciary focusing on the
highest impact strategic decisions. The Investment Committee will maintain responsibility for
defining objectives, setting strategy, monitoring SEI’s performance and providing timely
updates on the University’s operating environment. We will also rely on the Investment
Committee to communicate changes to their financial objectives, risk tolerance, liquidity and
reporting needs.
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SEI acts as a managing fiduciary to streamline the investment process and strategy
implementation, resulting in a more efficient use of the Investment Committee’s time and
deployment of assets. Our OCIO Solution provides adherence to the guidelines established
under UPMIFA while facilitating improved decision making and reducing time to implement
investment decisions.
SEI is dedicated to adhering to the highest standards of compliance and due diligence. We
have enacted numerous policies and procedures to make sure we are meeting the fiduciary
needs of our clients. The chart below illustrates fiduciary best practices relative to SEI’s
offering:
Fiduciary Practice SEI Provides
Know standards, laws and trust provisions
Education and consultation regarding program setup and features
Proactive training to ensure fiduciary duties are met
Diversify assets to specific risk/return profile of client
Advice/modeling to identify the appropriate level of risk and return
Enhanced diversification through multimanager program
Prepare Investment Policy Statement
Customized investment policy
Annual review of client’s Investment Policy Document
Consultation on industry trends and best practices
Use ―prudent experts‖ and document due diligence
An experienced partner with more than 300 investment and industry professionals
Control and account for investment expenses
Cost savings through economies of scale
Clear communication and transparency regarding fees
Monitor the activities of ―prudent experts‖
Custom, timely reporting allows you to easily monitor all key activities
Daily access to account information
Avoid conflicts of interest and prohibited transactions
Disciplined internal processes that help protect against these Occurrences
Source: Prudent Practices for Investment Stewards 2011 by Fiduciary360, LP
B. What services does your firm provide for the education and enhancement of our IC
members?
SEI will establish a client plan designed to meet your objectives. Working together, we will
establish the protocol for regular asset allocation and investment policy discussions
(quarterly, annually or as needed) or discussions triggered by specific client or market
events. We meet with clients quarterly and have regular strategy and planning discussions
with leadership and staff to ensure the client experience meets expectations.
Our regular review meetings will include:
Review of asset allocation including the financial statement impacts
Spending policy
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Progress towards specific organizational goals
Education for the University Investment Committee on investment strategies
Discussion of administrative objectives and results
Discussion of research, investments and the industry
Experts are also available to visit and present on relevant strategy and industry changes.
We have found this approach provides maximum benefit to our clients by combining
continuous relationship oversight with access to a high level of specific expertise, all within
one integrated model.
When there is a sudden change that affects your portfolio, SEI will work to reassess the
appropriateness of the current strategy.
Commitment to Education
As a research-based organization providing integrated solutions, we feel it is critical to keep
our clients educated on industry, investment and legislative topics. In addition to our regular
quarterly client presentations, we offer a variety of opportunities for education delivered
through working sessions, technology tools and educational materials. Lastly, economic
analysis is incorporated within quarterly client reviews. Samples of our thought leadership
include market commentaries, white papers and economic overviews. Samples of these
pieces can be found in Appendix C. We feel the more knowledgeable the Investment
Committee, the more effective the decision making for your portfolio.
Our resources include:
Thought leadership – We have dedicated resources in our Advisory Team and
Investment Management Unit (IMU) to develop thought leadership by conducting in-
depth studies on the impact of numerous industry challenges. The research is
available online and in a hardcopy format. Industry information and SEI-sponsored
research can also be found in our Knowledge Center on our website at
www.seic.com/knowledgecenter.
New Committee Member Website – This site provides new clients and their new
Committee members with educational videos such as an introduction to SEI and
overviews of our investment and risk management processes as well as a
comprehensive guidebook that outlines SEI’s services.
Access to content experts – We frequently bring content experts to update clients
on crucial issues such as portfolio design, Committee education and peer group
surveys and comparisons.
Video-conference calls – To communicate fast-moving information, we use video
conferencing to keep clients fully informed in a rapidly changing environment.
SEI’s Institutional Account Access Website – In addition to comprehensive account
details, clients can access performance reports, investment research and educational
tools via our inclusive client website.
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Client conferences and seminars – We have held several conferences and
seminars such as our Global Symposium to communicate our strategic direction,
educate clients on investment research initiatives and enhancements and allow clients
to share ideas and discuss challenges.
Select online research forum – On a monthly basis or as topics arise, we supply
hosted audio/video research presentations delivered by SEI experts on various key
issues within the investment industry to our clients.
Email alerts – We provide timely email communications on breaking industry news,
legislative issues, market events and strategy updates as needed.
Social networking outreach – We maintain a presence on LinkedIn, including
dedicated nonprofit and pension research panels. We also offer a YouTube channel
that features video presentations with our professionals on important industry-related
topics, priorities, challenges and trends.
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III. INVESTMENT PHILOSOPHY AND PROCESS
A. Describe your firm’s investment philosophy. Has it changed significantly over the past
5 years?
SEI’s ongoing approach as an OCIO integrates portfolio customization and active
management. We work with Concordia University’s leadership to design an asset allocation
that aligns your goals, risk tolerance and financial objectives using our strategic Advice
Process described in question B below. We also incorporate the investment management
philosophy outlined below to achieve those stated goals and objectives.
SEI’s investment philosophy is based on a multi-tiered approach to active investment
management that applies to all aspects of a diversified portfolio. Our approach transcends
the use of a single, specific investment vehicle to embrace a more comprehensive view
across strategies, managers and asset classes. Strategic asset allocation is the foundation
of a client’s portfolio; however, by taking a more active view on asset allocation, we aim to
capitalize on short-term market inefficiencies in order to generate excess returns or limit
overall risk.
We believe:
In a strategic asset allocation framework customized to the financial objectives of each
client
Short-term market inefficiencies create opportunities to add value across and within
asset classes
Skilled active managers exist and can be sourced
A multimanager framework provides tangible benefits
In an active risk management approach and continual oversight
SEI utilizes a multimanager investment platform in which we hire and monitor multiple
specialized sub-advisers with clearly differentiated investment processes within each asset
class and combine them to achieve maximum diversification.
Investment Policy Changes
Increased market volatility during the credit crisis led SEI to evolve our investment strategy
and implementation for clients in several ways. At the highest level, risk tolerances were
revisited at the asset class, strategy and portfolio level, with a particular focus on liquidity. We
believe that liquidity constraints must be assessed as part of investment policy development.
Historically, we have not recommended high levels of allocation to particularly illiquid asset
classes such as private equity.
We recognize that, while long-term strategic asset allocation objectives are important, the
ability to have short- to medium-term flexibility in the asset allocation and around rebalancing
is also beneficial. We also understand that market structure changes yield new investment
opportunities. We have evolved the structure of our client relationships to provide for a more
efficient way to capitalize on these opportunities in the marketplace.
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Active Asset Allocation
We believe it is important to set a strategic asset allocation for each client based on the
objective of the organization. While this allocation should be the primary focus for a client to
achieve its financial objectives, there will be periods of time in which it is possible to capture
shorter-term market opportunities. As a result, SEI has evolved our client contractual
relationship to include a discretionary element.
SEI believes, and has always believed, that significant changes (e.g. greater than 10%
movements by asset class) in the asset allocation should be based on strategic changes in
the goals, spending policy and risk tolerance of the organization. The additional features that
we have introduced to our clients are to provide dynamic point of view changes but are not
designed to overwhelm the strategic asset allocation.
For clients that choose to fully participate in active management, SEI will not only be active
in manager selection and portfolio construction, but will also implement our point of view
across and within asset classes. This is implemented through re-directing cash flows and/or
adjusting a client’s asset allocation to account for these shorter-term views on asset classes.
Asset allocation changes are made to improve portfolio returns as well as to reduce
avoidable risks and are done in the broader context of the client’s strategic asset allocation.
These methods can be implemented within a client’s portfolio, as changes within a dynamic
asset allocation strategy.
Revisiting Risk
SEI’s risk management approach has not fundamentally changed as we have always
focused on managing risk, a key to our OCIO Solution. However, we now revisit our capital
market assumptions more frequently due to more volatile market conditions we experienced
during the credit crisis. These changes are crucial to SEI’s modeling process as we strive to
create portfolios for our clients that limit volatility at the total strategy level.
From a strategic advice standpoint, SEI revisited asset allocations with our clients and has
put in place short- to medium-term liquidity strategies to meet spending needs. We also
have worked with clients to adjust their allocations based on changes in their risk tolerances.
Response to Global Events: Credit Crisis and Beyond
As the market structure continues to evolve, SEI’s IMU is continually evaluating
opportunities, constructing new products and incorporating new opportunities into our
current investment lineup for the continued benefit of our clients.
For example, SEI made a number of manager changes during the credit crisis to address
the economic environment as well as repositioned our portfolios to take advantage of
potential future return opportunities. An example includes the hiring of a high-yield manager
for its skill in navigating rising default rate environments and focusing on managers whose
investment processes outperform in market recovery periods.
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Communicating with Our Clients
Specific to major events affecting the capital markets, SEI proactively communicates the
impact of events and subsequent portfolio changes to our clients in a timely fashion. We
have a dedicated Investment Communications Team that drafts information materials
shared internally and with our clients, and we can adapt this messaging to address the
impact on the University. Mark and MJ, your dedicated points of contact, will contact you via
telephone, email or in person to discuss specific industry details.
Alternative Investments
The foundation of our approach to alternatives is manager evaluation, a core capability of
our firm. Our process incorporates five stages—we assess the opportunity set at any given
point in time, source potential managers, perform due diligence in order to arrive at selection
and allocation decisions, construct portfolios and continuously monitor and review manager
and portfolio performance and risk parameters. These strategies are only distributed to our
institutional clients, thus reducing the risk of disruptive cash outflows from these strategies
during periods of crisis.
Our Advisory professionals work with clients to include alternatives in an asset allocation that
is customized to client needs. The following graphic illustrates the variety of alternative
investment options that are available to institutional clients only.
• PE – Corporate Finance
• PE – LBO
• Control distressed debt
• CRE – Value Added
• CRE – Opportunistic
• Real Asset
• Distressed debt
• Direct lending
• Consumer Sector – MBS /
ABS Long Short
• Whole Loan Mortgages
• Govt Sponsored Programs
• Structured Credit
• Distressed debt
• Direct lending
• Consumer Sector – MBS / ABS Long Short
• Whole Loan Mortgages
• Govt Sponsored Programs
• Structured Credit
• Long Short Equity
• Credit Hedging
• Convertible Bond Hedging
• Fixed Income Arbitrage
• Global Macro
• Multi-Strategy
• Event Driven
• Long Short Equity
• Credit Hedging
• Convertible Bond Hedging
• Fixed Income Arbitrage
• Global Macro
• Multi-Strategy
• Event Driven
• Long Short Equity
• Credit Hedging
• Convertible Bond Hedging
• Fixed Income Arbitrage
• Global Macro
• Multi-Strategy
• Event Driven
Need for liquidity
Exp
ecte
d R
etu
rn
High Medium Low
Lo
wH
igh
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B. Describe the process your firm will use to construct a portfolio for us, including a
description of your approach to developing the investment goals/objectives/policies
and the expected role of the IC and University staff.
SEI’s Advice Process is designed to focus on your organization and understand how various
portfolio decisions such as spending policy, contribution assumptions and restrictions of asset
classes will impact your organizational objectives.
1 Establish Goals
SEI works closely with your Investment Committee to identify your objectives and determine
the portfolio’s impact on the entire organization. This results in a thorough understanding of
your organization’s goals and objectives and is the basis for the development of your
Investment Policy Statement (IPS) and custom asset allocation.
We educate our clients to ensure they understand various strategies that can be
implemented to obtain their goals and the risk considerations for each possible strategy
We view the role of the Investment Committee as a governing fiduciary focusing on the
highest impact strategic decisions. The Investment Committee will maintain responsibility for
defining objectives, setting strategy, monitoring SEI’s performance and providing timely
updates on the University’s operating environment. We will also rely on the Investment
Committee to communicate changes to their financial objectives, risk tolerance, liquidity and
reporting needs. Please refer to question A for more information on the expected role of the
Investment Committee.
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2 Identify, Quantify & Prioritize Risks
SEI’s Advice Process uses a fully integrated financial modeling tool that allows us to create
and customize an unlimited number of capital market scenarios to test their impact on your
portfolio. We provide these simulations for the University to review and compare, and to
identify and quantify risk and risk tolerance relevant to the organization. For example, we
educate clients on the impact of market changes to their portfolios, to their spending and to
the long-term financial health of their organizations. We encourage clients to build that into
the investment policy.
With our modeling technology, we are able to evaluate potential changes to spending,
inflation, asset allocation or market scenarios and the impact they may have on meeting
short- and long-term objectives. Our portfolios are ―objective based‖ and utilize the inputs
provided by our clients such as spending policy, contribution assumptions and restrictions of
asset classes. Custom portfolios may also be entered based on ―what if‖ analysis.
Below is a snapshot of SEI’s proprietary modeling technology:
Ongoing Capital Market Assumption (CMA) Development
We use CMAs as key inputs in our asset allocation process. This allows our modeling
technology to provide a careful analysis that can establish appropriate correlations between
the drivers of asset and liability changes – market returns and interest rates – and the
Proposal of Services for Concordia University | Page 19
drivers of the organization’s financial performance as it relates to the University’s objectives.
We include estimates of variables like expected return, expected risk and asset class
correlation. These assumptions are updated periodically as market conditions change. To
develop expectations for asset class return and alpha sources, we use a multi-stage
process.
3 Develop Optimal Risk Management Strategy
SEI’s risk management tools are applied at multiple levels to client portfolios. We first apply
a variety of risk assessments and guidelines to the managers we research and select as we
build our multimanager portfolios. We use those portfolios as asset class building blocks for
the client’s custom allocation. We then use a BlackRock risk analytics system to assess and
monitor multimanager portfolios continuously. We then establish an expected return and
associated volatility around that return for each portfolio using our CMA process. Finally, we
apply risk analysis to the client’s portfolio once those building blocks are combined in a
custom portfolio allocation.
SEI’s process for developing an optimal asset allocation is flexible and can accommodate
client preferences, objectives and sensitivities. We will introduce asset classes that are
designed to help manage portfolio risks and provide return enhancement. Some common
risks we consider when determining the appropriate asset allocation are:
Downside risk – The risk of loss during difficult market environments, which can
impact the long-term viability of the University
Drawdown risk – The risk of withdrawing and meeting the annual spending policy
during down markets
Longevity risk – The risk of organizational needs outliving the assets
Inflation risk – The risk of inflation eroding the long-term purchasing power of the
assets
Liquidity risk – The risk of not having access to capital due to liquidity constraints of
the underlying investments
Headline/reputation risk – The risk of negative public perception as a result of media
statements
We will work with you to determine which asset classes are appropriate for your customized
allocation. Through collaborative discussions, we help determine the asset mix and portfolio
structure that will best meet your organization’s objectives.
4 Manage & Monitor Progress Toward Goals
SEI monitors the progress and success of your portfolio against a number of metrics. In
addition to monitoring the impact of annual spending and contributions on cash flows,
organizational financial ratios and changes in the market environment, we also measure
manager activities against the IPS to ensure that all guidelines are met. Regular review
meetings between SEI and the University will include comprehensive portfolio reporting and
discussions evaluating the appropriateness of the asset allocation, compliance with the IPS
and performance against investment objectives.
Proposal of Services for Concordia University | Page 20
C. Included with this Request is our portfolio and return history as of December 31,
2013. Per our current IPS, the primary investment objective of the Endowment is to
achieve an annualized total return (net of fees and expenses) over a full market cycle
(3 to 5 years) which equals or exceeds the assumed spending rate of 5% plus the rate
of inflation.
If you wish to do so, we would be interested in your opinion on our return history and
current portfolio and its ability to meet our investment objective. Discuss how your
firm, if given full discretion, would change the portfolio. Please provide your rationale.
The current portfolio performance has generally met the return objective of 5% plus inflation
over the one- and five-year periods, falling 0.7% short for the three-year period and 0.3%
short over the longer ten-year period. Assuming this performance is shown net of
investment fees, this represents a fairly successful track record in maintaining the spending
and real purchasing power of the University’s assets. If this performance is gross of fees,
however, the 0.3% differential would be unsatisfactory. With regard to asset class
performance, the small cap equity allocation has been highly additive, as well as
components of the large cap and international equity allocations. We suggest the Committee
considers rebalancing or cutting back some of the ―winners‖ from last year to encourage re-
investing into lower priced securities. Fixed income has been more challenging, with the
exception of international and Loomis Sayles. High yield has been an attractive asset class
for the past five years, and until recently so has emerging markets debt, but these managers
in the current allocation appear to have struggled in meeting the goals of the portfolio. The
hedge fund allocations appear to have experienced mixed performance, but this may
depend on the role of those hedge funds, whether they are designed to be risk mitigating or
return enhancing. We would be happy to comment further on the underlying managers if we
are selected to be the University’s investment partner.
We also looked at the current allocation from a forward-looking perspective, applying our
capital market expectations for the asset classes currently utilized. We expect the current
portfolio to return 7.5% gross of fees, just below an estimated hurdle rate of 7.7% to 7.8%.
This performance expectation builds in a 5% spending allocation (as indicated) plus a 2%
ten-year forward-looking inflation assumption and an estimate of 0.75% in fees. We show
two sample portfolios that meet this hurdle rate; one portfolio includes the maximum
allocation to illiquid asset classes, and the other portfolio allocates 10% below the 30% limit
set forth in the investment policy. Before finalizing a recommendation, we would prefer to
discuss your liquidity constraints. In particular, we would address the calculations for your
loan covenant requirements, as having long-term debt of $21 million on a $40 million
investment base can present some coverage ratio challenges.
We observe a high allocation to hedge funds in the current portfolio, which can be an
efficient way to achieve uncorrelated results compared to equities and bonds. However,
there are other alternative strategies that offer diversifying return and risk sources. In both
sample portfolios, we include allocations to private real estate, which we expect will have a
Proposal of Services for Concordia University | Page 21
5% income component of the total return expectation of 7% over the next ten years at a
relatively low standard deviation (compared to other asset classes). We also include an
allocation to private equity, which has volatility expectations similar to public equity with
higher return potential. We have had continued success with structured credit securities and
suggest an allocation there to enhance return. In the more liquid space, we diversified a
portion of the U.S. equity allocation with a managed volatility strategy that is designed to
protect in periods of market volatility. This is a unique way to control equity volatility while
still achieving overall return expectations comparable to the broader market. Two other
strategies we employ in both portfolios are a multi-asset class strategy and dynamic
allocation strategy, which allows SEI to implement high conviction bets over and above
those in the underlying manager positioning. This is one way we can implement more
discretion around the asset allocation if the investment committee desires SEI to take on a
discretionary role. A multi-asset class approach to real return and inflation-sensitive assets
allows for some flexibility around the exposure to TIPS, REITs, commodities and other sub-
asset classes that are highly correlated to inflation, such as energy and short credit.
Creation of Probability Distributions
• The probability distribution graphs and / or tables that follow are meant to
provide an overview of the range of possible outcomes for a given variable
(e.g., returns, pension contributions, expense) for a given asset allocation.
• The probability distributions are generated using SEI’s proprietary
modeling tool and simulated capital market behavior.
• Capital market behavior is simulated for 1,000 possible scenarios based on
expected performance of each asset class and reflecting current economic
conditions. Capital market assumptions such as return, standard deviation
and covariances are inputs into this process, combining with model
parameters to create market scenarios.
• We use these 1,000 capital market scenarios to create 1,000 output
scenarios for each variable being considered.
• A 90% confidence interval should be interpreted as 90% of the projected
output variables, falling between the 5% and 95% results, based on SEI
Capital Market Assumptions.
• This projection is hypothetical in nature, does not reflect actual investment
results and is not a guarantee of future results.
95th percentile:
95% of outcomes are less than
or equal to this value
5th percentile:
5% of outcomes are less than or
equal to this value
50th percentile:
50% of outcomes are greater than
this amount, and 50% are less
$ M
illi
on
s
Distribution of
Probable Outcomes
95th Percentile
Median
(50th Percentile)
5th Percentile
75th Percentile
25th Percentile
22
20
18
16
14
12
10
8
6
4
2
0
About Capital Market Assumptions
• SEI Investment Management Corporation develops forward-looking, long-term capital market assumptions for risk, return, and
correlations for a variety of global asset classes, currencies, interest rates, and inflation.
• These assumptions are created using a combination of historical analysis, future market environment expectations and by applying our
own judgment. In certain cases, alpha and tracking error estimates for a particular asset class are also factored into the assumptions.
• We believe this approach is less biased than using pure historical data, which may be affected by unsustainable trends or permanent
material shifts in market conditions.
Proposal of Services for Concordia University | Page 22
Portfolios and Asset Allocations
*Gross of Fees
Annual Return Distribution
*Gross of Fees
Asset Class Current Portfolio Portfolio #1 Hurdle Rate PortfolioPortfolio #2 More Liquid Hurdle Rate
Portfolio
US Large Cap Fundamental Equity 3.0 - -
US Managed Volatility Equity - 6.0 10.0
S&P 500 Index 6.0 5.0 8.0
US Small/Mid Cap Equity Index - 1.0 3.0
US Small Cap Equity 4.0 2.0 2.0
World Equity Ex-US - 8.0 13.0
International Equity 9.0 - -
Emerging Markets Equity 5.0 2.0 4.0
Dynamic Asset Allocation - 3.0 5.0
Total Equity Exposure 27.0 27.0 45.0
Core Fixed Income 10.0 12.0 11.0
International Bond 7.0 - -
U.S. High Yield 9.0 8.0 6.0
Emerging Markets Debt 3.0 7.0 5.0
Diversified Short Term Fixed Income - 6.0 4.0
TIPs 3.0 - -
Total Fixed Income Exposure 32.0 33.0 26.0
Multi-Asset - 10.0 9.0
Commodities 7.0 - -
REITs 6.0 - -
Total Inflation Hedge/Real Assets 13.0 10.0 9.0
MLP 6.0 - -
Moderate Volatility Hedge 22.0 8.0 5.0
Private Real Estate - 8.0 5.0
Private Equity - 7.0 5.0
Structured Credit - 7.0 5.0
Total Alternatives/Other Exposure 28.0 30.0 20.0
Portfolio Metrics
Expected Return 7.5% 7.7% 7.8%
Standard Deviation 10.3% 10.8% 12.5%
Risk of Loss (5th percentile) -8.0% -8.6% -10.7%
Sharpe Ratio 0.53 0.52 0.46
POTENTIAL
OUTCOMES
Good Scenarios
(95th Percentile)
75th Percentile
Median
(50th Percentile)
25th Percentile
Poor Scenarios
(5th Percentile)
Expected Returns
-8.0% -8.6%-10.7%
0.8% 0.7% -0.2%
7.5% 7.7% 7.8%
14.6% 15.1%16.5%
25.7%26.8%
30.2%
-20%
-10%
0%
10%
20%
30%
40%
Current Portfolio Portfolio #1 Hurdle RatePortfolio
Portfolio #2 More LiquidHurdle Rate Portfolio
RE
TU
RN
(%
)
Proposal of Services for Concordia University | Page 23
10 Year Fund Value Distributions
Starting Market Value: $40MM
*Gross of Fees
Please see important information at the end of this document.
POTENTIAL
OUTCOMES
Good Scenarios
(95th Percentile)
75th Percentile
Median
(50th Percentile)
25th Percentile
Poor Scenarios
(5th Percentile)
Spending Policy: 5% over a 12 quarter moving average
31.2 31.629.7
41.5 42.0 41.0
51.4 52.8 54.0
62.664.5
67.5
83.2
88.1
97.7
20
30
40
50
60
70
80
90
100
Current Portfolio Portfolio #1Hurdle Rate
Portfolio
Portfolio #2 MoreLiquid HurdleRate Portfolio
$ M
illio
ns
Nominal Values
24.8 24.622.7
33.3 33.9 32.9
42.0 42.7 42.9
52.154.3
56.9
72.7
78.2
87.0
20
30
40
50
60
70
80
90
100
Current Portfolio Portfolio #1Hurdle Rate
Portfolio
Portfolio #2 MoreLiquid HurdleRate Portfolio
$ M
illio
ns
Real Values
Proposal of Services for Concordia University | Page 24
IV. INVESTMENT MANAGER RESEARCH AND SELECTION
A. How are investment managers/funds selected?
Our unique Manager Selection Process has two basic goals:
Identify the most reliable drivers of excess return
Identify the industry-leading managers delivering these strategies
Sources: eVestment, HFRI, Prequin. All data as of March 31, 2014.
Analyze Markets to Identify Drivers of Excess Return
Not all sources of return are equal, nor are they all effective. Successful manager selection
is not solely dependent upon manager skill, but also on the level of opportunity that exists
within the area in which they seek excess returns. As such, our process begins with
ensuring that the manager universe we search includes the managers with the highest
probability of outperforming. This process is focused on analyzing the capital markets and
determining the inefficiencies in these markets. When an inefficiency is identified, we
determine the sustainability of that inefficiency and investigate the various investment
processes that can be used to maximize it.
Define Manager Universe
After identifying the best, sustainable sources of return, we research the managers
employing these strategies to discover which have demonstrated success in exploiting the
Analyze markets to
identify opportunities for
excess return
Analysis of manager’s
decisions and decision-
making process
Onsite manager due
diligence
Construct portfolios to
diversify risk
Define manager
universe for the
opportunity
• Proprietary framework to assess markets
• Measure the quality and sustainability of the opportunity
• Access academic and manager network to uncover opportunities
• 90 experienced professionals worldwide
• Significant investment in research technology annually
• Proprietary database of 32,000+ products
• Leverage knowledge and firm reputation
• Separate quality of decisions from outcomes
• Utilize analytical technology to understand drivers of return
• Extensive database of historical decisions
• Assess sustainability of competitive advantages
• 20+ years assessing investment firms
• 1,000 manager visits and contacts annually
• 100+ current managers
• Monitor firm and process changes
• Analyze changes in market dynamics
• Incentive-based research team
Proposal of Services for Concordia University | Page 25
inefficiency. SEI’s manager discovery utilizes multiple channels to ensure as many money
management firms as possible are identified. We have research offices on three continents
and appropriately leverage our research network for the benefit of our clients. We use our
size, reputation and industry knowledge in conjunction with other channels such as
academic research and conferences to discover new firms and gain access to changes at
established firms.
Analysis of Decisions and Decision-Making Process
Once the managers have been identified, we analyze their historical investment decisions in
relation to the inefficiency they are expected to exploit. To conduct this analysis, we ask
managers to send us their monthly investment decisions, including archived data. We
measure the quality, repeatability and discipline of these decisions over time. This decision
analysis enhances our ability to identify whether a manager has skill in exploiting the
inefficiencies in the market or if their success has resulted from random, unrepeatable
actions. We separate the quality of the decision from the quality of the outcome to eliminate
the effects of market noise. We assess risk such as absolute and relative volatility and
upside/downside capture ratios. These factors help us to determine whether or not the risk a
manager is taking is in proportion to the returns being generated.
Due Diligence
SEI visits managers’ offices to investigate their investment process, historical decisions and
qualitative factors that relate to the successful management of their firm. We review their
investment philosophy, process, risk tolerances and competitive advantages. We consider
staff background, tenure, compensation structure and other factors to help us determine an
investment team’s stability and commitment level. SEI hires teams and not firms in our
search for successful managers.
We conduct a detailed analysis of the investment team, how they operate and what impact it
would have if any members left the firm. This analysis of these qualitative risk factors helps
us to assess and validate the sustainability of their competitive advantages. We use this
forum and the results of our analysis to query the managers and further validate the quality
of their decision-making process.
Construct Portfolios to Diversify Sources of Risk and Return
We aim to construct portfolios that are diversified by sources of return. This approach is
designed to offer optimal diversification, reduce risk and deliver consistency. Manager sub-
styles, which by themselves are inherently risky, are constructed to have low correlations
across excess returns, thus reducing overall volatility. Each manager’s risk contribution is
calculated and serves as one of the primary measures in allocating assets amongst the
managers. We continually monitor our portfolios to ensure that they are appropriately
positioned given our goals and the market environment.
Proposal of Services for Concordia University | Page 26
Below is our sample manager list:
Manager Diversification as of March 2014. The strategies above are not an exhaustive list, but
represent those that are typically utilized by SEI Institutional clients. Certain strategies are currently
available only in registered mutual fund products. References to specific SEI funds are designed to
illustrate SEI’s manager selection process, which is implemented by SEI Investments Management
Corporation (SEI). The managers may be offered exclusively through mutual funds. References to
specific securities do not constitute an offer or recommendation to buy, sell or hold such securities.
*As of March 31, 2014, SEI Investments Company has a 39.3% minority ownership interest in LSV
Asset Management.
Large Cap Index StrategyState Street Global Advisors – Passive
S&P 500 Index StrategyState Street Global Advisors – Passive
Extended Markets Index StrategyState Street Global Advisors – Passive
US Managed Volatility StrategyAronson Johnson OrtizAnalytic InvestorsLSV Asset Management*
Large Cap Equity StrategyAQR Capital Management – Quantitative CoreAronson Johnson Ortiz – Quantitative Relative ValueBrown Investment Advisory – GrowthJackson Square Partners – GrowthLSV Asset Management* – Quantitative Contrarian ValueWaddell & Reed Asset Mgmt. – Core
World Equity ex US StrategyAcadian Asset Management – Quant Value/MomentumBaillie Gifford – Growth EARNEST Partners – Core/Relative Value TiltJO Hambro Capital Management – GARPMcKinley Capital Management – Quantitative MomentumNFJ Investment Group – Contrarian Value w/ Dividend FocusThornburg Investment Management – Core
Domestic Equity
International Equity
US Large Cap Disciplined Equity StrategyAnalytic Investors – Quantitative Factor RotationINTECH Inv. Management – Quantitative Volatility CaptureLazard Asset Management – CoreQuantitative Mgmt. Associates – Quantitative Bias
ExploitationOppenheimer Funds – Core
US Small Cap II Equity StrategyAllianceBernstein L.P. – GrowthAQR Capital Mgmt. – Quantitative CoreFiduciary Management Associates – GrowthLee Munder Capital Group – Relative Value Montibus Capital Management, LLC – Growth
Emerging Markets Equity StrategyDelaware Management Company – Intrinsic ValueJO Hambro Capital Management – GrowthKleinwort Benson Investors International Ltd. – Dividend FocusLazard Asset Management – GrowthNeuberger Berman Management – QuaRPPanAgora Asset Mgmt. Company – Quant Value/Momentum
US Small/Mid Cap Equity StrategyAllianceBernstein L.P. – GrowthIntegrity Asset Management – Opportunistic ValueJanus Capital Management – Quality Growth Lee Munder Capital Group – Relative ValueLSV Asset Management* – Contrarian Value Montibus Capital Management, LLC– GrowthRobeco Investment Management – ValueSecurity Capital Research & Management – REITWellington Management Company LLP – GrowthWilliam Blair and Company, LLC – Relative Value
Real Estate StrategySecurity Capital Research & Management – REITCenterSquare Investment Management – REIT
Global Managed Volatility StrategyAcadian Asset Management Analytic Investors
Fixed Income
GNMA StrategyWellington Management Company
US Core Fixed Income StrategyJP Morgan Asset Management – Security Selector w/ MBS focusJennison Associates – Security Selector w/ Corporate Bond FocusWestern Asset Management – Macro/Sector RotatorMetropolitan West Asset Management – Macro/Value-OrientedWells Capital Management – Security Selection
Core Fixed Income Plus Strategy80% US Core Fixed Income Strategy10% High Yield Strategy10% Emerging Debt Strategy
Long Duration Bond StrategyMetropolitan West Asset Management – Macro/Value-OrientedJennison Associates – Security Selector w/ Corporate Bond FocusIncome Research & Management – Security Selector w/ Corporate Bond FocusLegal & General Inv. Mgmt. America – Security Selector w/ Corporate Bond Focus
Cash Management StrategiesMoney Market FundsCustom Separate Accounts
Dynamic Asset Allocation StrategyState Street Global Advisors
Multi-Asset Real Return StrategyAllianceBernsteinCohen & Steers, Inc.QS Investors, LLC
Alternative Investments
Hedge Fund Strategies
Private Equity Strategies
Structured Credit Strategies
Real Estate Strategies
Long Duration Corporate Bond StrategyIncome Research & Management – Corporate Bond FocusJennison Associates – Corporate Bond FocusLegal & General Inv. Mgmt. America – Corporate Bond FocusMetropolitan West Asset Management – Corporate Bond Focus
High Yield Bond StrategyAres Management – OpportunisticBrigade Capital Management – OpportunisticDelaware Management Company – FundamentalBenefit Street Partners – Relative ValueJP Morgan Asset Management – Relative Value
Emerging Markets Debt StrategyNeuberger Berman – MacroStone Harbor Investment Partners – Relative ValueInvestec Asset Management – Security Selection
Short and Intermediate-Term Gov’t StrategyWellington Management Company
Ultra Short Duration Bond StrategyWellington Management CompanyLogan Circle Partners
Opportunistic Income StrategyWellington Management Company – Enhanced CashAres Management – Bank LoansDeclaration Management & Research, LLC – Enhanced CashHyperion Brookfield Asset Management, Inc. – Enhanced Cash
Other/Alternative Investments
Proposal of Services for Concordia University | Page 27
B. How does your firm evaluate and monitor investment managers/funds? What key
criteria do you consider in the review of an investment manager/fund?
Manager Evaluation
One of the primary objectives of SEI’s Manager Research Process is to differentiate
manager skill (alpha) from market-generated returns (beta) in order to identify managers that
can deliver consistent results.
After identifying the desired inefficiencies in the marketplace for a given investment strategy,
we utilize both quantitative and qualitative research to evaluate and select the best
managers to exploit those inefficiencies within each asset class of the strategy. Each
manager undergoes a rigorous assessment of how it performs in isolation and the
contribution it makes toward both risk and return at the portfolio level.
We also look to identify each manager’s competitive advantage and characteristics of that
advantage that can then be monitored on an ongoing basis. This proactive approach allows
us to remove managers from a strategy when the manager’s competitive advantage
diminishes (such as through staff departures) rather than waiting for poor performance prior
to removal, or based on index revisions or market conditions.
Quantitative Analysis
Our quantitative analysis focuses on a range of statistical factors including but not limited to:
Risk - Factors such as overall absolute and relative volatility and upside/downside capture
ratios help us to determine whether or not the risk a manager is taking is in proportion to the
returns being generated.
Performance attribution - Our goal is to determine the source(s) of the manager’s returns
relative to a given benchmark. Our assessment considers data points and trends that may
include static and/or tactical beta exposures, factor rotation, strategic weightings and long or
short volatility exposures. We also focus on analyzing the manager’s implementation
process to determine its sustainability and repeatability.
Proposal of Services for Concordia University | Page 28
Qualitative Analysis
Once the quantitative analysis is complete, it is used as a basis for qualitative analysis. The
goal of this effort is to make sure that a manager has the right people and resources in place
for its particular strategy. We focus on assessing the quality of the manager’s personnel, the
firm’s stability, the efficiency of its investment process and the effectiveness of its trading
processes. Because a significant amount of analysis has been conducted prior to this stage,
our analysts are able to ask direct questions and check answers against the initial
evaluation. Our qualitative analysis efforts center around three primary factors:
Philosophy - We want to understand the premise upon which a manager makes decisions.
Process - Each manager employs a proprietary investment process. We want to
understand how potential investment ideas are developed, explored, adopted and
discarded.
People - People are responsible for designing and implementing a firm’s philosophy and
process. SEI hires teams and not firms. We are looking for successful investors and want to
know who those people are, how they operate and what impact it would have if they left the
firm. We consider background, tenure, compensation structure and other factors to help us
determine an investment team’s stability and commitment level.
Manager Thesis
Based on our manager research, we develop a manager thesis, which includes forward-
looking expectations regarding how the manager will execute a given investment mandate,
environments in which the strategy should outperform and environments in which the
strategy might underperform. We aim to identify, classify and validate skill.
This ―thesis-based culture‖ provides the basis for our forward-looking, proactive due
diligence process. The hiring rationale in our thesis gives us the basis for our sell discipline
and incorporates guidelines for actions that will be taken if that discipline is violated. The
thesis also sets our strategic and tactical portfolio weightings to a given manager. Please
see Appendix D for a sample manager thesis.
Manager Monitoring
We use several tools to measure and monitor risks at the manager level and at the portfolio
level. SEI’s IMU Portfolio Managers and Analysts review each manager’s underlying
holdings on a regular basis to determine whether the outcomes are consistent with the
expectations and guidelines that were established prior to selection. This security-level
analysis is also important in understanding the forward-looking risk level of the manager and
overall portfolio risk budget. Our systems provide tracking-error expectations for each of the
managers based on the current securities held in the portfolio. This gives our IMU
professionals access to the same level of detail the managers use to make their decisions,
including price trends, trading volume and fundamental characteristics of key holdings. It
Proposal of Services for Concordia University | Page 29
also enables us to challenge their positioning in an effective manner during our periodic
evaluations and assess their consistency with the objectives of our initial manager thesis.
Conference calls and onsite due diligence visits are scheduled regularly so that our IMU
professionals can monitor and analyze changes in underlying portfolios and manager
organizations. In situations where a manager is deviating from expectations, an SEI Analyst
or Portfolio Manager will initiate a call to discuss the reasons behind the change.
The following provides a timetable of our Monitoring Process:
Daily
Access to underlying portfolio holdings and risk analytics
Weekly
Performance and risk attribution analysis
Monthly
Buys and sells review, portfolio characteristics and market trend overview
Quarterly
Conference call to evaluate manager decision and outlook
Annually
Onsite visit to access manager and dedicated investment teams (performed annually or more often)
Ongoing
Peer analysis, investment strategy oversight and review, backup list, watch list
If a manager’s performance or risk management deviates from expectations and further
action is required, SEI Portfolio Managers have a number of options. Cash that becomes
available in the portfolio may be channeled to other fund managers or the portfolio may be
rebalanced according to target weights. Similarly, the manager’s allocation within the
portfolio could be reduced to limit its overall impact, in which case it would be placed on an
internal ―watch list.‖
Proposal of Services for Concordia University | Page 30
V. RISK MANAGEMENT
A. Describe the manner in which your firm accounts for and allocates risk at the total
portfolio level. How are decisions as to allocation of portfolio risk taken and who
makes those decisions?
Risk management is a critical part of SEI’s investment and asset allocation processes. The
ultimate objective of SEI’s Risk Management Process is to produce a portfolio that achieves
risk-adjusted alpha targets while delivering diversification and risk mitigation benefits for the
client portfolio. Our solution leverages industry-specific risk tools with the manager selection
and monitoring capabilities of SEI. The cornerstone of our process is the position-level data
that we demand from all managers. This transparency enables us to assess and manage
the risks involved in the construction and maintenance of portfolios.
Our approach to risk management includes total portfolio risk attributes and:
Daily transparency at the security level
Monitoring of current volatility including measurement relative to long-term capital
market assumptions
Making informed asset allocation changes to client portfolios based on current market
conditions within a risk budget framework
Flexibility to redeploy capital to different managers based on current market conditions
within a risk budget framework
SEI’s proprietary risk management and monitoring technology incorporates the leading
software in the industry such as BlackRock Solutions, FactSet and Axioma to provide
detailed real-time information to make well-informed decisions for our clients.
We focus on evaluating and managing the strategic risks to an organization by monitoring
and managing risk at multiple levels: the organization level, market risk level and alpha risk
level. We have a dedicated and independent Risk Management Group that is focused on
overseeing these levels and the teams responsible for them.
Risk Management Group
SEI’s Risk Management Group is an independent team that reports directly to the head of
the Investment Management Unit. The team manages risk by maintaining a system of
checks and balances through budgeting to ensure that IMU Portfolio Managers have a clear
view of the risk exposure of each manager and the overall strategies. The team has an
average of 22 years of investment industry experience and is led by Robert Ludwig,
Managing Director.
Proposal of Services for Concordia University | Page 31
Organization Risk Management
SEI’s Risk Management Process begins with understanding an organization’s strategic risk
tolerances and objectives in an asset/liability context. Our process recognizes that
endowment assets exist to satisfy the financing of future and current spending needs, as
well as the protection and growth of purchasing power.
When developing asset allocation, SEI evaluates the range of outcomes for relevant
strategic metrics. For example, we evaluate the amount of appropriate inflation protection
within the portfolio and its correlation to the specific short- and long-term goals and
objectives of the institution.
Specifically, this process would include stochastically forecasting ranges of outcomes for the
following strategic metrics, depending on the priorities of the endowment:
Target exposure to asset classes based on economic sensitivity (growth, inflation
hedges, downside protection, liquidity needs)
Appropriate mix between traditional and alternative investments
Balance between marketable and non-marketable investments within the alternatives
allocation
Appropriate allocation to asset classes that provide ample liquidity to meet short-term
spending needs and not at the detriment of long-term growth objectives
Market Risk Management
SEI dedicates significant resources to the evaluation and monitoring of market risk. We
recognize that one of the significant contributors to risk from an endowment’s perspective is
the volatility inherent in capital markets. In this regard, our portfolio construction process
explicitly incorporates expected returns, standard deviations and correlations across asset
classes in the development of an investor’s strategic asset allocation. By constantly
analyzing the capital markets and regularly reviewing short-term and long-term capital
market assumptions, SEI manages market risk by optimizing the mix of asset classes to
reduce risk at the total portfolio level. SEI consciously builds portfolios to ―replicate‖ entire
asset classes with the objective of capturing the underlying risk/return characteristics of
each individual asset class.
Alpha Risk Management
While organizational and beta risks are the most important and tangible from an endowment
perspective, additional risks to the portfolio are derived from the variance of a strategy’s
returns from the market return (tracking error). Alpha risk at the strategy level (or the risk of
underperforming the market) is driven both by the skill of the underlying managers and the
correlation of an individual manager’s alpha within a strategy to other managers in that
same strategy. The objective of SEI’s Manager Research Process is to identify and select
skillful managers with differentiated investment processes. Embedded in this philosophy is
the importance of diversification: By using multiple managers with different investment
processes across asset classes, one can reduce risk for a given level of excess return
(alpha).
Proposal of Services for Concordia University | Page 32
VI. PERFORMANCE EVALUATION AND REPORTING
A. Does your firm offer comprehensive performance reporting that tracks progress
against goals and monitors the level of risk across the entire portfolio? If so, how
frequently and how soon after the end of a period are the reports available? Please
provide a sample performance report. Describe your firm’s ability to provide
customized reporting based on specific client preferences or requirements.
Yes, we offer comprehensive performance reporting and clients have various opportunities
to address and review the progress of their portfolio as outlined in the following chart:
Performance Reports
Performance is available on a daily basis on our Institutional Account Access Website. SEI
will provide monthly performance reports within seven to ten business days after the end of
the month. A sample reporting package is included in Appendix E.
We also provide a detailed Quarterly Investment Review every quarter, which outlines SEI’s
outlook for the future, performance across strategies, manager changes, industry and
market events and other investment details.
FREQUENCY ACTIVITY TIMING
DAILY
• Internet Access
• Telephone Access• On Demand
MONTHLY
• Performance Reporting
• Rebalancing Reports
• Risk Reporting
• 7-10 Business Days
QUARTERLY
• Quarterly Performance Report
• Client Meetings Covering: Performance, Market Reviews,
Manager Changes, Asset Allocation, Client Training
• Reports
25 Business Days
• Meetings
As Scheduled
ANNUALLY
• Asset/Spending Studies
• Review of Investment Policy Statement• As Scheduled
AD HOC
• Client Training
• Financial Modeling
• Miscellaneous
• As Scheduled
For Illustrative Purposes Only
Proposal of Services for Concordia University | Page 33
Customized Reporting
Reporting can be customized to each client’s portfolio. We will work with you to determine
the level of customization you desire, the best means to achieve your goals and what
reports you would like to see on a regular basis. Ad hoc reports can also be provided,
generally within 24 hours.
SEI's Institutional Account Access Website
SEI's Institutional Account Access Website is a password-protected client portal that brings
together the tools, information and education that our clients need to manage their portfolio
effectively. All changes to the portfolio are posted to this site, as well as information about
managers. The University can access the following information via the Institutional Account
Access Website:
Transaction history
Balance information
Complete reporting package
Customized reporting capability
Market analysis
SEI performance data
Market commentary and updates from managers and experts
Contacts, forms and instructions
B. How do you benchmark client portfolios? How should we, as a client, measure our
joint success?
Market Benchmarks
SEI employs multiple benchmarks depending on the asset class we are replicating. Each
benchmark is weighted appropriately based on the client’s specific allocations to create a
portfolio-level benchmark. Examples include the Russell 1000 Index for large cap and the
Barclays Aggregate Bond Index for fixed income. We choose widely accepted benchmarks
that best represent specific market exposures and compare the actual performance of our
strategies with benchmarks correlating to the given segment of the investment universe.
Measuring Success
Appropriate benchmarks for an organization should be linked to the strategic and financial
goals of the organization. SEI takes into consideration your goals and objectives and looks
to capture all of the market exposures that are required to meet those goals.
Proposal of Services for Concordia University | Page 34
SEI measures success within our OCIO relationships at three levels. We utilize clear
indicators to evaluate our performance at each level as we partner with our clients to
achieve their investment objectives.
Investment performance versus capital market benchmarks
Total portfolio return vs. blended benchmark return
Total portfolio risk vs. blended benchmark risk
Individual strategy return vs. strategy benchmark return
Individual strategy risk vs. individual strategy benchmark risk
Peer group risk and return comparisons
Client satisfaction
Client surveys
Tenure and growth of client relationships
Annual client conference
We can provide custom benchmarks if required by the University.
Proposal of Services for Concordia University | Page 35
VII. CLIENT BASE
A. What is the total dollar amount of client assets advised by your firm? Please provide a
current client summary by client type.
SEI’s Institutional Group acts within a fiduciary capacity as a leading global provider of
investment management solutions to endowments, foundations, corporations, healthcare
organizations, unions and other institutional entities.
SEI’s Institutional Group provides services directly to institutions with asset pools in excess
of $25 million. As of March 31, 2014, we have $71.8 billion in assets under management
and service 474 client accounts worldwide.
Type $ USD (mm) # of Clients
Corporate Defined Benefit $38,641 201
Corporate Defined Contribution $3,021 44
Corporate Operating Asset $444 6
Union $6,035 48
Nonprofit $18,103 156
Government $1,660 19
Other $3,891 n/a
Total $71,796 474
These numbers represent fully funded clients (as of March 31, 2014) and exclude clients that have
committed but are not yet funded.
Other represents liquidity assets, the SEI Target Date Strategies and other defined contribution
platform assets.
B. Provide a list of clients that may be contacted as references for which you provide
OCIO services.
As a courtesy to our clients, we respectfully request that you speak with Danielle Kovach at
610.676.4178 when you are ready to contact the following organizations. Jane will be out on
maternity leave beginning May 11th, but Danielle will be available as a future contact. Due to
the amount of reference checks requested from SEI, we want to ensure we are considerate
of our clients’ time. Danielle would be happy to make the proper introductions at that time.
Des Moines University Osteopathic Medical Center
Des Moines, Iowa
Mark Pfeiffer, Chief Financial Officer
515.271.1475
Client since: September 2007
Assets with SEI: $119 Million
Proposal of Services for Concordia University | Page 36
Wright State University Foundation
Dayton, Ohio
Bob Batson, Executive Director of Advancement Services
937.775.2869
Client since: November 2004
Assets with SEI: $114 Million
State College of Florida Foundation
Bradenton, Florida
Raul Elizalde, Investment Committee Chair
941.350.7904
Client since: March 2004
Assets with SEI: $48 Million
Below is a representative client list.
Representative clients reflect a partial list of U.S. institutional clients, primarily from the Midwest
region. These clients have been selected from SEI’s complete client roster with assets in excess of
$25 million that have provided SEI with permission to use their names in marketing materials. The
inclusion of particular clients on this list does not constitute an endorsement or recommendation of
SEI’s products or services by such clients. List has a focus on higher education clients Client list as of
March 31, 2014.
Non-profit/Higher Education Corporate
Central Connecticut State University (New Britain, CT)
Children’s Mercy Hospital (Kansas City, MO)
College of Central Florida (Ocala, FL)
Conemaugh Health System (Johnstown, PA)
Cooper Health System (Cherry Hill, NJ)
Des Moines University (Des Moines, IA)
Edison State College Foundation (Fort Myers, FL)
Georgian Court University (Lakewood, NJ)
Jewish Foundation of Nashville (Nashville, TN)
La Salle University (Philadelphia, PA)
Lasell College (Newton, MA)
Lee Memorial Health System (Cape Coral, FL)
Unity Point Health System ( Des Moines, Iowa)
University of North Dakota (Grand Forks, ND)
University of Southern Mississippi (Hattiesburg, MS)
Wright State University (Dayton, OH)
Boston Mutual Life Insurance Co. (Boston, MA)
Covidien (Mansfield, MA)
Ecolab, Inc. (St. Paul, MN)
Ferro Corporation (Mayfield Heights, OH)
Givaudan Corporation (Cincinnati, OH)
Joy Global, Inc. (Milwaukee, WI)
Lafarge N.A. (Chicago, IL)
LVMH Moet Hennessy Louis Vuitton (New York, NY)
Mitsubishi Motors North America, Inc. (Cypress, CA)
New Jersey Education Association (Trenton, NJ)
Omaha World-Herald (Omaha, NE)
Panasonic Corporation (Secaucus, NJ)
Pirelli Tire North America (Rome, GA)
The Brink's Company (Richmond, VA)
The J.M. Smucker Company (Orrville, OH)
Westar Energy, Inc (Topeka, KS)
Proposal of Services for Concordia University | Page 37
VIII. CODE OF ETHICS & CONFLICTS OF INTEREST
A. Describe your firm’s code of ethics and conflict of interest policies. Include an
explanation of how these policies and any other measures taken by your firm insure
that your firm’s actions are always aligned with your clients’ best interests.
A summary of our Code of Ethics is provided below:
SEI Investments Management Corporation has a highly ethical business culture and expects
that all personnel will conduct any personal securities transactions consistent with its Code
of Ethics and in such a manner as to avoid any actual or potential conflicts of interest or
abuse of a position of trust and responsibility. Generally, when an advisory employee
invests for his or her own account, various conflicts of interest could arise between a client’s
and that employee’s interest. Such conflicts include using that employee’s advisory position
to take advantage of available investment opportunities, taking an investment opportunity
from a client for the employee’s own portfolio or front-running, which occurs when an
advisory employee trades in his or her personal account before making client transactions.
As a fiduciary, SEI Investments Management Corporation owes a duty of loyalty to clients,
which requires that applicable employees must always place the interests of clients first and
foremost and prohibits those employees from taking inappropriate advantage of their
position. Thus, SEI Investments Management Corporation personnel must conduct
themselves and their personal securities transactions in a manner that does not create
conflicts of interest with the firm’s clients.
Pursuant to the Code of Ethics, applicable SEI Investments Management Corporation
personnel, their family members and other persons associated with SEI Investments
Management Corporation will be subject to various pre-clearance and reporting standards
for their personal securities transactions based on their status as defined by the Code of
Ethics.
SEI Investments Management Corporation employees are subject to the Code of Ethics and
must certify to their compliance with the Code of Ethics on an annual basis. SEI Investments
Management Corporation employees also receive annual training on the policies and
procedures set forth in the Code of Ethics. Failure to comply with the provisions of the Code
of Ethics may result in the imposition of serious sanctions including but not limited to
disgorgement of profits, penalties, dismissal, substantial personal liability and/or referral to
regulatory or law enforcement agencies.
SEI Investments Management Corporation employees are also subject to the Code of
Conduct of SEI Investments Company (SEIC), which is the entity’s parent company.
The requirements and limitations of the SEI Investments Management Corporation Code of
Ethics are in addition to any requirements or limitations contained in the Code of Conduct or
in other compliance policies and procedures applicable to SEI Investments Management
Proposal of Services for Concordia University | Page 38
Corporation and its personnel. All employees are required to comply with the federal and
state securities laws.
SEI Investments Management Corporation has adopted the following procedures to
implement and monitor compliance with these policies:
Codes of ethics and of conduct – All employees must adhere to policies regarding
conflicts of interest and behavior.
Business Unit Leaders – On a continuous basis, Business Unit Leaders are
responsible for understanding and reviewing the activities and transactions of their
business units that may give rise to conflicts of interest between SEI Investments
Management Corporation and its clients. Business Unit Leaders that become aware of
activities and transactions presenting areas of concern with respect to conflicts of
interest are required to notify and consult promptly with the Compliance and Legal
Departments.
Determination of conflicts – The Compliance and Legal Departments will determine
whether a particular area of SEI Investments Management Corporation’s business
gives rise to conflicts of interest between SEI Investments Management Corporation
and its clients.
Addressing conflicts of interest – As necessary, SEI Compliance is responsible for
developing separate policies and procedures to address all new SEI Investments
Management Corporation conflicts of interest.
Periodic review – Designated Business Unit Leaders and representatives of SEI’s
Compliance and Legal Departments will periodically review the current areas of SEI
Investments Management Corporation’s business that give rise to potential conflicts of
interest and discuss whether any additional business activities, transactions or
engagements that may give rise to potential conflicts of interest are being
contemplated over the next quarter.
B. If you answered yes to the question at section I, E), then describe how your firm
avoids any potential conflicts of interest.
Under the Investment Advisers Act, SEI Investments Management Corporation (SEI) has a
duty to make full and fair disclosure to the advisory client, through its Form ADV, contract or
applicable document, particularly where there is a material conflict of interest. Potential
conflicts of interest that trigger such disclosure include dealings with affiliates, the receipt of
compensation from third parties that may affect the adviser’s advice, an adviser’s financial
interest in a transaction (for example, acting as a principal), client referral arrangements and
personal and proprietary trading by the adviser and its employees. The nature and amount
of disclosure that SEI should make in any such situation will depend on the facts and
circumstances of each case, including the materiality of the conflict, though the disclosure
obligation in such situations is broader than that under normal circumstances. Underlying
this duty is the common law notion that a fiduciary must disclose when its interests may be
Proposal of Services for Concordia University | Page 39
in material conflict with those of its client so that the client may make a fully informed
evaluation of the adviser.
Potential conflicts of interest may exist between SEI and its advisory clients under certain
circumstances in which SEI and/or its affiliates provide services to clients. To the extent
such potential conflicts exist, SEI generally will only engage in the activity giving rise to the
conflicts if it is permissible under applicable regulatory requirements and/or if it first obtains
the client's informed consent.
A copy of our most recent Form ADV is included in Appendix B.
Proposal of Services for Concordia University | Page 40
IX. FEES
A. Specify all fees (consulting, custodial, management, etc.) applicable to the OCIO
services described in the “Scope of Services” section. Please specify whether the fee
quoted is all- inclusive or could other expenses occur as a result of this relationship
(travel, special projects, etc.).
It is important to note that our all-inclusive fee structure proposed to the University includes
fees for managers; there will be no additional fees beyond those stated in this document for
the services offered. Our tremendous buying power and scale provide all of our clients with
significant cost savings and access to the same top manager talent regardless of size. Any
investment management fees received by SEI Investments Management Corporation (SEI)
within our strategies will be rebated (or deducted) against our proposed management fees.
Below are two sample portfolios and asset allocations we describe as possibilities for
Concordia to consider in the asset allocation section on this RFP. The fees for each portfolio
have been described in the following fee schedule.
Asset Class Portfolio 1 - Hurdle Rate PortfolioPortfolio 2 - More Liquid Hurdle Rate
Portfolio
US Managed Volatility Equity 6.0 10.0
S&P 500 Index 5.0 8.0
US Small/Mid Cap Equity Index 1.0 3.0
US Small Cap Equity 2.0 2.0
World Equity Ex-US 8.0 13.0
Emerging Markets Equity 2.0 4.0
Dynamic Asset Allocation 3.0 5.0
Total Equity Exposure 27.0 45.0
Core Fixed Income 12.0 11.0
U.S. High Yield 8.0 6.0
Emerging Markets Debt 7.0 5.0
Diversified Short Term Fixed Income 6.0 4.0
Total Fixed Income Exposure 33.0 26.0
Multi-Asset 10.0 9.0
Total Inflation Hedge/Real Assets 10.0 9.0
Moderate Volatility Hedge 8.0 5.0
Private Real Estate 8.0 5.0
Private Equity 7.0 5.0
Structured Credit 7.0 5.0
Total Alternatives/Other Exposure 30.0 20.0
Proposal of Services for Concordia University | Page 41
SEI Fee Proposal for Concordia University
Asset Level Portfolio 1 - Hurdle Rate
Portfolio Fee(1)
Portfolio 2 - More Liquid Hurdle Rate
Portfolio Fee(2)
First $20 Million 0.61%
0.61%
Next $20 Million 0.57% 0.57%
Over $40 Million 0.53% 0.53%
Public Market Weighted
Average ($00.0million)
0.60% 0.60%
Alternative Assets(3)
SEI Structured Credit Fund 1.15% 1.15%
SEI Special Situations Fund 1.15% 1.15%
SEI Core Property Fund 1.25% 1.25%
SEI Private Equity Fund 1.15% 1.15%
Total Weighted Average
($00.0million)
0.79% 0.72%
Optional Services: Fee Fee
Custody 0.03% 0.03%
Oversight on legacy assets $4,000-$10,000 per unique asset $4,000-$10,000 per unique asset
(1) This detail is based on Portfolio 1 – Hurdle Rate Portfolio and is weighted: 6% SEI US Managed Volatility Strategy, 5% SEI S&P 500 Index Strategy, 1% SEI Extended Markets Index Strategy, 2% SEI Small Cap II Equity Strategy, 8% SEI World Equity ex-US Strategy, 2% SEI Emerging Markets Equity Strategy, 3% SEI Dynamic Asset Allocation Strategy, 12% SEI Core Fixed Income Strategy, 8% SEI High Yield Bond Strategy, 7% SEI Emerging Markets Debt Strategy, 6% SEI Opportunistic Income Strategy, 10% SEI Multi-Asset Real Return Strategy, 8% SEI Special Situations Fund, 8% SEI Core Property Fund, 7% SEI Structured Credit Fund and 7% SEI Private Equity Fund.
(2) This detail is based on Portfolio 2 – More Liquid Hurdle Rate Portfolio and is weighted: 10% SEI US Managed Volatility Strategy, 8% SEI S&P 500 Index Strategy, 3% SEI Extended Markets Index Strategy, 2% SEI Small Cap II Equity Strategy, 13% SEI World Equity ex-US Strategy, 4% SEI Emerging Markets Equity Strategy, 5% SEI Dynamic Asset Allocation Strategy, 11% SEI Core Fixed Income Strategy, 6% SEI High Yield Bond Strategy, 5% SEI Emerging Markets Debt Strategy, 4% SEI Opportunistic Income Strategy, 9% SEI Multi-Asset Real Return Strategy, 5% SEI Special Situations Fund, 5% SEI Core Property Fund, 5% SEI Structured Credit Fund and 5% SEI Private Equity Fund.
(3) Alternatives fee disclosures: SEI Opportunity Fund (1.15% plus administrative expenses), SEI Special Situations Fund (1.15% plus administrative expenses), SEI Structured Credit Fund (1.25% plus administrative expenses) and SEI Core Property Fund (1.25% plus administrative expenses). Any addition of these and other asset classes will be approved by client and documented within the Investment Policy Statement.
For the fees proposed, the University will receive all of the following services:
Payment of all manager fees
Strategic advice unique to the University’s goals and objectives
Portfolio structure - multiple asset classes
Ongoing financial modeling
Asset allocation analysis and implementation
Active portfolio management and measurement to goals
Proposal of Services for Concordia University | Page 42
Consolidated performance reporting and measurement
Secure internet website and reporting
Access to SEI’s investment research team
Dedicated Client Portfolio Management Team including regular visits, meetings and
travel expenses
Outside Asset Oversight
The fee proposal assumes SEI manages the entire client portfolio. If outside managers are
retained there may be an additional fee to cover SEI services related to these assets. If the
client specifically requires fiduciary services over outside managers, SEI will need to vet
these managers prior to accepting fiduciary responsibility and an additional fee will apply in
this case. Depending on the level of oversight and fiduciary responsibility needed for outside
assets, the fee would be $4,000 to $10,000 per unique asset.
In Comparison to the Competition
When comparing SEI’s fee during your evaluation process, please compare our all-inclusive
fee versus the fee your current or proposed service providers charge. Take note of manager
and strategy fees, as well as the level of passive and/or in-house investment management
services. Please also consider into your evaluation any additional ad hoc fees such as travel
costs, additional asset allocation studies or special research projects you may want
conducted for which other providers may charge.
Variability of Fees
Asset allocation is a key determinate of SEI’s pricing for institutional clients. When
comparing service provider pricing, it is critical to compare the level of active/passive
management and the percentage of dollars allocated to each asset class to ensure accuracy
of the comparison. SEI clients are made aware of the fee impact to any recommended
change of the strategic asset allocation. Depending on the level of discretion given to SEI, a
fee change does not occur unless the Committee agrees to a strategic shift in the asset
allocation.
Fees can increase or decrease based on some of the following factors:
Increase in Fee Decrease in Fee
More overall equity Less overall equity
More small/mid cap More investment grade fixed income
More international Less small/mid cap
Addition of alternatives Less international
Addition of private equity Addition of indexing
Proposal of Services for Concordia University | Page 43
X. ADDITIONAL INFORMATION
A. Provide an executive summary that explains your firm’s strengths and competitive
advantages (i.e. why should we select your firm?).
An executive summary has been included at the beginning of this proposal. In addition, we
believe our solution offers several advantages designed to provide the highest level of
investment management to the University, including:
Significant Track Record and Experience
One of the largest global providers of OCIO solutions
More than 20 years of experience in institutional investing
Involvement in industry groups and professional associations
474 institutional clients worldwide including 156 nonprofit client accounts
Team-based relationship management approach leveraging 315 experts in finance,
spending policy analysis, asset allocation and investment management
Publicly held firm (NASDAQ: SEIC) with strong and stable financial position
Active Asset Management Implementation
Custom active asset allocation
Active point of view to capture market inefficiencies
Active portfolio design
Active manager selection
Active portfolio management
Active risk management
Integrated Enterprise Risk Management Approach
Proactive recommendations based on complete integration of mission goals/spending
objectives and overall financial statement impact
Proprietary modeling technology incorporating assets and financial statements
Significant annual investment in research tools and technology
Diversified Asset Class and Multimanager Approach
Legacy of implementing client-focused investment strategies
Economies of scale and manager diversification from $239 billion in assets under
management as of March 31, 2014
Strategies designed to meet specific objectives
Multi-level risk management, continual oversight and objective manager selection
Proposal of Services for Concordia University | Page 44
B. Provide the primary contact information for questions and future contact.
Primary Contact Jane Kerr
Title Regional Director, Institutional Group
Address 1 Freedom Valley Drive
Oaks, Pennsylvania 19456
Telephone 610.676.1227
Fax 484.676.1227
Email [email protected]
Jane will be out on maternity leave beginning May 11th. In the event Jane is unavailable,
Danielle Kovach will be available for questions as a future contact.
Primary Contact Danielle Kovach
Title Senior Account Executive, Institutional Group
Address 1 Freedom Valley Drive
Oaks, Pennsylvania 19456
Telephone 610.676.4178
Fax 484.676.4178
Email [email protected]
Proposal of Services for Concordia University | Page 45
IMPORTANT INFORMATION
This presentation is provided by SEI Investments Management Corporation (SIMC), a registered
investment adviser and wholly owned subsidiary of SEI Investments Company. The material included
herein is based on the views of SIMC. Statements that are not factual in nature, including opinions,
projections and estimates, assume certain economic conditions and industry developments and
constitute only current opinions that are subject to change without notice. Nothing herein is intended
to be a forecast of future events, or a guarantee of future results. This presentation should not be
relied upon by the reader as research or investment advice (unless SIMC has otherwise separately
entered into a written agreement for the provision of investment advice).
There are risks involved with investing including loss of principal. There is no assurance that the
objectives of any strategy or fund will be achieved or will be successful. No investment strategy,
including diversification, can protect against market risk or loss. Current and future portfolio holdings
are subject to risk. Past performance does not guarantee future results.
For those SEI funds which employ a ―manager of managers‖ structure, SIMC is responsible for
overseeing the sub-advisers and recommending their hiring, termination, and replacement.
References to specific securities, if any, are provided solely to illustrate SIMC’s investment advisory
services and do not constitute an offer or recommendation to buy, sell or hold such securities.
SIMC develops forward-looking, long-term capital market assumptions for risk, return, and
correlations for a variety of global asset classes, interest rates, and inflation. These assumptions are
created using a combination of historical analysis, current market environment assessment and by
applying our own judgment. We believe this approach is less biased than using pure historical data,
which is often biased by a particular time period or event.
The asset class assumptions are aggregated into a diversified portfolio, so that each portfolio can
then be simulated through time using a Monte Carlo simulation approach. This approach enables us
to develop scenarios across a wide variety of market environments so that we can educate our clients
with regard to the potential impact of market variability over time. Ultimately, the value of these
assumptions is not in their accuracy as point estimates, but in their ability to capture relevant
relationships and changes in those relationships as a function of economic and market influences.
The projections or other scenarios in this presentation are purely hypothetical and do not represent all
possible outcomes. They do not reflect actual investment results and are not guarantees of future
results. All opinions and estimates provided herein, including forecast of returns, reflect our judgment
on the date of this report and are subject to change without notice. These opinions and analyses
involve a number of assumptions which may not prove valid. The performance numbers are not
necessarily indicative of the results you would obtain as a client of SIMC.
We believe our approach enables our clients to make more informed decisions related to the
selection of their investment strategies.
For more information on how SIMC develops capital market assumptions, please refer to the SEI
paper entitled “Executive Summary: Developing Capital Market Assumptions for Asset Allocation
Modeling.” If you would like further information on the actual assumptions utilized, you may request
them from your SEI representative.