Background
North Pier was engaged to provide fiduciary education, evaluation, and OCIO search services for a city police and fire’s $2.6 billion retirement system. The Investment Committee hired North Pier to help fulfill their fiduciary duty to monitor its service providers.
Scope
The education, evaluation, and OCIO search process was conducted in two phases. The first phase included a thorough review of the city’s investment process and governance, as well as fiduciary education. The second phase included OCIO candidate evaluation and selection through an RFP process.
Process & Findings
To begin Phase One, North Pier provided the client’s staff and Investment Committee with education on fiduciary best practices, the state of the industry, and OCIO service models. North Pier then conducted a thorough review of the client’s investment process and governance, and observations were made and shared with the client. It was observed that the city followed a well-articulated fiduciary process, but the roles and responsibilities between the Board and Chief Investment Office (CIO) were not as clearly delineated, and that the CIO office had a high workload.
North Pier also performed a cost analysis, which showed that the total cost for consulting fees were found to be significantly higher than the market range for similar fees and slightly higher than the median for enhanced OCIO services. Additionally, the underlying manager fees were at the high end of the peer group range. North Pier’s quantitative evaluation of the plan found that the risk adjusted returns underperformed peers on a 12 quarter rolling average for the most recent five years.
After these analyses were presented to the Committee, the client chose to go to search through an OCIO RFP process in order to gain benefits that included:
- Clarification of roles, responsibilities, and accountability
- Evaluation of CIO office roles to see if some could be outsourced or more efficiently co-sourced
- Optimization of service and implementation model
- Ensuring the efficient pricing of providers
- Providing the Investment Committee insight on the most competitive and current models and solutions in the marketplace.
In Phase Two, North Pier ran an open RFP where nine qualified OCIO organizations submitted bids, which included the incumbent.
North Pier’s team standardized RFP responses and performed due diligence on each candidate through quantitative performance analyses and qualitative evaluations.
The Committee then used the information provided in a decision ready report format to determine finalists. The client selected three finalists plus the incumbent to present during finalist meetings. Once North Pier completed additional due diligence and reference checks on finalists, North Pier facilitated two days of finalist presentations.
Results
Following finalist presentations, the Committee chose to retain the incumbent after North Pier was able to negotiate the following:
- A 20% reduction in fees, bringing them into the median of the peer group
- Enhanced services
Learn more about North Pier’s Evaluation and Search services here.Â