Agenda Item 5
January 17,2012
Introduction
MEMORANDUM
January 13, 2012
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
Introduction:
Bill 2-12, Personnel
Investment Managers
rr::\
!1.A;'j_
Retirement Trust Funds - Emerging
Emerging Investment Managers,
Bill 2-12, Personnel - Retirement Trust Funds
sponsored by the Council President at the request of the County Executive, is scheduled to be
introduced on January 17, 2012. A public hearing is tentatively scheduled for February 14 at
1:30 p.m.
Bill 2-12 would require the Board of Investment Trustees and the Consolidated Retiree
Health Benefits Trust Board of Trustees to make a good faith effort, consistent with their
fiduciary duties, to hire qualified emerging investment managers. The Board of Investment
Trustees is responsible for managing the assets in the Employees Retirement Trust Fund. The
Consolidated Retiree Health Benefits Trust Board of Trustees is responsible for managing the
assets in the Consolidated Retiree Health Benefits Trust Fund. Both Boards regularly hire
professional investment managers to fulfill this responsibility.
An "emerging investment manager" means an investment manager with assets or product
assets below the 75
th
percentile of their respective peer group or a new or developing investment
manager. The Bill would require each Board to adopt guidelines to identify and evaluate
qualified emerging investment managers. Each Board would also be required to report annually
to the Council and the Executive on or before September 1 for the prior fiscal year. The report
must:
(l)
identify each emerging investment manager used during the fiscal year;
(2) list the percentage and dollar value of the assets of the trust fund, by investment
sector, managed by each emerging investment manager; and
(3) describe the good faith effort made to include qualified emerging investment
managers in the procurement process during the fiscal year.
 PDF to HTML - Convert PDF files to HTML files
This packet contains:
Bill 2-12
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statement
F:ILAW\B\LLSI1202 Personnel-Retirement-Emerging Investment Mgrsl\ntro Memo.Doc
Circle
#
1
6
7
9
2
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Bill No.
2-12
Concerning: Personnel - Retirement
Trust Funds - Emerging Investment
Managers
Revised: December
22, 2011
Draft No.1
Introduced:
January
17, 2012
Expires:
July
17, 2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset
Date:---!.N~o:!.!.ne:::<..-
_ _ _ _ __
Ch. _ _, Laws of Mont. Co._ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the request ofthe County Executive
AN
ACT
to:
(1)
(2)
require the Board of Investment Trustees and the Consolidated Retiree Health
Benefits Trust Board of Trustees to make a good faith effort to hire qualified
emerging investment managers; and
generally amend the laws governing the Employees' Retirement System and the
Consolidated Retiree Health Benefits Trust Fund.
By adding
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-60B and 33-162A
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bil/.
Deleted from existing law by original bill.
Added by amendment.
Deleted from existing law or the bill
by
amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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Bill No. 2-12
1
Sec. 1. Sections 33-60B and 33-162A are added as follows:
33-60B.
Emerging Investment Managers.
Legislativefindings.
2
3
4
5
6
tru
ill
Emerging investment managers, including businesses owned
Qy
women, minorities and disabled individuals, should receive an
equal opportunity to provide investment management services
to the Board of Investment Trustees.
7
8
ill
The Board of Investment Trustees has adopted
~
policy
9
10
11
requiring its staff to identify qualified emerging investment
managers to participate in an investment manager search,
including regular monitoring of investment managers.
12
ill
Expanding opportunities for emerging investment managers
will increase competition.
(hl
Definitions.
13
14
15
As used in this Section:
Assets
means total client assets managed
Qy
an investment manager.
Emerging investment manager
means:
16
17
18
ill
ill
an investment manager with assets or product assets below the
75
th
percentile of their respective peer group; or
~
19
20
21
new or developing investment manager.
New or developing investment manager
means an investment
22
23
24
25
manager:
(1) raising its first or second private institutional investment fund;
or
(2)
creating its first institutional product.
26
Product Assets
means client assets managed
Qy
an investment
27
manager in
~
single strategy.
F:\LAW(;[LS\1202 Personnel-Retirement-Emerging Investment Mgrs\Bill l.Doc
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Bill No. 2-12
28
29
W
Consistent with the fiduciary duties established in Section
33-61C,
the
Board must make
~
good faith effort to remove any barriers that limit
30
31
32
participation
Qy
qualified emerging investment managers to manage
funds for the Employees' Retirement System.
@
The Board must adopt guidelines to identify and evaluate qualified
emerging investment managers.
procedures for:
The guidelines must include
33
34
35
36
ill
ill
identifying possible firms;
reviewing, evaluating and interviewing emergmg investment
managers on an ongoing basis; and
37
38
39
40
41
42
ill
maintaining research files on emerging investment managers.
ill
The Board must report annually to the Council and the Executive on
compliance with this Section on or before September
1
for the prior
fiscal year. The report must:
ill
identify each emerging investment manager used during the
fiscal year;
list the percentage and dollar value of the assets of the trust
fund,
Qy
investment sector, managed
Qy
each emerging
investment manager; and
43
44
45
46
47
48
ill
describe the good faith effort made to include qualified
emerging investment managers in the procurement process
during the fiscal
49
50
51
52
53
33-162A.
Emerging Investment Managers.
Legis lative findings.
ill
ill
Emerging investment managers, including businesses owned
Qy
women, minorities and disabled individuals, should receive an
F:\LA
W~LS\1202
Personnel-Retirement-Emerging Investment Mgrs\BiIIl.Doc
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Bill No. 2-12
54
55
56
57
equal opportunity to provide investment management services
to the Consolidated Retiree Health Benefits Trust Board.
ill
The Board has adopted
~
policy requiring its staff to identify
qualified emerging investment managers to participate in an
investment manager search, including regular monitoring of
investment managers.
58
59
60
61
62
63
64
65
66
67
ill
(hl
Expanding opportunities for emergmg investment managers
will increase competition.
Definitions.
As used in this Section:
-----=..:::...==
Assets
means total client assets managed by an investment manager.
Emerging investment manager
means:
ill
ill
an investment manager with assets or product assets below the
75
th
percentile of their respective peer group; or
~
68
69
70
new or developing investment manager.
New or developing investment manager
means an investment
manager:
(1)
71
72
73
raising its first or second private institutional investment fund;
or
(2)
creating its first institutional product.
74
75
76
77
78
79
Product Assets
means client assets managed by an investment
manager in
~
single strategy.
W
Consistent with the fiduciary duties established in Section 33-163, the
Board must make
~
good faith effort to remove any barriers that limit
participation by qualified emerging investment managers to manage
funds for the Consolidated Retiree Health Benefits Trust Fund.
F:\LA
W~LS\1202
Personnel-Retirement-Emerging Investment Mgrs\Bili I.Doc
 PDF to HTML - Convert PDF files to HTML files
Bill No. 2-12
80
81
@
The Board must adopt guidelines to identify and evaluate qualified
emerging investment managers.
procedures for:
(i)
(ii)
The guidelines must include
82
83
84
85
identifying possible firms;
revIewmg,
evaluating
and
interviewing
emergmg
investment managers on an ongoing basis; and
(iii)
maintaining research files on emerging investment
managers.
86
87
88
W
The Board must report annually to the Council and the Executive on
compliance with this Section on or before September
1
for the prior
fiscal year. The report must:
89
90
91
ill
ill
identify each emerging investment manager used during the
fiscal year;
list the percentage and dollar value of the assets of the trust
fund, Qy investment sector, managed Qy each emerging
investment manager; and
92
93
94
95
96
ill
describe the good faith effort made to include qualified
emerging investment managers in the procurement process
during the fiscal year.
97
98
99
100
101
Approved:
Roger Berliner, President, County Council
Date
102
Approved:
103
Isiah Leggett, County Executive
Date
F:\LA
\~LS\L202
Personnel-Retirement-Emerging Investment Mgrs\Bill
L
.Doc
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LEGISLATIVE REQUEST REPORT
Bill 2-12
Personnel- Retirement Trust Funds - Emerging Investment Managers
DESCRIPTION:
This Bill would encourage the Board of Investment Trustees and the
Consolidated Retiree Health Benefits Trust Board (Boards) to continue
their current efforts to provide opportunities for emerging investment
managers to manage some of the assets of the Employees' Retirement
System Trust Fund and the Consolidated Retiree Health Benefits Trust
Fund, consistent with their fiduciary duties.
The Bill would codify the current procurement policies used by each
Board which requires all investment managers who meet the stated criteria
to be included in a search for a new investment manager. The Bill would
also require the Boards to report annually to the Executive and the Council
on the results of their good faith efforts to include emerging finns.
PROBLEM:
GOALS AND
OBJECTIVES:
The goal of this Bill is to provide opportunities for emerging investment
managers to manage some of the assets of the Employees' Retirement
System Trust Fund and the Consolidated Retiree Health Benefit Trust
Fund.
The Boards and the County Attorney's Office have reviewed this bill.
See Fiscal and Economic Impact Statement.
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
See Fiscal and Economic Impact Statement.
N/A
The State of Maryland, along with several other state and local pension
systems, have recently enacted similar policies and laws requiring a
pension system's governing body to make a good faith effort to use
emergmg managers.
SOURCE OF
INFORMATION:
Linda Hennan, Board ofInvestment Trustees
Amy Moskowitz, County Attorney's Office
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
N/A
F:\LAW\BILLS\1202 Personnel-Retirement-Emerging Investment Mgrs\LRR.Doc
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OFFICE OF TI-IE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
. lsiah Leggett
County Executive
MEMORANDUM
December 19, 2011
TO:
Roger Berliner, Council President
lsiah Leggett, County
Bill _
FROM:
SUBJECT:
Executive~~"'t---_~.
")
~
- Personnel - Retirement - Emerging Investment Managers
I am transmitting for introduction at Council a bill that would amend the County
Code to require the Boards overseeing the investment programs for the Employees' Retirement
System (ERS) and the Consolidated Retiree Health Benefits Trust (CRHBT) to continue their
current efforts to include emerging investment managers in the procurement of services for the
investment programs. I am also transmitting a Legislative Request Report and Fiscal and
Economic Impact Statement for the bill.
The bill would require the Boards to make a good faith effort to use emerging
investment managers defined as:
(1)
an investment manager with assets or product assets below
the 75
th
percentile of their respective peer group; or (2) a new or developing investment manager.
The current Service Provider Procurement Policies (policies) of the Boards
require the Boards to include emerging investment managers in searches if the firms meet the
search criteria. The Policies require special efforts be made by the Boards' staff and its
consultants to ensure identification of possible eligible investment managers to participate in the
search process, including regular monitoring of investment managers and maintenance of
research files on such investment managers to assist efforts when searches begin. In addition,
the Boards receive quarterly reports from Board staff on meetings conducted with emerging
investment managers and their analysis of the firms.
As
of November 30, 2011 the Board of Investment Trustees committed
approximately 6% of ERS assets with firms that were emerging investment managers when
hired.
I am proposing this legislation to codify the current procurement policies used by
the Boards which require all service providers who meet the stated criteria to be included in
searches conducted by the Boards. The primary purpose of the legislation is to ensure that all
service providers are afforded the opportunity to participate in procurement searches conducted
by the Boards, to provide full transparency of the procurement process, and to ensure that the
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Roger Berliner, Council President
December 19, 2011
Page 2
intent and goals of the current procurement practices remain in place regardless of future changes
in
Board membership due to terms expiring, changes to Board policies, or changes in Board
Staff. The legislation would also require an annual report on efforts made by the Board to
include emerging service providers.
Thank you for your prompt consideration of this bill.
Attachments (3):
Proposed Legislation
Legislative Request Report
Fiscal and Economic Impact Statements
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Jennifer
A.
Hughes
Director
MEMORANDUM
December
9. 2011
TO:
FROM:
SUBJECT:
Roger Befliner resident, County Council
P
Jennifer
es, Director
Council
B XX-II -
Personnel- Retirement - Emerging Investment
Managers
Attached please find
the
fiscal and economic impact statements for the above
referenced legislation.
JAH:hv
Attachments
c:
Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Joseph F. Beach, Director, Department of Finance
Patrick Lacefield, Director, Public Information Office
Michael Coveyou, Department of Finance
Linda Herman, Executive Director, Board ofInvestment Trustees
Amy
Moskowitz, Office of the
County
Attorney
Helen Vallone, Office ofManagement and Budget
Naeem Mia, Office of Management and Budget
Blaise DeFazio, Office of Management and Budget
Office of the Director
WI
MOllroe
Street, 14th
Floor·
Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
montgomerycountymd.gov/311
240-773-3556 lTV
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Fiscal Impact Statement
Council BiU
XX-U-
Personnel- Retirement - Emerging Investment Managers
1. Legislative Summary
The bill would amend the County Code to encourage the Boards overseeing the investment
programs for the Employees' Retirement System (ERS) and the Consolidated Retiree Health
Benefits Trust (CRHB1)
to
continue their current efforts to include emerging investment
managers in the procurement of services for the investment programs. The Bill would
require the Boards to make a good faith effort to use emerging investment managers defmed
as:
• an investment manager with assets or product assets below the 75
th
percentile oftheir
respective peer group; or
• a new or developing investment manager
The current Service Provider Procurement Policies (policies) require the Boards
to
include
emerging investment managers in searches
if
the firms meet the search criteria. The Policies
require special efforts be made by the Boards' staff and
its
consultants to ensure
identification ofpossible eligible investment managers
to
participate in the search process,
including regular monitoring ofinvestment managers
and
maintenance of research files on
such investment managers to assist efforts when searches begin.
In
addition, the Boards
receive quarterly reports from Board staffon meetings conducted with emerging investment
managers and their analysis ofthe firms. The bill also requires annual reporting
to
the County
Council on efforts made by the Boards to include emerging investment managers.
2.
An
estimate of changes
in
County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in, the recommended or approved budget.
Indudes souree of information, assumptions, and methodologies used.
This bill has no impact to revenues or expenditures.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
This bill has no impact to revenues or expenditures.
4. An actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not Applicable
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
TItis change will not result
in
subsequent government action that will impact future revenues
and expenditures.
1
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6. An estimate of the staff time needed to implement the bill.
Not Applicable
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
No change in staff responsibilities.
8. An estimate of costs when an additional appropriation is needed.
Not Applicable
9. A description of any variable that could affect revenue and cost estimates.
Not Applicable
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not Applicable
11. H
a bill is
likely
to have no
rucaJ
impact, why that is the case.
The bill codifies the current procurement policies used
by
the Boards which require
all
investment managers who meet the stated criteria to
be
included in searches conducted
by
the
respective Boards.
12. Other fiscal impacts or comments.
Not Applicable
13. The following contributed to and concurred
with
this analysis:
Linda Herman, Executive Director, Board of Investment Trustees and Consolidated Retiree
Health Benefits Boar4
Amy
Moskowitz, Counsel to the Boards, Office ofthe County Attorney
Helen Vallone, Office of Management and Budget
Naeem Mia, Office of Management and Budget
Blaise DeFazio, Office of Management and Budget
Jenni
Office
2
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Economic Impact Statement
Council Bill XX-II, Qualified Emerging Investment Managers
Background:
This legislation requires the Boards overseeing the County>s Retirement Plans and the
Consolidated Retiree Health Benefits Trust to make a good faith effort to hire qualified emerging
investment managers. A qualified emerging investment manager is defined as an investment
manager with assets or product assets below the
7S
tll
percentile of their respective peer group; or a
new investment manager who is raising its first or second private institutional investment fund; or
creating its first institutional product. This legislation codifies current policy and practices of
both Boards.
I.
The sources of infonnation. assumptions, and methodologies used.
Not Applicable. This legislation codifies current poticy and practice, and its only requirement
that
is
not currently in place is a requirement for an annual report, which the Boards state can
be handled with existing resources.
2. A
description of any variable that could affect economic impact estimates.
Not Applicable
3. The bill's positive or negative effect, if any, on employment, spending, saving, investment,
incomes, and property values in the County.
Not Applicable
4. If a bill is likely to have no economic impact, why that is the case.
This Bill codifies current policy and practice; therefore there is no economic impact.
5. The foHowing contributed to and concurred with this analysis: David Platt, Finance; Mike
Coveyou, Finance
@
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Agenda Item 5
January 17,2012
Introduction
MEMORANDUM
January 13, 2012
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
Introduction:
Bill 2-12, Personnel
Investment Managers
rr::\
!1.A;'j_
Retirement Trust Funds - Emerging
Emerging Investment Managers,
Bill 2-12, Personnel - Retirement Trust Funds
sponsored by the Council President at the request of the County Executive, is scheduled to be
introduced on January 17, 2012. A public hearing is tentatively scheduled for February 14 at
1:30 p.m.
Bill 2-12 would require the Board of Investment Trustees and the Consolidated Retiree
Health Benefits Trust Board of Trustees to make a good faith effort, consistent with their
fiduciary duties, to hire qualified emerging investment managers. The Board of Investment
Trustees is responsible for managing the assets in the Employees Retirement Trust Fund. The
Consolidated Retiree Health Benefits Trust Board of Trustees is responsible for managing the
assets in the Consolidated Retiree Health Benefits Trust Fund. Both Boards regularly hire
professional investment managers to fulfill this responsibility.
An "emerging investment manager" means an investment manager with assets or product
assets below the 75
th
percentile of their respective peer group or a new or developing investment
manager. The Bill would require each Board to adopt guidelines to identify and evaluate
qualified emerging investment managers. Each Board would also be required to report annually
to the Council and the Executive on or before September 1 for the prior fiscal year. The report
must:
(l)
identify each emerging investment manager used during the fiscal year;
(2) list the percentage and dollar value of the assets of the trust fund, by investment
sector, managed by each emerging investment manager; and
(3) describe the good faith effort made to include qualified emerging investment
managers in the procurement process during the fiscal year.
 PDF to HTML - Convert PDF files to HTML files
This packet contains:
Bill 2-12
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statement
F:ILAW\B\LLSI1202 Personnel-Retirement-Emerging Investment Mgrsl\ntro Memo.Doc
Circle
#
1
6
7
9
2
 PDF to HTML - Convert PDF files to HTML files
Bill No.
2-12
Concerning: Personnel - Retirement
Trust Funds - Emerging Investment
Managers
Revised: December
22, 2011
Draft No.1
Introduced:
January
17, 2012
Expires:
July
17, 2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset
Date:---!.N~o:!.!.ne:::<..-
_ _ _ _ __
Ch. _ _, Laws of Mont. Co._ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the request ofthe County Executive
AN
ACT
to:
(1)
(2)
require the Board of Investment Trustees and the Consolidated Retiree Health
Benefits Trust Board of Trustees to make a good faith effort to hire qualified
emerging investment managers; and
generally amend the laws governing the Employees' Retirement System and the
Consolidated Retiree Health Benefits Trust Fund.
By adding
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-60B and 33-162A
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bil/.
Deleted from existing law by original bill.
Added by amendment.
Deleted from existing law or the bill
by
amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
 PDF to HTML - Convert PDF files to HTML files
Bill No. 2-12
1
Sec. 1. Sections 33-60B and 33-162A are added as follows:
33-60B.
Emerging Investment Managers.
Legislativefindings.
2
3
4
5
6
tru
ill
Emerging investment managers, including businesses owned
Qy
women, minorities and disabled individuals, should receive an
equal opportunity to provide investment management services
to the Board of Investment Trustees.
7
8
ill
The Board of Investment Trustees has adopted
~
policy
9
10
11
requiring its staff to identify qualified emerging investment
managers to participate in an investment manager search,
including regular monitoring of investment managers.
12
ill
Expanding opportunities for emerging investment managers
will increase competition.
(hl
Definitions.
13
14
15
As used in this Section:
Assets
means total client assets managed
Qy
an investment manager.
Emerging investment manager
means:
16
17
18
ill
ill
an investment manager with assets or product assets below the
75
th
percentile of their respective peer group; or
~
19
20
21
new or developing investment manager.
New or developing investment manager
means an investment
22
23
24
25
manager:
(1) raising its first or second private institutional investment fund;
or
(2)
creating its first institutional product.
26
Product Assets
means client assets managed
Qy
an investment
27
manager in
~
single strategy.
F:\LAW(;[LS\1202 Personnel-Retirement-Emerging Investment Mgrs\Bill l.Doc
 PDF to HTML - Convert PDF files to HTML files
Bill No. 2-12
28
29
W
Consistent with the fiduciary duties established in Section
33-61C,
the
Board must make
~
good faith effort to remove any barriers that limit
30
31
32
participation
Qy
qualified emerging investment managers to manage
funds for the Employees' Retirement System.
@
The Board must adopt guidelines to identify and evaluate qualified
emerging investment managers.
procedures for:
The guidelines must include
33
34
35
36
ill
ill
identifying possible firms;
reviewing, evaluating and interviewing emergmg investment
managers on an ongoing basis; and
37
38
39
40
41
42
ill
maintaining research files on emerging investment managers.
ill
The Board must report annually to the Council and the Executive on
compliance with this Section on or before September
1
for the prior
fiscal year. The report must:
ill
identify each emerging investment manager used during the
fiscal year;
list the percentage and dollar value of the assets of the trust
fund,
Qy
investment sector, managed
Qy
each emerging
investment manager; and
43
44
45
46
47
48
ill
describe the good faith effort made to include qualified
emerging investment managers in the procurement process
during the fiscal
49
50
51
52
53
33-162A.
Emerging Investment Managers.
Legis lative findings.
ill
ill
Emerging investment managers, including businesses owned
Qy
women, minorities and disabled individuals, should receive an
F:\LA
W~LS\1202
Personnel-Retirement-Emerging Investment Mgrs\BiIIl.Doc
 PDF to HTML - Convert PDF files to HTML files
Bill No. 2-12
54
55
56
57
equal opportunity to provide investment management services
to the Consolidated Retiree Health Benefits Trust Board.
ill
The Board has adopted
~
policy requiring its staff to identify
qualified emerging investment managers to participate in an
investment manager search, including regular monitoring of
investment managers.
58
59
60
61
62
63
64
65
66
67
ill
(hl
Expanding opportunities for emergmg investment managers
will increase competition.
Definitions.
As used in this Section:
-----=..:::...==
Assets
means total client assets managed by an investment manager.
Emerging investment manager
means:
ill
ill
an investment manager with assets or product assets below the
75
th
percentile of their respective peer group; or
~
68
69
70
new or developing investment manager.
New or developing investment manager
means an investment
manager:
(1)
71
72
73
raising its first or second private institutional investment fund;
or
(2)
creating its first institutional product.
74
75
76
77
78
79
Product Assets
means client assets managed by an investment
manager in
~
single strategy.
W
Consistent with the fiduciary duties established in Section 33-163, the
Board must make
~
good faith effort to remove any barriers that limit
participation by qualified emerging investment managers to manage
funds for the Consolidated Retiree Health Benefits Trust Fund.
F:\LA
W~LS\1202
Personnel-Retirement-Emerging Investment Mgrs\Bili I.Doc
 PDF to HTML - Convert PDF files to HTML files
Bill No. 2-12
80
81
@
The Board must adopt guidelines to identify and evaluate qualified
emerging investment managers.
procedures for:
(i)
(ii)
The guidelines must include
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identifying possible firms;
revIewmg,
evaluating
and
interviewing
emergmg
investment managers on an ongoing basis; and
(iii)
maintaining research files on emerging investment
managers.
86
87
88
W
The Board must report annually to the Council and the Executive on
compliance with this Section on or before September
1
for the prior
fiscal year. The report must:
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ill
ill
identify each emerging investment manager used during the
fiscal year;
list the percentage and dollar value of the assets of the trust
fund, Qy investment sector, managed Qy each emerging
investment manager; and
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ill
describe the good faith effort made to include qualified
emerging investment managers in the procurement process
during the fiscal year.
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Approved:
Roger Berliner, President, County Council
Date
102
Approved:
103
Isiah Leggett, County Executive
Date
F:\LA
\~LS\L202
Personnel-Retirement-Emerging Investment Mgrs\Bill
L
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LEGISLATIVE REQUEST REPORT
Bill 2-12
Personnel- Retirement Trust Funds - Emerging Investment Managers
DESCRIPTION:
This Bill would encourage the Board of Investment Trustees and the
Consolidated Retiree Health Benefits Trust Board (Boards) to continue
their current efforts to provide opportunities for emerging investment
managers to manage some of the assets of the Employees' Retirement
System Trust Fund and the Consolidated Retiree Health Benefits Trust
Fund, consistent with their fiduciary duties.
The Bill would codify the current procurement policies used by each
Board which requires all investment managers who meet the stated criteria
to be included in a search for a new investment manager. The Bill would
also require the Boards to report annually to the Executive and the Council
on the results of their good faith efforts to include emerging finns.
PROBLEM:
GOALS AND
OBJECTIVES:
The goal of this Bill is to provide opportunities for emerging investment
managers to manage some of the assets of the Employees' Retirement
System Trust Fund and the Consolidated Retiree Health Benefit Trust
Fund.
The Boards and the County Attorney's Office have reviewed this bill.
See Fiscal and Economic Impact Statement.
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
See Fiscal and Economic Impact Statement.
N/A
The State of Maryland, along with several other state and local pension
systems, have recently enacted similar policies and laws requiring a
pension system's governing body to make a good faith effort to use
emergmg managers.
SOURCE OF
INFORMATION:
Linda Hennan, Board ofInvestment Trustees
Amy Moskowitz, County Attorney's Office
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
N/A
F:\LAW\BILLS\1202 Personnel-Retirement-Emerging Investment Mgrs\LRR.Doc
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OFFICE OF TI-IE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
. lsiah Leggett
County Executive
MEMORANDUM
December 19, 2011
TO:
Roger Berliner, Council President
lsiah Leggett, County
Bill _
FROM:
SUBJECT:
Executive~~"'t---_~.
")
~
- Personnel - Retirement - Emerging Investment Managers
I am transmitting for introduction at Council a bill that would amend the County
Code to require the Boards overseeing the investment programs for the Employees' Retirement
System (ERS) and the Consolidated Retiree Health Benefits Trust (CRHBT) to continue their
current efforts to include emerging investment managers in the procurement of services for the
investment programs. I am also transmitting a Legislative Request Report and Fiscal and
Economic Impact Statement for the bill.
The bill would require the Boards to make a good faith effort to use emerging
investment managers defined as:
(1)
an investment manager with assets or product assets below
the 75
th
percentile of their respective peer group; or (2) a new or developing investment manager.
The current Service Provider Procurement Policies (policies) of the Boards
require the Boards to include emerging investment managers in searches if the firms meet the
search criteria. The Policies require special efforts be made by the Boards' staff and its
consultants to ensure identification of possible eligible investment managers to participate in the
search process, including regular monitoring of investment managers and maintenance of
research files on such investment managers to assist efforts when searches begin. In addition,
the Boards receive quarterly reports from Board staff on meetings conducted with emerging
investment managers and their analysis of the firms.
As
of November 30, 2011 the Board of Investment Trustees committed
approximately 6% of ERS assets with firms that were emerging investment managers when
hired.
I am proposing this legislation to codify the current procurement policies used by
the Boards which require all service providers who meet the stated criteria to be included in
searches conducted by the Boards. The primary purpose of the legislation is to ensure that all
service providers are afforded the opportunity to participate in procurement searches conducted
by the Boards, to provide full transparency of the procurement process, and to ensure that the
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Roger Berliner, Council President
December 19, 2011
Page 2
intent and goals of the current procurement practices remain in place regardless of future changes
in
Board membership due to terms expiring, changes to Board policies, or changes in Board
Staff. The legislation would also require an annual report on efforts made by the Board to
include emerging service providers.
Thank you for your prompt consideration of this bill.
Attachments (3):
Proposed Legislation
Legislative Request Report
Fiscal and Economic Impact Statements
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Jennifer
A.
Hughes
Director
MEMORANDUM
December
9. 2011
TO:
FROM:
SUBJECT:
Roger Befliner resident, County Council
P
Jennifer
es, Director
Council
B XX-II -
Personnel- Retirement - Emerging Investment
Managers
Attached please find
the
fiscal and economic impact statements for the above
referenced legislation.
JAH:hv
Attachments
c:
Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Joseph F. Beach, Director, Department of Finance
Patrick Lacefield, Director, Public Information Office
Michael Coveyou, Department of Finance
Linda Herman, Executive Director, Board ofInvestment Trustees
Amy
Moskowitz, Office of the
County
Attorney
Helen Vallone, Office ofManagement and Budget
Naeem Mia, Office of Management and Budget
Blaise DeFazio, Office of Management and Budget
Office of the Director
WI
MOllroe
Street, 14th
Floor·
Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
montgomerycountymd.gov/311
240-773-3556 lTV
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Fiscal Impact Statement
Council BiU
XX-U-
Personnel- Retirement - Emerging Investment Managers
1. Legislative Summary
The bill would amend the County Code to encourage the Boards overseeing the investment
programs for the Employees' Retirement System (ERS) and the Consolidated Retiree Health
Benefits Trust (CRHB1)
to
continue their current efforts to include emerging investment
managers in the procurement of services for the investment programs. The Bill would
require the Boards to make a good faith effort to use emerging investment managers defmed
as:
• an investment manager with assets or product assets below the 75
th
percentile oftheir
respective peer group; or
• a new or developing investment manager
The current Service Provider Procurement Policies (policies) require the Boards
to
include
emerging investment managers in searches
if
the firms meet the search criteria. The Policies
require special efforts be made by the Boards' staff and
its
consultants to ensure
identification ofpossible eligible investment managers
to
participate in the search process,
including regular monitoring ofinvestment managers
and
maintenance of research files on
such investment managers to assist efforts when searches begin.
In
addition, the Boards
receive quarterly reports from Board staffon meetings conducted with emerging investment
managers and their analysis ofthe firms. The bill also requires annual reporting
to
the County
Council on efforts made by the Boards to include emerging investment managers.
2.
An
estimate of changes
in
County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in, the recommended or approved budget.
Indudes souree of information, assumptions, and methodologies used.
This bill has no impact to revenues or expenditures.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
This bill has no impact to revenues or expenditures.
4. An actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not Applicable
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
TItis change will not result
in
subsequent government action that will impact future revenues
and expenditures.
1
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6. An estimate of the staff time needed to implement the bill.
Not Applicable
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
No change in staff responsibilities.
8. An estimate of costs when an additional appropriation is needed.
Not Applicable
9. A description of any variable that could affect revenue and cost estimates.
Not Applicable
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not Applicable
11. H
a bill is
likely
to have no
rucaJ
impact, why that is the case.
The bill codifies the current procurement policies used
by
the Boards which require
all
investment managers who meet the stated criteria to
be
included in searches conducted
by
the
respective Boards.
12. Other fiscal impacts or comments.
Not Applicable
13. The following contributed to and concurred
with
this analysis:
Linda Herman, Executive Director, Board of Investment Trustees and Consolidated Retiree
Health Benefits Boar4
Amy
Moskowitz, Counsel to the Boards, Office ofthe County Attorney
Helen Vallone, Office of Management and Budget
Naeem Mia, Office of Management and Budget
Blaise DeFazio, Office of Management and Budget
Jenni
Office
2
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Economic Impact Statement
Council Bill XX-II, Qualified Emerging Investment Managers
Background:
This legislation requires the Boards overseeing the County>s Retirement Plans and the
Consolidated Retiree Health Benefits Trust to make a good faith effort to hire qualified emerging
investment managers. A qualified emerging investment manager is defined as an investment
manager with assets or product assets below the
7S
tll
percentile of their respective peer group; or a
new investment manager who is raising its first or second private institutional investment fund; or
creating its first institutional product. This legislation codifies current policy and practices of
both Boards.
I.
The sources of infonnation. assumptions, and methodologies used.
Not Applicable. This legislation codifies current poticy and practice, and its only requirement
that
is
not currently in place is a requirement for an annual report, which the Boards state can
be handled with existing resources.
2. A
description of any variable that could affect economic impact estimates.
Not Applicable
3. The bill's positive or negative effect, if any, on employment, spending, saving, investment,
incomes, and property values in the County.
Not Applicable
4. If a bill is likely to have no economic impact, why that is the case.
This Bill codifies current policy and practice; therefore there is no economic impact.
5. The foHowing contributed to and concurred with this analysis: David Platt, Finance; Mike
Coveyou, Finance
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