dms - concordia university...

DMS

Response to Request for Proposal for Outsourced Chief Investment Officer Services

May 2014

Request for Proposal – OCIO Services

Concordia University, Nebraska

Concordia University, Nebraska – May 2014 1 Discretionary Management Services, LLC

QUESTIONNAIRE

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.

Discretionary Management Services, LLC (DMS) is based in Merriam, KS (Kansas City)

and is an affiliate of DeMarche Associates, Inc. DMS was established in 2007 in

response to DeMarche client requests for outsourced discretionary management services

(OCIO). Prior to 2007, discretionary accounts were managed by DeMarche and the

initial client engagement was in 2003. The principals formed DMS to formalize

management of tax-exempt assets for institutions. The current principals have been

partners at DeMarche Associates, Inc., for over 18 years.

Ownership of Discretionary Management Services is as follows:

William Miskell 36.4%

Thomas C. Woolwine 36.3%

Robert F. Marchesi 27.3%

Affiliates and related entities

DeMarche Associates, Inc.

DMS is an affiliate of DeMarche Associates, Inc., an investment consulting firm founded

by Robert Marchesi in 1974, providing institutional investment consulting and research

services to defined benefit, defined contribution, endowment, foundation and operating

fund clients. DMS and DeMarche have a facilities and services agreement, under which

various services are provided to DMS by DeMarche.

Kansas City Brokerage, Inc.

DeMarche established Kansas City Brokerage, Inc. (KCB) in 1993 as a subsidiary to

accommodate those clients who choose to use third-party payer or directed brokerage

services as a method of paying for consulting services. KCB is registered with the

Securities and Exchange Commission and is a member of the Financial Industry

Regulatory Authority (FINRA). All trading and clearing services are provided by

ConvergEx Execution Solutions LLC. DMS does not trade with KCB.

ENDEX Capital Management

ENDEX is a private, independently-owned investment advisory firm organized in 1997

in the State of Kansas as a Limited Liability Company. ENDEX is owned by four

individuals, all of whom serve on the company’s Board of Managers. Principal owners of

ENDEX are Julie Marchesi, Christine Rudicile, Timothy Marchesi, and Jeffrey Hoffman.

ENDEX and DeMarche Associates, Inc. have a facilities and services agreement, under

which certain back-office services are provided to ENDEX by DeMarche, such as

accounting, programming/IT and compliance. ENDEX provides discretionary

investment management services in portfolios of exchange-listed and over-the-counter

equity securities.




Our corporate headquarters are located at the following:

Discretionary Management Services, LLC

6700 Antioch Road

Antioch Plaza, Suite 420

Merriam, Kansas 66204 (Kansas City suburb)

We have 14 consultants who average 28 years investment experience. Four consultants

serve as portfolio managers for DMS. It is important to note that research time invested

on capital markets and managers is generally shared and employed by both firms,

DeMarche and DMS.

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.

DMS Investment Committee

Christina R. Danner, CFA, Portfolio Manager

Ms. Danner is a portfolio manager of the firm specializing in fixed

income securities, international assets and stable value products. She is

also a senior consultant with DeMarche Associates, Inc., an affiliated

firm. Prior to joining DeMarche, she was senior securities analyst of

fixed income securities at Kansas City Life Insurance Company. In that

role, she implemented strategic decisions on more than $800 million in

fixed income assets.

Ms. Danner is a Chartered Financial Analyst, a member of the

DeMarche Manager Review Committee and chair of the Asset

Allocation Committee. She received her MBA from the University of

Kansas and her bachelor’s degree from the University of Missouri,

where she graduated summa cum laude. Ms. Danner is a member of the

Kansas City Society of Financial Analysts and the CFA Institute.

James F. Dykstal, CFA, Portfolio Manager

Mr. Dykstal is a portfolio manager of the firm, specializing in capital

markets research and asset allocation. He is also a consultant with

DeMarche Associates, Inc., an affiliated firm. He is a member of the

DeMarche Manager Review Committee and MARC-Alternatives

Committee. Prior to joining DeMarche he was treasurer and fixed

income manager for FC Stone Group. Prior to that time, he was vice

president and senior portfolio manager at Commerce Trust Company in

Kansas City. He also held the positions of vice president at First

Tennessee Capital Markets and investment advisor at Southwest

Corporate Federal Credit Union.

Mr. Dykstal received his CFA in 1998 and his MBA from the

University of Missouri. His undergraduate degree is from the

University of Wisconsin-Madison. Mr. Dykstal is a member of the

Kansas City Society of Financial Analysts and the CFA Institute.




Timothy J. Marchesi, CFA, Chief Investment Officer & Portfolio

Manager

Mr. Tim Marchesi serves as chief investment officer and portfolio

manager for Discretionary Management Services (DMS). Tim is also

president & CEO of affiliate, DeMarche Associates, Inc. (DeMarche).

Mr. Marchesi serves DeMarche in numerous other capacities including

principal, senior consultant, chair of the Manager Review Committee

and director of research. Further, Tim is principal and president of

Kansas City Brokerage (KCB), a subsidiary established by DeMarche,

which is a registered broker/dealer with the Securities & Exchange

Commission. DeMarche established KCB for clients who choose to use

directed brokerage.

Previously, Tim served as vice president and portfolio manager for

American National Bank and Trust Company of Chicago. He earned

his bachelor’s degree in business from the University of Notre Dame.

In addition to his Chartered Financial Analyst (CFA) designation, he

has FINRA licenses Series 6, 7, 24, and 63.

Robert F. Marchesi, Chief Investment Officer & Portfolio Manager

Mr. Marchesi serves as chief investment officer, portfolio manager and

principal of Discretionary Management Services (DMS). He is also

founder of affiliate, DeMarche Associates, Inc. (DeMarche), where he

is currently chairman. Prior to founding DeMarche, he was vice

president and director of portfolio, economic and technical research for

Waddell & Reed, Inc., and vice president and general manager for

Research Management Associates, Inc., an investment counseling

subsidiary of Waddell & Reed, Inc. Previously, he was a senior

investment analyst for Waddell & Reed, and a senior investment analyst

for the Harris Trust & Savings Bank, Chicago.

Mr. Marchesi received his MBA with honors from Washington

University and his bachelor’s degree in business administration from

Quincy College. He is a frequent lecturer at investment conferences and

the author of articles on performance measurement, asset allocation, and

portfolio diversification. His focus in corporate finance has been on

Company Life Cycles, Cost of Equity Capital and Liquidity. Mr.

Marchesi is a past member of the board of directors and past president

of the Kansas City Society of Financial Analysts and past advisor to the

Center for Research on Security Prices at the University of Chicago. He

is currently a member of the International Society of Financial Analysts

and the CFA Institute.

James F. Dykstal, CFA, Portfolio Manager, will have direct responsibility for managing

your account and will be your lead DMS contact. Thomas C. Woolwine, DMS President

and Relationship Principal, will serve as back-up. Jim has been with DMS since 2010 and

has 24 years investment experience. Thomas C. Woolwine has been with DMS since its

inception (2007), joined parent company DeMarche in 1986 and has 32 years investment

experience.




Thomas C. Woolwine, President

Mr. Woolwine is the president and a principal of the firm. Prior to

joining DeMarche Associates, he was an investment officer in the

fixed income department of Boatmen's First National Bank of Kansas

City, where he advised institutional clients on portfolio management

and trading strategies.

Mr. Woolwine received his graduate diploma from the ABA’s Stonier

Graduate School of Banking at the University of Delaware and his

bachelor’s degree in economics from Knox College. He is a member

of the Kansas City Society of Financial Analysts and the CFA

Institute. He completed the AIMR Investment Management Workshop

at Princeton University, the Financial Analyst Seminar at Northwestern

University and the CFA Continuing Education Program.

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?

See question I. A).

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. Please see attached Form ADV Part II.

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.

No.

F) What protection does your firm offer it 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.

DMS carries Investment Advisors Errors & Omissions Liability insurance with an

aggregate limit of liability of $1,000,000 per policy period, $75,000 deductible. The

name of our primary insurance carrier is Chubb Group, underwritten by Federal

Insurance Company.

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?

Discretionary Management Services is an affiliate company of DeMarche Associates,

Inc. DMS was expressly formed in 2007 to provide an outsourcing solution for plan

sponsors seeking to utilize the investment experience and expertise of DeMarche

Associates. DMS goes beyond DeMarche’s traditional consulting model to assume

responsibility for manager retention and replacement decisions as well as tactical asset




allocation and rebalancing. Through DMS, the broad asset allocation and investment

policy determination is a collaborative effort between our firm, the client and their

actuary. This ensures that the client is comfortable with the overall definition and level

of risk being assumed by the portfolio. DMS representatives deliver a quarterly

performance report, discuss our economic and market outlook and review tactical

portfolio positioning to ensure our client understands how our long-term vision is being

carried out. DMS management believes that clear and regular communication with

clients is the key to successful customer service. Because we have common goals and a

vested interest in the successful, long-term management of our clients’ assets, we believe

that DMS is in a true partnership with each client.

B) What services does your firm provide for the education and enhancement of our IC

members?

DeMarche provides regular educational forums for our clients including luncheon

workshops, teleconferences and an annual Client Conference which we have held for

thirty consecutive years. Our continuing education program is supplemented by a series

of regular White Papers in all of the practice areas with which we consult.

In addition, we will work with your committee or trustees for custom workshops as

needed.

Recent White Papers

Alternative Investments

Understanding Active Equity Manager Performance (and Underperformance)

Behavioral Finance: The "Science" Behind Investor Decisions, Coleen D. Trimble,

Senior Consultant

Tactical Asset Allocation, James Dykstal, CFA

DMS Enables Clients to Focus on Strategic Initiatives

CONSULTING SERVICE DISCRETIONARY SERVICE

Function Consultant Client DMS Client

Investment Policy

Asset Allocation* Analysis Decision Analysis Decision

Investment Policy Statement* Analysis Decision Analysis Decision

Portfolio Construction

Investment Strategy Analysis Decision Implements Monitors

Manager Structure Analysis Decision Implements Monitors

Manager Selection

Manager Search and Selection Analysis Decision Implements Monitors

Portfolio Optimization Analysis Decision Implements Monitors

Transition Management Analysis Decision Implements Monitors

Tactical Restructuring

Rebalancing Analysis Decision Implements Monitors

Tactical Shifts Analysis Decision Implements Monitors

Ongoing Due Diligence

Performance Monitoring & Reporting Implements Monitors Implements Monitors

Ongoing Manager Due Diligence Implements Monitors Implements Monitors

Manager Retention/Replacement Analysis Decision Implements Monitors

* The broad asset allocation and investment policy determination is a collaborative effort to ensure the client is comfortable with the overall level of

risk being assumed by the portfolio.




III. Investment Philosophy and Process

A) Describe your firm’s investment philosophy. Has it changed significantly over the past 5

years?

Our investment philosophy is value oriented, global and dynamic and the process has

been consistent, without significant changes since inception. DMS believes that different

economies create different investment markets. Changing markets impact leadership of

various assets and styles. Our philosophy of investing is best highlighted by the

following tenets:

Tactical, dynamic asset allocation strategies are effective at improving risk/return

profiles.

Win by not losing; emphasize downside protection and capital preservation.

Emphasize active management over passive because markets are inefficient.

Employ multiple sources of alpha generation to beat the odds of being average.

Employ a “value” tilt in equity style diversification; “growth” does not persist and

mean reverts.

Use fewer managers to concentrate best ideas.

Implement a contrarian strategy willing to invest at point of greatest pain.

Be patient and plan to be early.

Emphasize consistency and discipline; invest without emotion.

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.

We begin any new DMS relationship with completion of an Investment Philosophy and

Risk Tolerance Questionnaire. This activity helps us to become thoroughly cognizant of

their unique risk tolerance, the objective and purpose of their fund, and the guidelines and

considerations specific to their needs. The investment committee and university staff

would work with DMS and be asked to define risk tolerances and give return feedback.

An understanding of these helps DMS apply its view of the risks and opportunities in

various markets, styles, and strategies, in a way appropriate to each client. Whether a

client has regular or unpredictable cash withdrawal needs, or is planning a long phase of

making additional investment contributions, impacts application of our tactical opinions,

so it is critical for us to know as much as we can about each client and their

situation/needs.

DMS is unique among OCIO providers as we will tactically shift assets around the

targets/within the ranges for growth assets in an attempt to add alpha. Our approach,

process and philosophy for implementing this work are described in the three steps below

and remains consistent with our initial views and processes:

Step 1 – Global Asset Allocation Policy

Establish goals and objectives and define benchmark targets/ranges for client

portfolio

- Ensure suitability of multiple goals: absolute, relative, peer, and risk-adjusted

- Dynamic consideration of asset classes able to help strategically

- Enhance guidelines to benefit from opportunities in sub-classes including style




Evaluate economic conditions using DeMarche’s strategic forecast (next three to five

years) developed by the Asset Allocation Committee. This incorporates our

proprietary “supercycle” analysis, which identifies differences in the interaction and

performance between asset classes

- GDP and earnings growth forecasts

- Inflation, interest rates and Fed policy

- Demographics, unemployment and debt

Evaluate market conditions using proprietary and external measures of valuation,

spreads, momentum and liquidity

- DeMarche expected return factor model

- Conditional probability framework

- Stock market phase indicator

Step 2 – Portfolio Construction and Implementation

Select active managers to manage core sub-allocations using DeMarche Manager

Review Committee (MARC) approved managers universe

- MARC modeled after a traditional securities research department:

Committee members average nearly 30 years of investment experience

Due diligence is centralized within a committee structure

Top down and bottom up analysis

Qualitative and quantitative analysis

Extensive fundamental research including creating unique profiles

- Research emphasis on Leading Indicators of performance

- Factor model forecast expected good/bad performance by manager style

Execute tactical shifts among strategies and styles within and between asset classes

(i.e., large/small cap, growth/value, treasury/credit, long/short duration, etc.) based

upon portfolio managers reaching consensus on opportunities in current environment

Utilize ETFs/index funds for tactical moves to minimize frequency of disruptions to

managers

Step 3 – Ongoing Oversight and Risk Management

Meet at least weekly to review portfolio position (sub-classes and sub-advisers)

versus policy targets and ranges to ensure prudent monitoring, reporting and control

procedures

Have buy and sell orders in place to take advantage of market changes occurring

between meetings

Focus on being early at recognizing changes in direction and valuation of broad

markets and leadership of sectors and factors

Emphasize downside protection and capital preservation as losses hurt more than

gains heal

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.




DMS works with each client to become thoroughly cognizant of their unique risk

tolerance, the objective and purpose of their fund, and unique guidelines and

considerations. An understanding of these parameters helps DMS apply its view of the

risks and opportunities in various markets, styles, and strategies, in a way appropriate to

each client. Without the appropriate due diligence and a greater understanding of your

investment committee and plan needs, DMS would be unable to give a complete

evaluation of prior or future investments. Although we are eager to provide our expertise

and assistance, an in-depth discussion of identifying risk and return tolerances that are

appropriate relative to the goals of the fund would be necessary to build the foundation

for our investment process and evaluation.

IV. Investment Manager Research and Selection

A) How are investment managers/funds selected?

DMS uses the databases and processes of DeMarche to select managers for a client

pursuant to their individual investment policy.

DeMarche maintains a proprietary, in-house database that includes information on over

1000 managers and over 3000 institutional-quality products. Our view is that the best

database is not about following the most managers but following the best managers.

While we always are looking for the next best manager, it is not a numbers game but a

quality issue. Many OCIO providers might answer this question by including the many

thousands of managers from non-proprietary databases – our answer is based on just our

in-house proprietary system. We do have outside databases such as Morningstar for

mutual funds or eVestment for separate accounts that provide many thousands of added

products and managers to consider.

Investment Manager Search

Director of Research/

Research Department

MARC Committee

Working List

Complete List

Questionnaire

Computer

Support

Style

Surveys

Field

Trips

Manager Visits

to DeMarcheManager

Profiles

Manager

Reports

Client

Input

Key Steps/Inputs In Our Research Process

Semi-Annual

Screens

ManagerGrading

System

DeMarche Associates is an independent investment consulting firm working with corporations, public entities, non-profit organizations and investment managers. DeMarche offers a broad range of services including some that provide recommendations about individual stocks, groups of stocks, investment managers, and groups of investment managers. Our stock and manager ratings and

recommendations are based on independent research and are not influenced by our relationship with the corporations or investment managers.

While we may from time to time provide services to a company or an investment manager, or have an investment manager as a sponsor of one of our conferences, such services are independent of our

stock rating, manager review and search services. We do not receive compensation or benefits from either the companies or managers in connection with our stock ratings, manager review, or search

services. Copies of our Form ADV are available for a more detailed disclosure. More information regarding DeMarche can be obtained from our website www.demarche.com.




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?

The responsibility for manager due diligence is driven by DeMarche’s Manager Review

Committee (MARC). MARC oversees a rigorous 10-phase due diligence process. The

committee is made up of the firm’s most experienced consultants who evaluate critical

quantitative and qualitative factors. This committee meets every Monday morning to

discuss manager news, review manager profiles and identify issues requiring additional

research. All client managers are evaluated by the Committee each quarter relative to

their appropriate style universe. Performance is also reviewed relative to each manager’s

benchmark, tracking error and alpha generation (information ratio). We watch for style

drift on a quarterly basis using a proprietary holdings-based analytical tool and monitor

qualitative factors that we believe are predictive of future poor performance such as a

change in firm ownership, changes in personnel or investment process and significant

changes in the amount of assets under management. Additionally, we confirm that all

returns are compliant with the Global Investment Performance Standards (GIPS).

Two primary groups of people perform investment manager research for DeMarche. The

Manager Research Team performs all manager research. The Manager Review

Committee (MARC) selects and approves all managers for use in our client’s portfolios.

Both groups are responsible for ongoing monitoring of investment managers.

The manager evaluation process described below illustrates how DeMarche evaluates

critical quantitative and qualitative factors of investment organizations.

The DeMarche questionnaire is the building block from which we collect information

on specific managers, their products and their performance. These questions include

specific performance data and other firm information.

Twice a year, DeMarche evaluates the performance data reported to us by managers

compared to broad market indexes like the S&P 500 and our own style indexes. We

group these managers by performance versus indexes over a three- to five-year

period. MARC uses this Manager Universe ranking as a tool to select managers that

deserve further review for use in our searches.

Using the data we retrieve from our various databases, we perform a cluster analysis,

grouping like-performing managers. This exercise tests our preliminary style coding.

Aberrant cluster performance is investigated to find out why a manager performs out

of the norm. Managers are either reassigned to another group or removed from the

DeMarche database based on violation of their self-described process or discipline.

The next screen we apply is that of tenure and size. We don't want to train managers

with our clients' money, so new and emerging firms are seldom used. Further, a

management firm’s size or growth may affect its ability to take on our clients’

business. The group of managers surviving this screening is placed on the DeMarche

Manager Working List.

Managers from the Working List with whom DeMarche has conducted face-to-face

meetings and written a full profile analysis pass the next hurdle. Each manager's

portfolio construction process and quality control techniques are articulated in the

DeMarche Profile. An in-person interview is mandatory. The interrogative nature of

these interviews is what separates DeMarche from other consultants. This process

gives us a deeper understanding of how managers generate returns, control risk and

maintain their investment discipline. We go beyond the marketing pitches and meet




personally with the actual portfolio managers and principals of the management

firms.

The final step in our manager screening process is a Portfolio Review. Before

managers are approved for use in our searches, they must submit an actual portfolio.

Holdings are checked against all of the manager's marketing claims as well as the

DeMarche style code and profile assertions.

A minimum of one face-to-face meeting with senior portfolio members is required

prior to product approval and one meeting every two years is generally required on

an ongoing basis.

Our research staff has in-person and/or conference call meetings with hundreds of

managers per year. Notes taken during our meetings with managers are ultimately

reflected in a profile written by our research staff, which can be made available to clients.

Consultants will often conduct on-site visits of investment managers.

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?

DMS uses DeMarche’s asset allocation process which was developed in-house and is

proprietary. Using computer optimization modeling and inputs on over 20 asset classes,

we explore a range of possible portfolio structures, each with a unique expected return

and risk profile. Portfolios are selected by the computer model based on the expected

returns, volatilities, and correlations of the underlying securities to each other. The result

is a range of “efficient portfolios,” each providing the greatest level of expected return for

a level of expected risk or volatility. The range of portfolios is called the efficient

frontier, a sample of which is shown below:

DMS works with each client to mitigate risk by employing these tools and utilizing

Tactical Asset Allocation to prevent excessive volatility. Your investment committee

will decide what your risk and return tolerances are and choose the “efficient portfolio”

that meets their needs.

1

2

3

5

4

Current

6

7

8

9

10

8.75

9.25

9.75

10.25

10.75

11.25

11.75

12.25

9 10 11 12 13 14 15 16

RETURN

RISK

Efficient Frontier

Base Case

Portfolio #1 9.36 9.15

Portfolio #2 9.54 9.34

Portfolio #3 10.03 9.66

Portfolio #5 10.90 10.10

Portfolio #6 11.34 10.29

Portfolio #7 11.97 10.53

Portfolio #8 12.73 10.75

Portfolio #9 13.70 10.99

Portfolio #10 14.54 11.18

Current Portfolio 11.69 10.09

RISK RETURN

Sample Client




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

DMS’ quarterly performance measurement service includes a Capital Market Review

and Performance Appraisal Report. They are described below. We will review these

reports with you in person every quarter and the availability of reports may vary with the

inclusion of real or alternative assets in your selected portfolio.

The Capital Market Review provides our analysis of specific, timely, capital market

conditions. This report is excellent for defining the economic and market environment

within which your managers operated for the previous quarter and helps to put your fund

and managers’ performance in perspective.

The Performance Appraisal Report provides comparisons of your total fund

performance verses the relative benchmark and comparable client universes for all major

time periods as well as by calendar year. Furthermore, it compares each investment

manager’s performance versus their specific risk and return objectives and universes of

style peers. It shows most recent portfolio positioning, attribution as well as market

outlooks for the economy and investment markets.

B) How do you benchmark client portfolios? How should we, as a client, measure our joint

success?

Since most investment managers have a distinct style, they perform differently in

different phases of a market cycle. To effectively evaluate performance, managers

should be compared to an index that truly reflects the type of securities they hold. For

example, small cap stock managers should be compared to an index of small cap stocks,

growth stock managers should be compared to an index of growth stocks, and so on.

Investment managers should be evaluated against benchmarks (market or style indexes)

that are reflective and representative of their investment process, including security style

and capitalization criteria. Furthermore, managers should be compared to a peer universe

- managers with similar investment orientations.

Typically, we establish three performance benchmarks for the total fund: (1) an absolute

objective (often a rate of return in excess of inflation), (2) a relative objective (weighted

average of asset class benchmarks representing the target asset allocation), and (3) peer

comparison with approximately similar asset allocations. Outperformance of these three

goals over a market cycle, net of fees and without taking undo risk, should be a deemed a

success.




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.

Client Accounts as of 12/31/2013:

DMS: 16 fully discretionary portfolios - $398 Million

DeMarche: $27.7 Billion

Breakout of DMS Assets by Client Type as of 12/31/2013:

Corporate 5.8%

Endowment/Foundation 30.8%

Private 62.7%

Partnership (GTAA Fund) 0.7%

B) Provide a list of clients that may be contacted as references for which you provide OCIO

services.

Mr. Jeff Remaley

Finance Manager

Unity School of Christianity

1901 N.W. Blue Parkway

Unity Village, MO 64065

Tel: (816) 524-3550 x3800

Mr. Steve Hilliard

Director

Endowment Trust Fund for Catholic Education

Diocese of Kansas City - St. Joseph

20 West 9th Street

Kansas City, MO 64105

Tel: (816) 213-3108

Ms. Kathy Collins

Vice President - Revenue and Treasurer

Christiana Care Home Health and Community Services, Inc.

200 Hygeia Drive, Suite 2600

Newark, DE 19713

Tel: (302) 623-7249

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.

Consultants must sign a quarterly compliance document that details our code of ethics

and compliance measures:




DeMarche Associates Code of Ethics

All employees are required to familiarize themselves with the DeMarche Code of Ethics

and acknowledge in writing each year that they have read and agree to abide by them.

The Chief Compliance Officer will maintain a record of each employee’s receipt of the

DeMarche Code of Ethics.

Provisions of the DeMarche Code of Ethics

Diligence

Employees are expected to exercise diligence and thoroughness in the preparation of

deliverables for clients, and make no misrepresentations about services, capabilities,

results achieved and qualifications of the firm or its employees. All employee work

product must be based on independence and objectivity, and in the best interest of the

client and the clients’ plan participants.

Compliance with Laws and Regulations

Employees shall maintain knowledge of and comply with all laws, rules and regulations

of any governmental or regulatory organization applicable to the firm’s business.

Confidentiality of Client Information

All client information is to be treated with confidentiality and should not be shared with

anyone outside the firm without written approval from the client.

Personal Securities Trading

Employees must submit quarterly securities transaction reports and annual securities

holding reports on a timely basis. New employees will provide a securities holding

report within their first 30 days of employment. Employees are prohibited from

purchasing or selling securities that are known to be planned purchases or sales by an

investment manager.

Employees are required to obtain approval from the CEO before acquiring beneficial

ownership in any security in an initial public offering or in a limited offering. The

Compliance Officer will review all securities reports, research any transactions and

holdings that appear to be questionable, and document investigations and infractions as

necessary.

Violations of the Code of Ethics

Violations of company policies or the Code of Ethics must be brought to the attention of

the Chief Compliance Officer, the Chief Operating Officer, or the Chief Executive

Officer. Violations will be reviewed on a case-by-case basis. Warnings will be issued in

less serious cases, and sanctions (including termination) may be imposed in more serious

cases. The Chief Compliance Officer will maintain files of violations, warnings issued,

and sanctions imposed.

B) If you answered yes to the question at section I, E), then describe how your firm avoids

any potential conflicts of interest.

N/A




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.).

Discretionary Management Services, LLC (DMS) offers two fee arrangements:

1) Asset Based Fee

30 basis points on first $25 million

20 basis points on next $25 million



5 basis points over $250 million

2) Asset Based Fee plus Performance-Based Fee

Asset Based Fee

20 basis points on first $25 million




3 basis points over $250 million

Performance-Based Fee

• 20% of Total Fund Return in excess of Relative Objective

• Example of a Quarterly Calculation:

○ Performance-Based Premium = Client Net Total Fund

Return – Relative Objective [based on the latest 4 quarters]

○ Performance-Based Fee = (Performance-Based Premium *

Average Fund Assets over the last 4 quarters) * 20% ÷ [4

quarters]

○ Performance-Based Premium is capped at 2%

Notes:

• Minimum Annual Fee is $50,000.

• Fees negotiable for mandates over $500 million.

• DMS may include ongoing Performance Measurement and an Asset Mix

Study to develop asset class targets and ranges as approved by the client.

• The fees represented above are for Discretionary Management Services, LLC

(DMS) only. Underlying investment managers and the custodian will charge

additional fees.

• Relative Objective is a mix of index benchmarks replicating the fund’s target

asset allocation.

Subadviser investment management and custody fees will vary based upon each client’s

unique asset allocation policy and current relationships. The underlying weighted

subadvisers’ fee was 55 bps on 12/31/13 (this will vary depending on our tactical

positioning and active/passive mix). The Fund custodian/recordkeeper is National

Advisers Trust Company and their fee is 20 bps. Our goal is to keep total management,

sub-adviser and custodial fees at or below 1%.




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?).

Distinguishing characteristics of our discretionary outsourcing service model are:

Leverage DeMarche's knowledge of markets and managers gained since 1974

Dynamic asset allocation using passive and active strategies

Fully transparent turnkey solution supported by independent custodian

No proprietary products and emphasis on controlling fees

Co-fiduciary role with portfolio manager as primary contact

Strong down market protection – win by not losing philosophy

B) Provide the primary contact information for questions and future contact.

Contact: Thomas C. Woolwine

President

Address: Discretionary Management Services, LLC

Antioch Plaza Building

6700 Antioch Road, Suite 420

Merriam, KS 66204

Email: [email protected]

Phone: 913-981-1345

FAX: 913-981-1380

Web site: www.dms-demarche.com

Attachments:

Form ADV, Part 2

Sample Performance Appraisal Report (PAR) with Capital Market Review (CMR)

Disclosure Statement

Discretionary Management Services, LLC is an independently owned investment research and management firm that is an affiliate of DeMarche Associates, Inc.

This presentation has been provided to you for use in a private and confidential meeting to discuss a potential or existing relationship. This information is not an advertisement and is not intended for public use. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice.

All investments carry a level of risk, including the potential for loss of principal. Investments do not grow at an even rate of return and investment will experience varying levels of volatility of returns with the potential for negative returns. Past performance is not indicative of future results.

Copies of the SEC Form ADV for Discretionary Management Services, LLC and DeMarche Associates, Inc. are available for more detailed disclosures. Please contact us for additional information.

mailto:[email protected]

dms - concordia university...

Documents