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]

mailto:[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.


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


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.


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.


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


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.

http://www.seic.com/


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.


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.


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


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.

http://www.seic.com/knowledgecenter


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.


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.


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.


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


• Credit Hedging



• Global Macro

• Multi-Strategy

• Event Driven


• Credit Hedging



• Global Macro

• Multi-Strategy

• Event Driven

Need for liquidity

Exp

ecte

d R

etu

rn

High Medium Low

Lo

wH

igh


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.


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


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.


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


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.


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

(%

)


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


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


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.


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


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.


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


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.‖


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.


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).


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


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.


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.


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

[email protected]

Client since: September 2007

Assets with SEI: $119 Million



Wright State University Foundation

Dayton, Ohio

Bob Batson, Executive Director of Advancement Services

937.775.2869

[email protected]

Client since: November 2004


State College of Florida Foundation

Bradenton, Florida

Raul Elizalde, Investment Committee Chair

941.350.7904

[email protected]

Client since: March 2004


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)




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


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


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.


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


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


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


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


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]




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.

may 2014 proposal of outsourced chief investment officer...

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