FROM: Barbara Hannah, Chief Counsel
SUBJECT: Consent to change in ownership of NEPC, LLC to Hightower, LLC.
RECOMMENDATION:
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Authorize SBCERA’s Chief Executive Officer to execute the Consent to NEPC, LLC Ownership Change form.
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BACKGROUND:
On October 21, 2024, Sam Austin, Partner with NEPC, informed SBCERA of a pending merger and acquisition of NEPC, LLC in which Hightower, LLC will acquire controlling ownership of NEPC, LLC. As part of the merger and acquisition, counsel for NEPC represented that Securities and Exchange Commission (SEC) requires that clients of an investment advisor be informed of any material changes to the adviser’s controlling ownership and obtain the consent of each client regarding such changes in controlling ownership. Additionally, under the Investment Security Advisers Act of 1940, advisory contracts cannot be assigned without the client’s consent. Along the same line, SBCERA’s Investment Consultant Agreement between SBCERA and NEPC, LLC dated January 1, 2022 (Agreement), Article 11, Section requires written consent of an “assignment” of the Agreement. The transfer of controlling ownership to Hightower constitutes an “assignment” under the Act, necessitating SBCERA’s written consent to continue the advisory relationship with NEPC, LLC. Failure to provide consent may terminate the advisory contract, which may result in the disruption of the services being provided by NEPC, LLC.
It is important to note that the transfer of ownership does not alter the terms of the existing advisory contract (Agreement) or the services provided by NEPC, LLC as SBCERA’s investment consultant. NEPC, LLC has assured SBCERA that:
1. Hightower’s acquisition will not impact the quality of services delivered to SBCERA.
2. The same key personnel will continue to serve the account, ensuring continuity.
3. Fiduciaries standards and duties will remain in effect, including all terms under the existing Agreement with NEPC, LLC.
Providing the requested consent allows SBCERA to maintain its contractual relationship with NEPC, LLC without interruption.
Therefore, staff recommends that the Board authorize SCBERA’s Chief Executive Officer to sign a consent form as requested by NEPC, LLC. The consent acknowledges SBCERA’s approval of the transfer of ownership of NEPC, LLC to Hightower, LLC as 80% controlling interest owner of NEPC, LLC, as well as consent to the “assignment” of the Investment Consultant Agreement between SBCERA and NEPC, LLC dated January 1, 2022.
COMMITTEE REVIEW:
In the interest of time, this item was not reviewed by a committee.
BUDGET IMPACT:
None.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Operational Excellence & Efficiency
STAFF CONTACT:
Barbara Hannah
Debby Cherney
ATTACHMENTS:
Exhibit A: NEPC, LLC Request for Consent re Ownership Change