FROM: Thomas Kim, Chief Investment Officer
SUBJECT: Contract Extension - Investment Consultant
RECOMMENDATION:
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Approve a two-year extension to the Professional Services Agreement for Investment Consulting Services between SBCERA and NEPC; authorize the Chief Executive Officer to execute the contract extension in a form approved by Chief Counsel.
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BACKGROUND:
In January 2022, SBCERA entered into an investment consultant agreement with NEPC with an initial contract term of five years; the contract is set to expire in January 2027. The contract included a two-year optional extension period.
Our engagement with NEPC covers both general fund consulting and alternative asset consulting - the scope of work performed is comprehensive, including: asset allocation, policy reviews, investment manager oversight/diligence, performance measurement, client service and continuing education.
Over the past five years, the NEPC team has participated significantly to the ongoing work and management of the SBCERA portfolio, led by Sam Austin (lead consultant) and augmented by multiple colleagues, including Will Dupree (backup consultant), Neil Sheth (head of global research), Margaret Belmondo (head of public fund practice) and Thao Nguyen (senior consulting specialist).
Annual costs over the first four years of the existing contract have averaged $1.3mm in fees (including both generalist consultant and alternative asset advisor fees), and approximately ~$10k in annual expense reimbursement (due diligence-related travel). Under the terms of the contract, SBCERA may extend for two years at a cost of ~$1.4mm (inclusive of an annual $15k escalator), plus expense reimbursement.
Staff believes that a two-year extension ahead of contract expiry is appropriate for the following reasons:
- Staff has greatly appreciated the firm’s performance of expected duties. NEPC has contributed at multiple levels of the organization, from participation at the Board and Investment Committee to contributions at the staff and portfolio level.
- The investment department is on the threshold of an anticipated transition in leadership for the first time in over 15 years; importantly, staff believe that limiting the amount of change during this transition is important for all stakeholders.
- Kreischer Miller re-evaluated NEPC after the close of the acquisition by Hightower Advisors and delivered a positive review. The KM team performed a full onsite visit and operational due diligence evaluation in May 2025.
Accordingly, staff advises that the Investment Committee recommend that the Board authorize a two-year extension of the existing Professional Services Agreement with NEPC through January 2029.
COMMITTEE REVIEW:
This item was reviewed by the Investment Committee at its October 8, 2026 meeting, and recommends Board approval with a 4-0 vote.
BUDGET IMPACT:
$15k annual increase (inflation adjustment).
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Thomas Kim
ATTACHMENTS:
None.