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...
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