HomeMy Public PortalAboutR3731 ST Pension Investment Policy
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RESOLUTION NO. 3731
WHEREAS, the adoption of Resolution No. 3731 authorizes the Secretary-
Treasurer of the Metropolitan St. Louis Sewer District to make changes to the District’s Defined
Benefit Plan Statement of Investment Policy, Objectives, and Operating Guidelines. These
changes fully comply with the criteria in the District’s Pension Plan as described in Ordinance
No. 15110.
WHEREAS, these changes will reduce the assumed actuarial rate of return from
6.75% to 6.25%, and
WHEREAS, the Metropolitan St. Louis Sewer District has established an
Employee Pension Plan in accordance with the Charter Plan, as amended April 6, 2021, Section
3.020(22), and
WHEREAS, in the form of a Pension Plan, Ordinance No. 15110, as amended,
provides for the pensioning and other retirement benefits of employees of the MSD and spouses
and minor children of deceased employees, and provides for the payment of public funds for such
purposes, in accordance with the MO Constitution of 1945, as amended, and the MO Statutes
enacted authorizing said Pension Plan, and
WHEREAS, Resolution 3597 calls for the Board of Trustees of the Metropolitan
St. Louis Sewer District to at least annually, review this Statement for relevance to and consistency
with governing law and the financial objectives of the Fund, and
WHEREAS, the Board of Trustees of the Metropolitan St. Louis Sewer District
presently receives services from AON Hewitt Investment Consulting, Inc. (AON), per Ordinance
No. 15006 adopted September 13, 2018 to act as the employee pension fund investment consultant
and provide investment advisory services, and
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WHEREAS, AON. has provided capital market expectations and conducted a
review and evaluation of the District’s asset allocation and certain actuarial assumptions of the
Defined Benefit Plan of the District, and has made certain recommendations to the Board of
Trustees,
NOW, THEREFORE, BE IT RESOLVED, that the Secretary-Treasurer of the
Metropolitan St. Louis Sewer District is hereby authorized to make changes to the District’s
Defined Benefit Plan Statement of Investment Policy, Objectives, and Operating Guidelines that
fully complies with the criteria in the District’s Pension Plan as described in Ordinance 15110.
The foregoing Resolution was adopted on February 10, 2022.
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METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFINED BENEFIT PLAN
STATEMENT OF INVESTMENT POLICY,
OBJECTIVES AND OPERATING GUIDELINES
March 2020
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INVESTMENT POLICY GUIDELINES
I. Introduction
II. Identification of Duties
A. Board of Trustees
B. Investment Committee
C. Secretary-Treasurer
D. Investment Consultant
E. Investment Manager
F. Custodian
III. Investment Goals and Objectives
IV. Asset Allocation
A. Policy Target and Ranges
B. Rebalancing Procedures
V. Investment Manager Appointment
VI. Investment Manager Guidelines -- General
A. Benchmarks
B. Philosophy
C. Compliance Monitoring
D. Prohibited Transactions
E. Use of Pooled Funds
F. Derivative Guidelines
VII. Investment Manager Guidelines – Asset Class Specific
A. Domestic Equity Managers
B. Global & International Equity Managers
C. Passive Managers
D. Domestic Fixed Income Managers
E. Global & International Fixed Income Managers
F. Real Estate Managers
VIII. Standard of Investment Performance
A. General Guidelines
B. Manager Probation and Termination
IX. Manager Reporting Requirements
A. Immediately
B. Quarterly
C. Annually
X. Implementation and Approval
Appendices and Exhibits
Appendix I: Asset Allocation
Appendix II: Performance Benchmarks
Appendix III: Manager Specific Guidelines and Exceptions
Exhibit I: Resolution 2193 – Proxy Voting
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METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENT OF INVESTMENT POLICY,
OBJECTIVES AND OPERATING GUIDELINES
I. INTRODUCTION
A. The Metropolitan St. Louis Sewer District Pension Plan (the “Plan”) is a defined benefit
plan which was established to provide retirement benefits to participants in accordance
with the benefit structure adopted by the Board of Trustees (the “Board”). The Plan is
maintained to provide benefits, and toward that end, invests contributions and reinvests
investment proceeds for the exclusive benefit of plan participants and beneficiaries.
Investments of the Plan shall be managed in accordance with applicable federal, state and
local statutes, as well as with the Plan document.
B. This Statement of Investment Policy, Objectives, and Operating Guidelines (the "Policy
Statement") is set forth so that all fiduciaries, including the Board, investment managers
(the “Manager(s)”), the investment consultant (the “Consultant”), and other Plan advisors
will have a clear understanding of what is expected in the course of managing the assets of
the Plan.
C. It is the intent of this Policy Statement to establish an attitude and/or philosophy that will
assure the achievement of the desired results. It is intended that this Policy Statement be
sufficiently specific to be meaningful but sufficiently flexible to be practical. Specifically,
this document is set forth to:
1. Briefly outline the investment-related responsibilities of the Board and the Managers it retains.
2. Establish formal, yet flexible investment guidelines incorporating prudent and realistic asset allocation and performance goals.
3. Establish investment guidelines regarding the selection of Managers, permissible investments and diversification of assets.
4. Provide a framework for regular constructive communication with the Board about its Managers.
5. Create standards of investment performance by which the Managers agree to be measured over a reasonable time period.
D. This Policy Statement upon adoption by the Board shall supersede and replace all prior
Policy Statement(s) and are hereby incorporated into all existing and any future Investment
Manager Agreements.
E. This Policy Statement may be amended by the Board both upon its own initiative and upon
consideration of the advice and recommendation from the Consultant, the Managers, and
other fund professionals. At least annually, the Investment Consultant, Secretary-
Treasurer, and Investment Committee will review this Statement for relevance to and
consistency with governing law and the financial objectives of the Plan. Proposed
modifications should be documented in writing to the Board.
II. IDENTIFICATION OF DUTIES
This document will set forth specific duties and responsibilities for the investment-related
parties as they carry out their specific roles towards achieving the objectives of the Plan.
A. Board of Trustees
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The role of the Board is to oversee and make policy decisions regarding the investment of
the Plan. As fiduciaries, the Board shall invest the Plan:
1. For the exclusive purposes of providing benefits to participants and for defraying
reasonable expenses of administering the Plan; and
2. With the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims.
The Board shall,
1. With the advice of the Secretary-Treasurer, Consultant, Actuary and Managers,
establish and develop the Plan’s Statement of Investment Policy, Objectives and
Operating Guidelines, including the development of the long-term asset allocation and
the appropriate mix of the Manager styles and strategies;
2. Periodically review and modify the Policy Statement in light of any changes in
actuarial variables and market conditions;
3. Diversify the investments of the Plan to minimize the risk of large losses, unless under the circumstances, it is clearly prudent not to do so;
4. Select qualified Managers and Consultants to manage and advise on the Plan’s assets, as appropriate;
5. Monitor and review the investment performance of the Plan and Managers to
determine achievement of goals and compliance with policy guidelines;
6. Act in accordance with the laws, documents and instruments governing the Plan.
B. Investment Committee
1. The Investment Committee shall assist the Board in developing and modifying policy
objectives and guidelines, selecting Managers and in performing other duties and
activities delegated to it by the Board.
C. Secretary-Treasurer
The Secretary-Treasurer is responsible for all day-to-day administrative functions
required to support the Policy Statement, including
1. Overseeing the day-to-day activities of all Plan Advisors;
2. Establish a procedural due diligence search process;
3. Conduct Manager searches when needed for policy implementation;
4. Coordinating the review of contracts when new service providers are engaged, and
as necessary with incumbent providers;
5. Execute contracts upon approval of the Board as documented by the appropriate
Resolutions and Ordinances as appropriate;
6. Coordinating funding of and withdrawals from the Managers;
7. Reviewing reports from the Managers, Consultant and other Plan Advisors and
bringing to the attention of the Board items requiring Board review or action; and
8. Employing such assistance as necessary from the Managers, Consultant and other
Plan Advisors.
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D. Investment Consultant
The Consultant, acting as a fiduciary to the Plan, shall assist the Board and Investment
Committee in:
1. Developing and monitoring investment objectives and guidelines, including the
Plan’s assets allocation strategy and mix of Managers;
2. Measuring and evaluating the performance results of the Plan and Managers on an
on-going basis and advising the Board as to their continued appropriateness;
3. Keeping the Board and Secretary-Treasurer informed of all significant matters
pertaining to the Plan’s investments;
4. Providing timely written or oral information on the Managers and other related
issues, as requested by the Board or the Secretary-Treasurer; and
5. Conducting such other duties as may be mutually agreed upon by the Board and the
Consultant within the scope of the contractual agreement.
E. Investment Managers
All Managers must agree in writing that they are fiduciaries as defined in ERISA, with
respect to the investment of all Plan assets over which they have investment discretion.
The duties and responsibilities of each Manager include:
1. Managing the portion of the Plan under its discretion in accordance with prudency
standards required by ERISA; (i.e., the Manager’s portfolio must be invested with
the care, skill, prudence, and due diligence under the circumstances then prevailing
that an experienced professional investment manager acting in a like capacity and
fully familiar with such matters would use in the investment of like assets with like
aims.);
2. Complying with all provisions and responsibilities under this Policy Statement.
Except in the case of investments in mutual funds or commingled accounts, each
Manager is required to comply with the policies and guidelines set forth in this Policy
Statement. To the extent that the policies and guidelines in this Policy Statement are
more restrictive than a Manager’s separate Investment Management Agreement with
the Board, the Manager must follow the more restrictive rules in this Policy
Statement.
3. Initiating communication with the Secretary-Treasurer and Consultant when the
Manager believes that this Policy Statement is inhibiting and/or should be changed.
A manager may suggest a modification to any policy or guideline with respect to the
portfolio it manages by providing the Investment Committee and Consultant with a
written submission describing the requested change, the reasons supporting the
change, and any other relevant information. No deviation from the guidelines is
permitted until the Board has approved the Manager’s requested changes. Failure to
comply with any applicable policy or guideline may result in the Manager being
liable for any corresponding loss to the Plan and/or in the Manager being terminated;
4. Exercising full discretion within the policy guidelines stated herein. Such discretion
includes the decisions to buy, hold, and sell securities in amounts and proportions
reflective of the Manager’s current invest strategy;
5. Using its best effort to ensure that portfolio transactions are placed on a “best
execution” basis. (The Managers are expected to avoid all conflicts of interest when
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using Plan assets to pay brokerage expenses and to ensure that all trading
expenditures are made for the exclusive benefit of the Plan.);
6. Exercising ownership rights, where applicable, through proxy voting in the best
interests of the Plan's participants and beneficiaries;
7. Responding to funding requests within mutually agreed upon timelines;
8. Meeting with the Board, Secretary-Treasurer, and Consultant upon request; and
9. Providing monthly reports to the Custodian Bank in a timely fashion to meet the
Bank’s timeline. (Does not apply to private market investments where reporting is
typically delayed relative to public market investments.)
F. Custodian Bank
The duties and responsibilities of the Custodian Bank include:
1. Cash management, including:
• Daily sweep of idle cash balances;
• Interest and dividend collections;
• Collecting proceeds from maturing securities;
2. Processing of the Managers’ transactions, and coordinating the availability of
securities for the securities lending program and other deliveries as directed, if
applicable.
3. Accounting for Managers’ transactions and holdings, including
• pricing of holdings;
• providing monthly statements sorted by Managers' accounts, either by hard
copy or electronically as requested, and a consolidated statement of all assets
in a timely fashion;
• working with the Managers, Consultant and the Secretary-Treasurer to ensure
accuracy in reporting;
• providing monthly custody statements which allow custody and Managers’
accounting statements to be reconciled in a timely manner, including setup of
new accounts and reporting assets in the new account in the month’s statement
when a new account is established;
• Researching transaction information as requested by the Secretary-Treasurer;
• Reporting asset, account, and other information in a consistent manner.
4. Notify Investment Managers of proxies, tenders, rights, fractional shares or other
dispositions of holdings.
5. Managing the Fund’s securities lending program, if applicable.
6. Providing the Secretary-Treasurer with an electronic interface to facilitate
monitoring of cash equivalent balances, and additions to or withdrawals from the
Fund’s accounts, and all other Fund transactions.
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7. Disbursement of all income or principal cash balances as directed by the Secretary-
Treasurer.
III. INVESTMENT GOALS AND OBJECTIVES
A. The Plan shall be invested to ensure that principal is preserved and enhanced over time,
both in real and nominal terms. In addition, the Plan is expected to perform above average
relative to comparable Plans without assuming undue risk, specifically:
1. The long term nominal rate of return objective is to meet or exceed the assumed
actuarial rate of return.
2. The Plan’s total return shall meet or exceed the return of the Plan's Policy Index, which
is the return the Plan would earn if the assets were invested according to the target asset
class weightings and earned index returns.
3. The Plan’s risk, as measured by the standard deviation of returns, shall meet or be
below the risk of the Plan’s Policy Index. The return expectation for the individual
Managers are listed in Appendix II and are also expected to exceed the median return
of an appropriate peer universe.
4. Normally, results will be evaluated over rolling three- to five-year time horizons, but
shorter-term results will be regularly reviewed and earlier action taken if the Board, in
its sole discretion, determines such action to be in the best interest of the Plan.
IV. ASSET ALLOCATION
A. Policy Target and Ranges. The current asset allocation targets and permissible ranges,
reflected in Appendix I, will be pursued by the Board on a long-term basis, but will be
revised if significant changes occur in the Plan’s liability structure, plan assumptions or
economic environment.
B. Rebalancing Procedures. The Secretary-Treasurer and the Consultant will review the
Fund's asset allocation at least quarterly to determine if the allocation is consistent with
the established exposure ranges. If an asset class is at or beyond the maximum/minimum
range as determined at the quarterly asset allocation review, the Secretary-Treasurer,
with the assistance of the Consultant, will develop a plan to rebalance the allocation to
target. At a minimum, a rebalancing plan will move the allocation to the midpoint
between the maximum/minimum limit violated and the target allocation. Market
conditions and transaction costs will be considered, as well as any other relevant factors
when rebalancing, but the predisposition shall be to transfer funds from asset classes
that are out performing to asset classes that are under performing.
V. INVESTMENT MANAGER APPOINTMENT
1. When, in consultation with the Secretary-Treasurer, and the Consultant, the Board
determines that a Manager search is warranted, the Board will direct the Consultant
to institute, coordinate and summarize the findings of the search. The Consultant,
working with the Board, and the Secretary-Treasurer, will have established certain
consistently applied minimum criteria for an investment manager to be considered
eligible to participate in the searches in accordance with, but not limited to, the
criteria listed below:
2. All qualified candidates will receive fair consideration. The Board will strive to hire
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Managers that offer the greatest incremental benefit to the Plan, net of fees and
expenses, in accordance with, but not limited to the criteria listed below:
a. Length of firm history;
b. Tenure of key professionals;
c. Appropriateness of investment philosophy and process;
d. Fit between product and existing plan assets, liabilities and
objectives;
e. Absolute and relative returns, and variability of returns;
f. Stability of the firm’s client base and assets under management;
g. Ownership structure;
h. Compensation structure;
i. Fee structure; and
j. References and professional qualifications.
VI. INVESTMENT MANAGER GUIDELINES – GENERAL
A. Benchmarks. Performance benchmarks are listed in Appendix II.
B. Philosophy. It is expected that the Managers will adhere to their stated philosophies and
that any material deviations will be communicated promptly to the Secretary-Treasurer
and Consultant.
C. Compliance Monitoring. Each Manager shall monitor compliance with all guidelines on
an on-going basis, based on current market values. Securities that, at purchase, would
move the Manager's portfolio out of compliance with these guidelines, based on the
Manager’s most recent valuation, may not be purchased. In the event that a Manager's
portfolio moves out of compliance with these guidelines (as identified in the Manager’s
regular review of the portfolio) through changes in market conditions or other changes
outside the Manager’s control, the Manager shall
1. Bring the portfolio back in compliance with the guidelines within the earliest time
frame the Manager considers prudent;
2. Inform the Secretary-Treasurer and Consultant as soon as feasible that the guideline
has been breached, and of the Manager’s plan for addressing the issue.
D. Prohibited Transactions. Except for private markets, the following transactions are
prohibited:
• Uncollaterized derivatives may not be purchased;
• Uncollaterized short positions are not permissible;
• There shall be no use of financial leverage;
• Private placements, except those eligible for resale under SEC rule 144A,
are prohibited;
E. Use of Pooled Funds. Mutual funds, collective trusts and other types of commingled
investment vehicles provide, under some circumstances, lower costs and better
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diversification than can be obtained with a separately managed fund pursuing the same
investment objectives. However, commingled investment funds cannot customize
investment policies and guidelines to the specific needs of individual clients. Therefore,
the written guidelines and policies of the commingled fund or the prospectus or
statement of additional information for the mutual fund and any provisions set forth in
any investment management agreement will replace this Policy Statement.
1. The Manager or other fund representative must provide the Consultant and the
Secretary-Treasurer with a copy of the applicable commingled or mutual fund
guidelines, policies, prospectus and other governing documents (and any
amendments or updates thereto).
2. In addition, the Manager or other fund representative of any commingled fund
or mutual fund must provide periodic reports and other communications to the
Consultant and the Secretary-Treasurer.
F. Derivatives Policy
1. A derivative is a security or contractual agreement, which derives its value from
some underlying security, commodity, currency, or index. Derivatives exist in
several types including, but not limited to, forward, future, swap and option
contracts.
2. Managers may use derivative contracts for the following reasons:
a. Hedging. To the extent that the portfolio is exposed to clearly defined risks and there are derivative contracts that can be used to reduce those risks, the Managers are permitted to use such derivatives for hedging purposes, including cross-hedging of currency exposures.
b. Creation of Market Exposures. Managers are permitted to use derivatives to replicate the risk/return profile of an asset or asset class provided that the guidelines for the Manager allow for such exposures to be created with the underlying assets themselves.
c. Leverage. On an exception basis, managers are permitted to use derivatives to magnify overall portfolio exposure to an asset, asset class, interest rate, or any other financial variable subject to the Manager’s risk management program.
3. Managers may not use derivative contracts or securities for the following purposes:
a. Unrelated Speculation. Derivatives shall not be used to create exposures to securities, currencies, indices, or any other financial variable unless such exposures would be allowed by a portfolio’s investment guidelines if created with non-derivative securities.
VII. INVESTMENT MANAGER GUIDELINES – Asset Class Specific
A. Domestic Equity Managers
1. All domestic equity securities must be listed on a U.S. stock exchange.
2. Convertible bonds, warrants, and rights may be purchased as equity substitutes so long
as they meet the equity guidelines.
3. Managers will be expected to diversify the portfolio in order to maximize long-term risk adjusted returns net of expenses. Cash balances will be the residual result of trading securities.
4. Equity holdings in any one company should not exceed 10% of the market value of the
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Manager’s portfolio.
5. No purchase shall be made, which would cause a holding to exceed 5% of the market
value of the issue outstanding.
6. Short selling, securities lending, and other specialized investment activity are expressly
prohibited.
7. Managers may use futures contracts to equitize the cash portion of the portfolio.
8. Additional guidelines may be included in Appendix III.
B. Global & International Equity Managers
1. International equity securities are listed on non-U.S. stock exchanges; however, the
Manager has latitude to hold domestic equity securities provided that such investments
are consistent with attainment of the portfolio’s investment objective.
2. Convertible bonds, warrants, and rights may be purchased as equity substitutes so long
as they meet the equity guidelines.
3. Managers will be expected to diversify the portfolio in order to maximize long-term risk adjusted returns net of expenses. Cash balances will be the residual result of trading securities.
4. Short-term reserves may be held in U.S. dollar denominated securities or investment
vehicles available through the Fund’s custodian.
5. Decisions as to the number of issues held and their geographic distribution shall be left
to the Manager provided that equity holdings in any one company do not exceed 10% of
the market value of the Manager’s portfolio.
6. No purchase shall be made, which would cause a holding to exceed 5% of the market
value of the issue outstanding.
7. Managers may employ an active currency management program and utilize derivatives
within the disciplines of the Manager’s risk and currency management program subject
to the derivatives guidelines set forth in Section VI. F. Derivatives Policy.
8. Managers with specific emerging markets equity mandates are expected to invest in the
emerging (non-developed) and frontier markets, subject to the guidelines listed above.
9. Additional guidelines for international equity managers may be included in Appendix III
C. Passive Investment Managers
1. Passive strategies are expected to have characteristics similar to the underlying
benchmark. For example, a large cap passive equity portfolio shall have similar
capitalization and sector exposure to the S&P 500 or Russell 1000 benchmark.
2. Performance benchmarks are listed in Appendix II.
D. Domestic Fixed Income Managers
1. Domestic fixed income securities include U.S. Government and Agency obligations,
corporate bonds, asset backed securities, mortgage backed securities, municipal
securities, and U.S. dollar denominated issues of international agencies, foreign
governments and foreign corporations (i.e., Eurodollar and Yankee bonds).
2. Managers will be expected to diversify the portfolio in order to maximize long-term risk adjusted returns net of expenses. Cash balances will be the residual result of trading securities.
3. The overall average quality rating of each high-grade portfolio shall be at least A- by
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S&P or A3 by Moody’s or better.
4. The diversification of securities by maturity, duration, quality, sector and coupon is the
responsibility of the manager.
5. No security, except issues of the US Government or its Agencies shall comprise more
than 5% of the market value of the Manager’s portfolio.
6. No purchase shall be made, which would cause a holding to exceed 5% of the market
value of the issue outstanding except issues of the U.S. Government or its Agencies.
7. Additional guidelines for fixed income managers may be included in appendix III.
E. Global & International Fixed Income Managers
1. Domestic fixed income securities include U.S. Government and Agency obligations,
corporate bonds, asset backed securities, mortgage backed securities, municipal
securities, U.S. dollar denominated issues of international agencies, foreign
governments and foreign corporations (i.e., Eurodollar and Yankee
bonds).International fixed income securities include non-U.S sovereign debt and non-
U.S. corporate debt.
2. Managers will be expected to diversify the portfolio in order to maximize long-term
risk adjusted returns net of expenses. Cash balances will be the residual result of
trading securities.
3. The overall average quality rating of each high-grade portfolio shall be at least A- by
S&P or A3 by Moody’s or equivalent rating.
4. No single non-government debt security shall constitute more than 5% of the market
value of the Manager’s portfolio. Securities issued by AAA Rated Supranational
Organizations (such as the World Bank) shall be considered to be government
equivalents.
5. Short-term reserves may be held in U.S. dollar- or local currency-denominated
securities or in investment vehicles available through the Custodian Bank.
6. Managers may employ an active currency management program and utilize derivatives
within the disciplines of the Manager’s risk and currency management program subject
to the derivatives guidelines set forth in Section VI. F. Derivatives Policy.
Opportunistic currency positioning may be utilized, in the Manager's discretion, to
hedge and cross-hedge the portfolio’s currency risk exposure or in the settlement of
securities transactions. The Manager may vary the total portfolio’s exposure to
currency from fully unhedged to fully hedged.
7. Managers may purchase or sell currency on a spot basis to accommodate securities
settlements.
8. The diversification of securities by geographic distribution, number of issues, maturity,
duration, quality, sector and coupon is the responsibility of the manager.
9. The total non-investment grade exposure shall not exceed 15% of the market value of
the Manager’s portfolio.
10. No security, country, or currency shall have a quality rating below BB- by S&P or Ba3
by Moody’s.
11. Additional guidelines for fixed income managers may be included in Appendix III.
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F. Real Estate Managers
1. All Manager investments are made through commingled investment trusts, managed
accounts, limited partnerships, open or closed REITS or similar vehicles. The investment
guidelines for these vehicles are governed by the subscription documents.
2. The Managers will have full discretion to invest portfolios in accordance with the terms
of their subscription or advisory agreements.
3. It is expected that the Real Estate investment program shall be broadly diversified with
respect to property type and geography, and primarily be in the equity of real property,
which may or may not be levered.
4. The majority of real estate investments shall be “core” investments, with the remainder
being styles complementary to core, such as “value-added” and “opportunistic.”
VIII. STANDARD OF INVESTMENT PERFORMANCE
A. General Guidelines
1. Performance of the Plan and individual Managers will be evaluated on a quarterly basis
to determine their success in achieving the investment objectives outlined in this
document over an appropriate time horizon. The Board realizes that most investments
go through cycles; therefore, interim fluctuations should be viewed within the long-
term perspective. Consideration will be given to the degree to which performance
results meet the goals and objectives as set forth in these policy guidelines
2. In addition to reviewing each Manager’s results, the Board will re-evaluate, from time
to time, its own progress in achieving the objectives set for the Plan overall. This re-
evaluation will involve an assessment of the continued appropriateness of: (1) the
overall asset allocation; (2) the allocation of assets among the Managers; and (3) the
investment objectives for the Fund.
3. Risk as measured by volatility, or standard deviation, should be evaluated after twelve
quarters of performance history and periodically thereafter. Performance dispersion of
each individual Manager relative to other managed accounts of a similar style will be
assessed from time-to-time. Such assessments will take into account the nature of the
Manager’s style, portfolio constraints, and the market environment.
B. Manager Probation
1. Managers may be placed on a watch list or probation in response to the Board’s
concerns about significant changes in ownership structure, turnover in key personnel,
changes in investment process, recent or long term investment results, failure to comply
with the investment guidelines, or for any other reasons which the Board deems
appropriate.
2. A Manager on the watch list or on probationary status will not be eligible to receive
additional investment funds.
3. Attainment of investment objectives does not guarantee continued employment by the
Board, nor does failure to achieve these guidelines ensure dismissal. Managers serve
at the discretion of the Board.
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IX. MANAGER REPORTING REQUIREMENTS
Managers shall meet the following reporting requirements by providing the Secretary-
Treasurer and Consultant with the following written information:
A. Immediately
1. A significant change in personnel, organization, philosophy, strategy or assets under
management);
2. Discovery of a violation of the investment guidelines contained in this Policy
Statement;
3. A significant change in investment strategy, portfolio structure, or market value or
liquidity of managed assets;
4. A significant change, in the ownership affiliations, organizational structure, financial
condition, or clientele of the Manager;
5. Sanctions against the firm or its employees by any state or federal governmental or
regulatory agency, or by NASD, to the extent permissible by law.
6. Quality ratings on any bond held in a Manager’s portfolio that falls below the minimum
quality rating required under these guidelines.
B. Quarterly
1. A Summary of Investment Guidelines
a. Brief review of investment process;
b. Discussion of any changes to the investment process;
c. Investment strategy used over the past year and underlying rationale;
d. Evaluation of strategy's successes/disappointments;
2. Performance Review
a. Present annualized (periods over one year) total fund and benchmark returns for
last calendar quarter, year-to-date, last year, last three years, last five years and
since inception versus designated benchmarks both on a gross and net fee basis;
b. Discuss performance and portfolio characteristics relative to benchmarks; provide
attribution analysis, which identifies returns due to allocation and selection
decisions, as appropriate;
c. Provide portfolio holdings listing individual securities, as appropriate, by sector,
asset class, or country;
C. Annually
Each separate account equity manager shall provide the following to the Secretary-
Treasurer and Consultant 45 days after the end of the calendar year:
a. A statement certifying compliance with the Policy Statement, or, if the portfolio
has been out of compliance, an explanation.
b. Proxy Voting
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The Board shall delegate responsibility for the exercise of ownership rights
through proxy voting to the Managers, who shall exercise this responsibility
strictly for the economic benefit of the Plan and its participants. Managers shall
adhere to the proxy voting guidelines set forth in the Proxy Voting Resolution
No. 2193 of the meeting dated August 10, 1995 which is attached as Exhibit 1.
X. IMPLEMENTATION AND APPROVAL
All monies invested for the Plan by its Managers shall conform to this Policy Statement
after its adoption. It is understood that this investment policy is to be reviewed periodically
by the Board to determine if any revisions are warranted by changing circumstances
including, but not limited to, changes in financial status, risk tolerance, changes in the Fund
or changes involving the Managers.
Chairman of the Board of Trustees Date
Investment Manager Acceptance
This Policy Statement has been reviewed and is hereby accepted on behalf of:
____________________________________
____________________________________
_____________________________________
Name (please print or type)
_____________________________________
(Signature)
_____________________________________
(Title)
_______________________________________
(Firm’s Name)
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APPENDIX I – ASSET ALLOCATION
The nominal long-term rate of return objectives for the Plan is 6.25%. In order to have a reasonable
probability of achieving this return, the Board has adopted the asset allocation policy outlined
below.
ASSET CLASS TARGET ALLOWABLE
% RANGE %
Equity
Large Cap Equity 25 15-30
SMID Cap Equity 10 5-15
International Equity 12 5-15
Emerging Markets Equity 6 2-8
Total Equity 53 46-60
Fixed Income
Domestic Core Bonds 14 9-19
Core "Plus" Bonds 13 8-18
Global Bonds 8 3-13
Total Fixed Income 35 28-42
Real Estate 12 0-15
Total 100
The current asset allocation of the Plan may deviate from the target asset allocation target due to
returns among asset classes and individual Managers. The current allocation will be evaluated at
least quarterly and may be rebalanced from time to time in accordance with Section IV. B. Asset
Allocation – Rebalancing.
Page 15
APPENDIX II - PERFORMANCE BENCHMARKS
TOTAL FUND AND MANAGERS
Asset Class Style
Asset Class Benchmark Universe Universe
Total Fund 25% Russell 1000 Index
10% Russell 2000 Index
12% MSCI EAFE Index
6% MSCI Emerging Markets
14% BB Intermediate Gov/Credit Index
13% BB Aggregate Index
8% FTSE World Gov’t Bond
12% NCREIF ODCE Index
Public
Pension
NA
Domestic Large Cap Equity
Domestic Large Cap - Passive
Russell 1000 Index
U.S. Large
Cap Equity
U.S. Large Cap
Domestic Small/Mid Cap
Equity
Domestic Small Cap Growth
Domestic Mid Cap Value
Russell 2000 Growth Index
Russell Mid-Cap Value Index
U.S. Small-
Mid Cap
Equity
Small Growth Mid-
Cap Value
International Equity
International Developed
MSCI EAFE Index
International
Equity
International Core
Emerging Markets Equities MSCI Emerging Markets Index Emerging
Market
Equity
Emerging Markets
Domestic Fixed Income
Domestic Core Bonds
Core “Plus” Bonds
Bloomberg Barclays Intermediate
Government/Credit Index
Bloomberg Barclays Aggregate Index
Intermediate
Duration
Fixed Income
Intermediate
Duration
Global Fixed Income FTSE World Government Bond Index Global Fixed
Income
Global Fixed
Income
Real Estate NCREIF ODCE Index Real Estate
Funds
NA
Page 16
APPENDIX III – Manager Specific Guidelines and Exceptions
(EXHIBIT 1)
RESOLUTION NO. 2193
WHEREAS, the Board of Trustees of The Metropolitan St. Louis Sewer District is
mindful of its fiduciary obligations with respect to the voting of proxies of companies whose securities
are owned by The Metropolitan St. Louis Sewer District's Pension Plan, and
WHEREAS, because of the complexity of issues, and further because of the direct impact
on investment values involved, it is the Board's considered belief that the Investment Managers that are
employed by the District are best suited to vote the proxies of shares held in the portfolios they manage,
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT, That, as part of the District's Investment Policy and
the Investment Managers' guidelines, the Board hereby directs and instructs the Investment Managers to
vote proxies of shares held in the portfolios they manage in accordance with said Investment Managers'
own guidelines and policies and in the best interests of the Pension Plan beneficiaries.
BE IT FURTHER RESOLVED, That all Investment Managers voting proxies shall
provide to the Board their firms' proxy policies, and shall provide semi-annual reports to the Board
showing securities voted, issues involved, and the vote made.
The foregoing Resolution was adopted August 10, 1995.