How To Manage Two Portfolios Of Money From A Danish National Research Foundation

Transcription

1 TENDER OF ASSET MANAGEMENT MANDATES, HIGH-YIELD BONDS AND BANK LOANS 1. TENDER The Board of Directors of the Danish National Research Foundation has decided to put the management of two portfolios out to tender to external asset managers, which are hereby invited to submit a bid. The purpose of the tender is to conclude an investment agreement regarding the following two portfolios: 1. High-yield bonds of approx. DKK 325 million, corresponding to 5% of the Danish National Research Foundation's assets. 2. US Senior Bank Loans ("US Bank Loans") of approx. DKK 325 million, corresponding to 5% of the Danish National Research Foundation's assets. The mandates are awarded separately for each portfolio, but can be awarded to the same manager. 2. BACKGROUND The Danish National Research Foundation is an independent foundation established by statute in Reference is made to the most recent annual report (2014) as well as the applicable legal framework ( including Danish Executive Order no. 154 of 10 February 2010 on the management of the Danish National Research Foundation's funds. The investment policy is characterised by a fundamentally cautious approach. The Danish National Research Foundation does not have any high-yield bonds or bank loans at present. The Danish National Research Foundation is non-taxable. 3. SELECTION CRITERIA The contract is awarded on the basis of an overall assessment of the following criteria: 1. Documented experience and qualifications 2. Investment philosophy 3. Investment process 4. Historical performance 5. Ethics 6. Costs 7. Draft investment agreement. PAGE 1

2 4. REQUIREMENTS FOR THE CONTENTS OF BIDS 4.1 The following general requirements apply to the high-yield bond and bank loan mandates: 1. Based on the bid received, an investment agreement regarding investment in a capital association (in Danish: Kapitalforening) or similar legal entity which fulfils the requirements set out in Sections 162 a and 162 b of the Danish Financial Business Act (Lov om finansiel virksomhed) will be concluded. 2. Currency hedging to EUR or DKK. 3. The proposed strategy must have a track record of minimum three years. 4. Portfolio management must comply with UNPRI or verifiably similar ethical standards. 5. Portfolio management may only be delegated to sub-contractors to the extent that this does not affect the quality of the delivered services, and the manager retains full responsibility for the delivered services as if the manager had delivered the services himself. 6. The bid must be accompanied by a draft investment agreement, which the manager is willing to enter into without any changes in content if he is awarded the mandate. The Danish National Research Foundation must be allowed to terminate the agreement without notice and without any costs. If, after the award of one or more mandates, the Danish National Research Foundation assesses that the manager is not willing or able to enter into the proposed investment agreement on unchanged terms, the Danish National Research Foundation reserves the right to reject the manager without liability of any kind. 4.2 The following additional requirements apply to the high-yield bond mandate: 7. A manager of a global or pure US portfolio is sought. 4.3 Detailed tender requirements Each bid must contain the following information in the stated order of priority. 1. Specification of whether the bid comprises high-yield bonds, US Bank Loans or both. 2. Description of the legal entity through which the investment is made, which must be a capital association or similar legal entity fulfilling the requirements set out in Sections 162 a and 162 b of the Danish Financial Business Act. 3. Description of (i) the manager that delivers all management services (except discretionary portfolio management), unless it is the same as the bidder, and (ii) the depositary for the legal entity described under item Ownership, capital base, organisation and the proposed team's place in the organisation. 5. Client base and distribution within the management of high-yield bonds and/or US Bank Loans (as appropriate to the mandate bid for). 6. Number and size of high-yield bond and bank loan portfolios under management, including: a) Specification of capacity for the proposed product PAGE 2

3 b) List of other products managed by the proposed team. 7. Composition, qualifications and experience of the high-yield bond and/or US Bank Loans team, including: a) Number of portfolio managers and analysts as well as their seniority at the manager and overall industry experience b) Decision-making structure of the team c) Development of the team since the launch d) Description of the reason for any changes made to the team in the past ten years e) Incentive pay f) Legal qualifications g) Geographical location of the team. 8. A short CV for the members of the investment team who will be responsible for the management in question. 9. Thorough description of investment philosophy and investment universe, including a description of resources for the analysis of issues outside the benchmark, and investments in the secondary market and in case of restructurings of issues. 10. Thorough description and illustration of the investment process, including methods and models to support investment decisions and portfolio composition. Describe the reason for any changes made to the investment process during the lifetime of the strategy. 11. Thorough description of the procedure for ethical investments with focus on guidelines and practical implementation, including deviations from UNPRI and the reason for such deviations. 12. Expected goal for performance or risk-adjusted performance compared to the benchmark, including how portfolio risk is managed. 13. Portfolio characteristics such as investment limits and the following key figures for the past five years at the end of the year, including: a) Turnover rate b) Number of holdings c) Active share d) Duration e) Spread duration f) Default rate g) Recovery rate. 14. Monthly return data before costs until April 2015 for the proposed product as well as the subpoints below. The yield must be specified, including: PAGE 3

4 a) Inception date b) Denomination currency c) Whether the strategy is hedged and, if so, to what currency d) Benchmark return and the full name of the benchmark. 15. Annual performance attributions for and simultaneous allocation to rating, sector and country level for the past five years or since the inception date, including performance explanations for the periods analysed. 16. Description of compliance with UNPRI and the reason for any deviations from it, as well as processes to ensure compliance with UNPRI or similar relevant principles. 17. Investment agreement costs, if any. Management fee and TER (Total Expense Ratio). 18. Draft investment agreement. 19. Documentation that the applicant has or will have, no later than at the time of the award of the mandate, all licences necessary to perform the financial services in question in Denmark. 20. Other asset management services. 21. Name, telephone number and address of the responsible contact person. 5. QUESTIONS Written questions concerning the tender may be directed to Deputy Director Mogens Klostergaard Jensen up to and including 26 May 2015 at (CET). Replies to any questions will be posted continuously on the Danish National Research Foundation's website (without revealing the identity of the asker) as a supplement to the text already posted. The Danish National Research Foundation reserves the right to contact the asker for clarification of questions, without this constituting discrimination of the applicants. To ensure equal treatment of the applicants, it will not be possible to discuss any matters other than the actual question, nor will the Danish National Research Foundation discuss its preferences for the content of bids. 6. DOCUMENTATION AND APPLICATION The bid must be submitted by completing the attached application form. An application form must be submitted for each portfolio applied for. The bid must be prepared in Danish or English. The bid must be valid for at least four months from the date of submission. The bid must reach the Danish National Research Foundation by Monday 8 June 2015 at 16.00, electronically at dg@dg.dk, or by post to Danmarks Grundforskningsfond, Holbergsgade 14, 1., 1057 Copenhagen K, Denmark, attn: Mogens Klostergaard Jensen. Bids submitted after this time will be rejected without further review. PAGE 4

5 The Danish National Research Foundation reserves the right to reject all bids received if they are not deemed to be sufficiently advantageous, and accepts no liability for costs incurred by the applicants in relation to the preparation of bids or otherwise. By submitting a bid, an applicant is deemed to have accepted all the terms and conditions of these tender documents, including all limitations of the Danish National Research Foundation's liability. 7. PROCESSING OF APPLICATIONS EXPECTED TIMELINE The bids received will be reviewed and processed in the period until mid-august During the week August, the Danish National Research Foundation expects to hold brief meetings with selected managers at the Danish National Research Foundation. It is expected that an investment agreement can be concluded with effect from 15 September PAGE 5