Revised_Q_and_As_PBGC01-RP-17-0003.pdf

QUESTIONS AND ANSWERS

SOLICITATION: INVESTMENT CONSULTING SERVICES

PBGC01-RP-17-0003

Questions and Answers (Rev. 1 – September 9, 2016)

Summary of Changes:

Question 4 response: The first sentence is revised as follows;

“Manager searches can result in the hiring of more than one manager covering multiple mandates and can span multiple calendar years.”

Question 6: Question 6 has been separated from Question 5. Note: 10 Manager Research Meetings for 2016 through 7/31/16.

Question 12: The revised response states, “Over the past five years, the number has averaged approximately

115, but has declined materially in recent years.”

1. Question: Is this a follow-on to an existing Contract? If so, can you provide the name of the incumbent Contractor and the Contract Number? Can the incumbent compete for the Contract Award?

Answer: Yes, the incumbent Contractor is Wilshire Associates, Inc. and the current contract number is PBGC01-CT-12-0007. This is a Full and Open Competition and nothing prohibits the incumbent from competing on this solicitation.

2. Question: Is your current consultant being invited to rebid?

Answer: See Question 1.

3. Question: Is the meeting schedule for 2017 available? If so, can you please provide it?

Answer: No, it is not available at this time.

4. Question: How many manager searches were conducted in 2014, 2015, and year to date?

Answer: Manager searches can result in the hiring of more than one manager covering multiple mandates and can span multiple calendar years. By year, the following is an estimate of the searches initiated:

2014: 2

2015: 3

YTD 2016 through 7/31/16: 1

5. Question: How many onsite manager research meetings did the investment consultant attend in 2014, 2015, and year to date?

Answer: A member of the consultant team shall attend all onsite meetings during the process of hiring managers and travel may be required. The on-site consultants have also been involved in select travel during the manager hiring process. The consultant has also attended other onsite due diligence meetings, which is also included in the number of manager research meetings below. By year, a member of the consulting team attended approximately the following number of manager research meetings:

2014: 7

2015: 34

YTD 2016 through 7/31/16: 10.

6. Question: Are there any major initiatives currently underway or that the Corporate Investments Department would like to address in the next couple of years that are not outlined in the Scope?

Answer: While these and other prospective changes that could occur are included in the Statement of Objectives, no definitive decisions on initiatives currently under consideration have been finalized as of today’s date.

7. Question: Can you please provide the name of your current custodian?

Answer: The U.S. Bureau of Public Debt is the custodian for the Revolving Funds. The custodian for the majority of Trust Fund assets is State Street Bank & Trust. PBGC contractors serve as the book of record for investment monitoring purposes of the Private Market portfolios.

8. Question: What currently drives the PBGC’s FI heavy allocation? Is there a document available that explains the rationale underlying the current AA?

Answer: The current asset allocation is set forth in the investment policy statement, which includes the following statement:

“Asset allocation will be based on a desire for sound long-term performance considering PBGC’s obligations and risks. PBGC seeks to produce a return on investment that is based on levels of liquidity and investment risk that are prudent and reasonable.”

The investment policy statement is included as attachment 1 of the solicitation and may also be found at:

http://www.pbgc.gov/documents/Investment-Policy-Statement.pdf

9. Question: When was the last Asset/Liability study completed for the Fund?

Answer: The last ALV study related to the 2015 IPS was conducted in 2014. Additional analysis was also completed in 2016 related to Board and Advisory Committee questions.

10. Question: With respect to the inherited Private Market Assets, will the engaged consulting firm be responsible for performance reporting on the approximately 750 separate investments?

Answer: No, the custodian is responsible for the performance reporting that goes into a quarterly Executive Summary completed by the consultant. Performance reporting on certain other Private Market assets are provided by another contractor.

Alternatively, will this be completed by the two private equity managers mentioned in the RFP?

Answer: Yes, PBGC relies on the two private equity managers to provide this reporting.

11. Question: What is the role that you are looking for the on-site consultant to fulfill?

Answer: Per the Statement of Objectives (SOO), the Offeror shall provide the Performance Work

Statement (PWS), and propose at least one on-site consultant to perform specific functions outlined in their

PWS. The Proposed approach should provide the relationship between the tasks and the labor force. For

Example, the Vendor might propose that: The Onsite Consultant support the development of investment performance reviews and reports for the PBGC and its investment managers in a variety of areas, including performance measurement, investment policy, asset allocation, investment structure, manager selection, asset transfer, and procurement. The on-site consultant(s) shall also support and assist the senior consultant and

PBGC with additional studies, reports, and projects to support PBGC in fulfilling its mission. Please note that these are examples of how the vendor might recommend fulfilling tasks, and the vendor is responsible for ensuring that they demonstrate the relationship between the SOO, PWS, and the labor categories proposed to complete the tasking.

12. Question: On average, how many plans has the PBGC annually taken over during the past 5 years?

Answer: Over the past five years, the number has averaged approximately 115, but has declined materially in recent years.

13. Question: Does the PBGC reserve the right to hire more than one consulting firm and divide the stated scope of work? If so, how might that be executed?

Answer: The PBGC anticipates hiring only one general consulting firm.

14. Question: Would you mind providing a recent performance report?

Answer: The PBGC does not provide interim performance reporting information. Please see

PBGC.gov for information from the 2015 Annual Report regarding our investment activities.

15. Question: Is there an incumbent already doing this work? If so, can you provide the number of hours utilized and amounts billed during the last contract?

Answer: Yes, the incumbent Contractor is Wilshire Associates, Inc. and the current contract number is PBGC01-CT-12-0007. The current contract is Firm Fixed Price and the amount billed under the contract is not based on hours utilized.

16. Question: How many hours do you expect the onsite consultant will be utilized yearly? How many hours do you anticipate utilizing the offsite senior consultant?

Answer: PBGC anticipates awarding a Firm Fixed Price contract. The onsite consultant(s) are located at PBGC's offices at 1200 K Street, N.W., Washington, D.C. 20005 and would be fully dedicated to the PBGC relationship. Please see the solicitation for the observance of legal holidays. We do not have an estimate for the hours anticipated for the senior consultant, although duties are described in the Statement of

Objectives.

17. Question: Can you describe the primary responsibilities for the onsite consultant? What will the onsite person typically be working on from day to day?

Answer: Please see the answer to question 11 above.

18. Question: Can you describe the primary responsibilities for the onsite consultant? What will the onsite person typically be working on from day to day?

Answer: Please see the answer to question 11 above.

19. Question: What is the current size of the assets?

Answer: The PBGC does not provide interim performance reporting information. As of

September 30, 2015, PBGC's total investments consisting of cash and cash equivalents, investments, and investment income receivable as shown on the Statements of Financial Position were $81,858 million. Total assets were approximately $87,659 million. Please see PBGC.gov for information from the 2015 Annual

Report regarding our investment activities.

20. Question: What is the current size of the team at The Corporate Investments Department at PBGC and the division of roles they have?

Answer: CID consists of three divisions: Global Equity; Fixed Income; and Investments, Operations and Services. Each division is led by a supervisory financial analyst who reports to the Deputy

Chief Investment Officer. The DCIO, in turn, reports to the Chief Investment Officer. CID is also staffed with financial analysts, an administrative officer, an administrative assistant, and an intern that reports to either a division head or the DCIO. In total, there are currently twenty-one “team” members within CID.

21. Question: Please can you provide a copy of the investment policy statement?

Answer: The investment policy statement is included as attachment 1 of the solicitation. It can also be found at the following link: http://www.pbgc.gov/documents/Investment-Policy-Statement.pdf

22. Question: Can you clarify the work requested for private equity portfolio?

Answer: Work in this area is limited but includes integrating the private market aggregate figures into the monthly staff IPR, Executive Summaries, and quarterly books. CID staff sends the consultant aggregate data and they input it into their reporting.

23. Question: In terms of investment manager fees do you prefer performance based or a flat fee? How important are fees in the manager selection criteria?

Answer: Typically, managers are chosen based on the best value to the Government. Each investment manager search solicitation instructs Offerors how to submit their fees and sets forth the basis of the selection criteria.

24. Question: Are the PBGC required to publish any of their investment strategy, performance, selection or activity publically?

Answer: Yes. Please see PBGC.gov for information from the 2015 Annual Report regarding our investment activities. Additional information on past manager selection and procurement activity can be found on www.FBO.gov.

25. Question: In section 5.5 you comment on the requirement of access to software for PBGC staff to enable screening of managers. Please clarify if this is pertains to industry non-proprietary systems or proprietary systems.

Answer: The PBGC requires access to both non-proprietary and proprietary systems used by the investment consultant for investment manager research.

26. Question: What is your appetite for “medium term” asset allocation decisions whereby deviance from the long term IPS can be undertaken to exploit dislocations in market conditions which may persist for longer than the short-term?

Answer: The PBGC is currently not considering tactical asset allocation in the short or medium term. Any short or medium term opportunities are executed at the manager level within the parameters of their investment manager guidelines.

27. Question: How important is ESG in your investment strategy and in the selection of asset managers?

Answer: Please refer to the PBGC investment policy statement for information related to

Governance of the PBGC investment program.

28. Question: Do you have an emerging (newer, smaller) manager program?

Answer: Contracts for a Smaller Asset Manager Pilot Program were awarded on July 1, 2016.

29. Question: When during the year does the PBGC have the ALM analysis performed?

Answer: There is no set time for this analysis. It would typically be performed well in advance of any approval of the investment policy statement.

30. Question: Are the single and multi-employer programs evaluated separately or together?

Answer: The single and multi-employer programs are typically evaluated together as an investment program.

31. Question: Please describe the model(s) and approach that the PBGC uses to forecast liabilities.

A. Question: What platform is used?

Answer: Liability forecasting is handled by a different department in the PBGC. The data is then used by the Consultant as part of the ALM analysis.

http://www.fbo.gov/

B. Question: Are there plan by plan forecasts or aggregate forecasts?

Answer: The forecasting data provided will be aggregated.

C. Question: What is the valuation basis?

Answer: The information is considered proprietary – unable to disclose.

32. Question: Please describe the model(s) used to forecast economic environments (inflation, yield curves, other variables) and asset class returns. Among other things please touch on the following in the response:

A. Question: What platform is used?

Answer: The PBGC typically relies on the Investment Consultant’s capital market assumptions.

B. Question: Can the model(s) best be described as driven by historical observations or more of a “new norm” focus?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

C. Question: Are there asset class specific models or are all asset classes modeled in the same manner (e.g. mean variance)?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

D. Question: How are economic variables related to asset returns (e.g. yield curves and bond returns)?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

E. Question: Can the model be used to isolate specific economic scenarios (e.g. low interest rates)?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

F. Question: How, if at all, are derivatives modeled by the PBGC?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

G. Question: Does the PBGC have its own views on the capital markets that need to be reflected?

Answer: The PBGC’s views are not incorporated in the capital market assumptions.

33. Question: Please describe the model(s) used to develop in integrated asset liability forecast. Among other things please touch on the following in the response:

A. Question: What platform is used?

Answer: The Policy, Research and Analysis Department (PRAD) with PBGC is responsible for liability information. PRAD provides data to the general consultant to be used in its ALM analysis.

B. Question: What are the key inputs and outputs?

Answer: This information is considered proprietary data. PBGC is unable to disclose.

C. Question: How is LDI analysis performed?

Answer: LDI analysis may include, among other items, a calculation of a hedge ratio in the management of funding status risk.

34. Question: What performance metrics does the PBGC use to evaluate the current asset allocation and possible alternatives?

Answer: Currently, PBGC utilizes monthly and quarterly reporting on the current asset allocation.

During Asset Liability Studies, PBGC uses possible alternative asset allocations provided by the Investment Consultant based on their proprietary model.

35. Question: Can you please provide the reports from the last ALM cycle?

Answer: No.

36. Question: Does the PBGC currently use a risk management system?

Answer: Yes. The PBGC currently uses BlackRock as its risk management system provider.

-- ALM process--

37. Question: Are there any desired process changes? Timing during year? Frequency?

Answer: There are no desired process changes but the PBGC is open to recommendations from the investment consultant. ALM studies are typically completed once every 1-3 years.

38. Question: With respect to the models mentioned above, are there updated or additional capabilities desired by the PBGC?

Answer: PBGC is open to additional capabilities that would enhance the investment program and fulfill its mission.

39. Question: Are there additional asset classes that the PBGC foresees needing to model?

Answer: PBGC currently foresees no new asset classes, but as market environment changes we will consider recommendations from the Investment Consultant.

40. Question: What, if any, enhancements to reporting does the PBGC seek in terms of content? delivery method?

Answer: PBGC is open to additional capabilities that would enhance the investment program and fulfill its mission.