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HomeMy WebLinkAboutc4agreementwithchandlerassetmanagement FROM: Wayne Padilla, Finance Director SUBJECT: APPROVE EXTENSION TO AGREEMENT WITH CHANDLER ASSET MANAGEMENT RECOMMENDATION Approve the extension to the existing agreement with Chandler Asset Management for Investment Advisor services until November 2014. DISCUSSION Background In November 2007 the City entered into an Agreement with Chandler Asset Management to provide investment advisor services. In this role they manage a portion of the City’s overall portfolio, provide for the valuation of the portfolio, recommend new investments and ensure that the City’s investments are in compliance with the City’s investment policy. Based on Chandler’s satisfactory performance, the original agreement was extended for a three year term until November 27, 2013 in accordance with the terms provided in that document. The term of that extension has lapsed and staff is now requesting a second extension of the agreement until November 2014. This will allow continuity of service while also allowing staff to concurrently work on releasing a new Request for Proposals document and provide the City Council with a recommendation for the successor investment advisor along with other important tasks such as the Measure Y Contingency Plan and the 2013-15 Supplemental Budget for the 2014-15 fiscal year. . FISCAL IMPACT In exchange for extending the agreement until next November, Chandler has agreed to provide a discount in the fees charged for its services. The current and proposed fees are shown below. Under the new fee structure, the average monthly cost will be approximately $500 less for the remainder of the term. The annual fees for this service will be approximately $45,000 per year and are paid from the interest proceeds earned from the portfolio. The market value of assets under Chandler’s management total $46.6 million as of January 31, 2014. Proposed Fee Schedule: Assets Under Management Annual Investment Management Fee First $25 million 0.10 of 1% (10 basis points) Next $25 million 0.08 of 1% (8 basis points) Assets in excess of $50 million 0.07 of 1% (7 basis points) Meeting Date Item Number 3-4-14 C4 - 1 Current Fee Schedule: Assets Under Management Annual Investment Management Fee First $20 million 0.12 of 1% (12 basis points) Next $40 million 0.09 of 1% (9 basis points) ALTERNATIVES Do not approve the contract extension and direct staff to issue a Request for Proposal document. This option is not recommended due to the fact that there must still be an interim agreement in place with the investment advisor until a successor firm can be selected. Staff is committed to other high priority tasks which must be completed before June 2014 and overseeing an RFP process would delay one or more of those tasks. Finally, Chandler Asset Management is performing satisfactorily and is capable of continuing in this role until November 2014. ATTACHMENTS 1. Extension to Agreement C4 - 2 AMENDMENT NO. 2 TO AGREEMENT THIS SECOND AMENDMENT TO AGREEMENT is made and entered into by the City of San Luis Obispo on November 28, 2013, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City, and CHANDLER ASSET MANAGEMENT, hereinafter referred to as Contractor. WITNESSETH: WHEREAS, on November 27, 2007 the City entered into an Agreement with Contractor for investment advisory services for portfolio management per Specification No. 90706; and WHEREAS, in January 2011, the City entered into Amendment 1 to Agreement with Contractor to extend the term as provided in the original Agreement; and WHEREAS, the City now desires to extend the term of the Agreement for an additional 1 year and Contractor has mutually agreed. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. Term. The term of this Amendment shall be until November 26, 2014 which is 1 year from the expiration date of the extension to the original Agreement. 2. Fees. City shall compensate Contractor monthly an amount calculated on the average market value of City’s portfolio, including accrued interest, in accordance with the following schedule: Assets Under Management Annual Investment Management Fee First $25 million 0.10 of 1% (10 basis points) Next $25 million 0.08 of 1% (8 basis points) Assets in excess of $50 million 0.07 of 1% (7 basis points) The fees expressed above do not include any custody fees that may be charged by City’s bank or other third party custodian. Fees shall be prorated to the effective date of termination of Amendment 1 to the Agreement, on the basis of actual days elapsed, and any unearned portion of prepaid fees shall be refunded. City is not required to pay any start-up or closing fees; there are no penalty fees. 3. City Representative. In its capacity as investment manager, Contractor shall receive all instructions, directions and other communications on City's behalf respecting City's account from the Director of Finance & Information Technology or Finance Manager (Representatives). Contractor is hereby authorized to rely and act C4 - 3 upon all such instructions, directions and communications from such Representative or any agent of such Representative. 4. Investment Policy. In investing and reinvesting City’s assets, Contractor shall comply with City’s Investment Policy, which is attached hereto as Exhibit A. 5. Authority of Contractor. Contractor is hereby granted full discretion to invest and reinvest all assets under its management in any type of security it deems appropriate, subject to the instructions given or guidelines set by Representative. 6. Electronic Delivery. From time to time, Contractor may be required to deliver certain documents to City such as account information, notices and required disclosures. City hereby consents to Contractor’s use of electronic means, such as email, to make such delivery. This delivery may include notification of the availability of such document(s) on a website, and City agrees that such notification will constitute “delivery”. City further agrees to provide Contractor with City’s email address(s) and to keep this information current at all times by promptly notifying Contractor of any change in email address(s). i. City email address: wpadilla@slocity.org 7. Proxy Voting. Contractor will vote proxies on behalf of City unless otherwise instructed. Contractor has adopted and implemented written policies and procedures and will provide City with a description of the proxy voting procedures upon request. Contractor will provide information regarding how Citys’ proxies were voted upon request. To request proxy policies or other information, please contact us by mail at the address provided, by calling 800-317-4747 or by emailing your request to info@chandlerasset.com. 8. Custody of Securities and Funds. Contractor shall not have custody or possession of the funds or securities that City has placed under its management. City shall appoint a custodian to take and have possession of its assets. City recognizes the importance of comparing statements received from the appointed custodian to statements received from Contractor. City recognizes that the fees incurred under this agreement do not include fees City will incur for custodial services. 9. Valuation. Contractor will value securities held in portfolios managed by Contractor no less than monthly. Securities or investments in the portfolio will be valued in a manner determined in good faith by Contractor to reflect fair market value. 10. No Assignment & Amendments. Neither party may assign, directly or indirectly, all or part of its rights or obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. This Agreement may be amended at any time by mutual agreement in writing. C4 - 4 11. Receipt of Brochure and Privacy Policy. City has received the disclosure statement or "brochure" required to be delivered pursuant to Rule 204-3 of the Investment Advisers Act of 1940 (Brochure). City has received a copy of Contractor’s Privacy Policy. 12. All other terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first written above. ATTEST: CITY OF SAN LUIS OBISPO ____________________________________ By: ____________________________________ City Clerk City Manager APPROVED AS TO FORM: CONTRACTOR _____________________________________ By: ____________________________________ City Attorney C4 - 5 Page intentionally left blank. C4 - 6