State Universities Retirement System of Illinois (SURS)

Request for Proposal

Diversified Multi-Strategy Fund of Hedge Funds

2015

Table of Contents

I. Request For Proposal Summary Statement 3

II. Background Information 3

III. Specific Services Requested from the Investment Manager 5

IV. Diversity Goals 5

V. Minimum Qualifications 5

VI. RFP Specifications 6

VII. Projected Schedule of Events 9

Appendix A Minimum Qualifications Certification 10

Appendix B Disclosures per Illinois Pension Code Section 1-113.21 12

Associated Documents

Appendix C SURS Questionnaire (Word document) (See Attachment)

Appendix D NEPC Questionnaire (Excel document) (See Attachment)

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State Universities Retirement System (SURS)Request for Proposal (RFP)

2015

Fund of Hedge Funds Manager Search

I. RFP Summary StatementThe State Universities Retirement System (“SURS” or the “System”) is requesting proposals from qualified firms to oversee and administer a Diversified Multi-Strategy Fund of Hedge Funds program which, after fees, exceeds the return of the agreed upon benchmark.

Respondents must answer all applicable questions in the questionnaire sections in order to be considered.

II. Background Information Agency DescriptionSURS is the administrator of a cost-sharing, multiple employer public employee retirement system. SURS membership includes employees of the Illinois public universities and other affiliated organizations. Currently, SURS membership totals more than 200,000 active, inactive and retired participants. SURS maintains both a defined benefit plan (DB plan) and defined contribution plan.

Defined Benefit Plan Investment ProgramAs of December 31, 2014, the DB plan trust totaled $17.0 billion with a target asset allocation as follows:

TargetU.S. Equity 23%Non-U.S. Equity 19%Global Equity 8% Core Fixed Income 19% Emerging Markets Debt 3%TIPS 4%Private Equity 6% Real Estate 6% REITS 4% Hedged Strategies 5%Opportunity Fund 1%Commodities 2%

Legislated Investment Restrictions Relating to the Republic of the Sudan and IranSection 1-110.6 of the Illinois Pension Code (40 ILCS 5/1-110.6) places certain obligations on “private market funds” (including a hedge fund-of-funds) concerning the control of property in the Republic of Sudan, the conduct of business operations in the Republic of Sudan, and direct or indirect investment in any company organized in, whose principal place of businesses is in, or conducts business operations in the Republic of Sudan.

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Section 1-110.15 of the Illinois Pension Code (40 ILCS 5/1-110.15) requires SURS to divest or request managers to divest from investments in “scrutinized companies” that have certain business or investment relations with the Government of Iran. Investment managers seeking consideration for this mandate should be familiar with and agree to comply with these provisions of the Illinois Pension Code.

State Fiduciary, Ethics, and Diversity LawsSections 1-109, 1-109.2, 1-110, 1-125. 1-130, 1-135, and 1-145 of the Illinois Pension Code (40 ILCS 5/1-109, 1-109.2, 1-110, 1-125, 1-130, 1-135, 1-145) contain fiduciary, ethics, and prohibited transaction provisions that may apply to investment managers.  Investment managers seeking to be considered for this mandate should be familiar with and must comply with such applicable provisions of the Illinois Pension Code.

Section 1-109.1 of the Illinois Pension Code (40 ILCS 5/1-109.1) encourages the Board to increase the use of minority-owned businesses, female-owned businesses, or businesses owned by persons with disabilities as emerging investment managers, minority investment managers, broker-dealers, or vendors for services and contracts; and to increase the racial, ethnic, and gender diversity of its fiduciaries (including investment managers and consultants), to the greatest extent feasible within the bounds of financial and fiduciary prudence. To this end, the Board encourages minority-, female- and persons with a disability-owned investment managers to submit proposals to this RFP.

Section 50-37 of the Illinois Procurement Code concerning prohibitions on political contributions for certain vendors (30 ILCS 500/50-37) may or may not apply to SURS investment managers or consultants.  SURS is not subject to the Illinois Procurement Code, generally (30 ILCS 500/1-15.100).  However, each investment manager and consultant should be familiar with the provisions of section 50-37 of the Procurement Code and comply with this section if the investment manager or consultant deems it appropriate.

Additional Disclosure RequirementsSection 1-113.21 of the Illinois Pension Code (40 ILCS 5/1-113.21), added by Public Act 98-1022, effective January 1, 2015, provides that no contract, oral or written, for investment services, consulting services, or commitment to a private market fund shall be awarded by a retirement system, pension fund, or investment board established under the Code unless the investment advisor, consultant, or private market fund first discloses:

(1) the number of its investment and senior staff and the percentage of its investment and senior staff who are (i) a minority person, (ii) a female, and (iii) a person with a disability; and

(2) the number of contracts, oral or written, for investment services, consulting services, and professional and artistic services that the investment advisor, consultant, or private market

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fund has with (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; and

(3) the number of contracts, oral or written, for investment services, consulting services, and professional and artistic services the investment advisor, consultant, or private market fund has with a business other than (i) a minority owned business, (ii) a female owned business or (iii) a business owned by a person with a disability, if more than 50% of services performed pursuant to the contract are performed by (i) a minority person, (ii) a female, and (iii) a person with a disability.

Each Proposer responding to this RFP must disclose this information in the form provided in Appendix B.

III. Specific Services Requested from the Investment ManagerSURS is requesting information from qualified firms to oversee and administer a Diversified Multi-Strategy Fund of Hedge Funds program. The purpose of this allocation is to reduce total plan risk and diversify the portfolio. It is anticipated that one or more investment managers will be hired to manage a total commitment of 3-4% of the total SURS portfolio. SURS will consider the following in making its decision:

Stability and General Experience of the Firm; as measured by the stability of the financial condition of the firm and experience in providing hedge fund of fund services to institutional clients.

Key Personnel – Personnel to be assigned to this account, including key professionals, applicable portfolio managers, back-up and other staff assistance, and education and experience of all such key personnel.

Expertise – Similar work performed for other clients. Investment Philosophy and Process – Sound investment philosophy with consistent

process implementation, as measured by outcomes, communication, and the implementation of risk controls.

Fees – Reasonableness and competitiveness of fees. RFP Proposal – Completeness, Clarity and responsiveness to requirements as

requested in the RFP and accompanying template.

IV. Diversity Goals : In September 2009, SURS established a goal of 10% of new allocations to alternative investments be made to firms owned by minorities, females or persons with a disability (MFDB). This goal is reviewed annually and presented to the Board as a component of the Investment Policy, most recently at the September 18, 2014 Investment Committee meeting.

V. Minimum Qualifications: The Proposer must meet all of the following minimum qualifications to be given further consideration. Failure to satisfy any of these qualifications and requirements upon submittal of the Proposal will result in the rejection of the Proposal. The Proposer must certify in writing on the Minimum Qualifications Certification, Appendix A, that it meets all of the minimum qualifications. Such certification must include evidence of how each qualification is met and must be signed by an individual who is authorized to bind the Proposer contractually. Qualified firms meeting the

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Illinois statutory definition of “Minority owned business”, “Female owned business” or “Business owned by a person with a disability” are exempt from (5), (6), and (7) below and will be evaluated for further consideration at SURS’ discretion.

1. Proposing firm must be SEC-registered or exempt from registration with the nature of the exemption provided. The firm must submit its full Form ADV (Parts I and II).

2. Proposing firm must agree to serve as a “fiduciary” to the Fund within the meaning of Illinois legislation and to act in accordance with all requirements and standards of conduct applicable to fiduciaries.

3. Proposer and its proposed team have all authorizations, permits, licenses and certifications required by federal and state laws and regulations to perform the services specified in this RFP at the time Proposer submits a response to the RFP. Proposer’s audited financial statements must be made available for review.

4. Proposer will comply with all legislation regarding investment in Iran and Sudan, and applicable State fiduciary, ethics, and diversity laws, including any additional disclosure requirements as outlined above.

5. The proposing firm must have an established track record of managing a diversified multi-strategy fund of hedge fund (commingled fund) that was incepted no later than January 1, 2008. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.

6. Minimum Firm Level AUM: $1 billion as of 12/31/2014. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.

7. Must provide performance track record (in managing non-proprietary capital) of the Proposed fund for the RFP: Fund Inception no later than January 1, 2008. Qualified Women, Minority, or Disabled Owned Businesses are exempt and will be evaluated for further consideration at SURS’ discretion.

8. Must have a core competency and demonstrated track record in constructing diversified multi-strategy fund of hedge funds. A “Diversified multi-strategy” fund of hedge fund is described as a fund that does not historically display a dominant (>50%) allocation and/or attribution related to any one single sub strategy either individually or collectively with similar strategies.

SURS retains the sole right to decide whether any Proposer is qualified to bid, including determining whether any Proposer’s qualifications are sufficiently comparable to satisfy all of the above minimum qualifications.

VI. RFP Specifications:If, in response to this RFP, trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged or confidential and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business, such claim must be clearly made and such information must be clearly identified.   The information must be identified in the   RFP response and provided separately   from the remainder of the   RFP response.   Such a claim is not definitive.  SURS has the right and obligation to determine whether such information is exempt from disclosure under the Illinois Freedom of Information Act (5 ILCS 140/7

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and 7.5).  However, no information will be determined to be proprietary, privileged or confidential unless it is identified and separated as indicated herein. 

Specific Items Requested from Respondent Firms:Enumerated below are the specific items requested from respondent firms.

1. Letter of Transmittal . A letter of transmittal must be submitted on the Proposer’s official letterhead. The letter must identify all documents provided collectively as a response to the RFP, and must be signed by an individual authorized to bind the Proposer contractually. An unsigned proposal will be rejected. The letter must also contain the following:

a. Statement that the proposal is being made without fraud or collusion; that the Proposer has not offered or received any finder’s fees, inducements or any other form of remuneration, monetary or non-monetary, from any individual or entity relating to the RFP.

b. Statement that discloses any current business relationship or any current negotiations for prospective business with the Board or any SURS Board Members or SURS Staff.

c. Statement that the proposing firm has been in compliance with the System’s Quiet Period Policy and Ex-Parte Communications Policy.

2. Minimum Qualification Certification . The Proposer must complete the certification in Appendix A and provide all supporting documentation.

3. Diversity Disclosures per Illinois Pension Code Section 1-113.21 . The Proposer must complete the required disclosures regarding staff and vendor diversity in the form provided in Appendix B.

4. Questionnaires . The Proposer must address the questionnaire items in the RFP in the order in which they appear in the RFP. Further, each question number and question in the RFP shall be repeated in its entirety before stating the answer. Certain questions may require supporting documentation, which should be submitted as attachments to the questionnaire. Specifically, Proposers should complete the RFP based on proposed strategy:

a. Appendix C - SURS Questionnaire (Word document)b. Appendix D - NEPC Questionnaire (Excel document)

Proposers who fail to complete each Attachment in its entirety will not be considered.

Submission Deadline:The completed RFP must be delivered (electronically, please) by 4:30 pm CT, Thursday, April 9, 2015. Earlier responses are welcome. Any RFP delivered after the deadline will not be considered. The e‐mail subject line must read as follows: “Fund of Hedge Funds RFP Response – Name of Respondent” and should be sent to both SURS and NEPC at:

Douglas Wesley, CFA Christian PieriSURS NEPCDeputy Chief Investment Officer Research Analyst, Hedge Funds

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invest@surs.org cpieri@nepc.com

Submission of Questions:In order to clarify any issues in this Request for Proposals, the System will respond only to questions that are presented in writing via e-mail to: Douglas Wesley, CFA at invest@surs.org. All questions should be submitted to SURS by 8:00 AM CT Tuesday, March 24, 2015. These questions will be consolidated into a single Q&A document and responded to by the System on, or about, Friday, April 3, 2015. The Q&A document will be posted on the SURS web site at www.surs.org /rfp without divulging the source of the query.

Communications with SURSOther than existing normal business matters, respondents, potential respondents, or their representatives should not contact anyone at SURS (including SURS staff, members of the SURS advisory committees and members of the SURS Board) other than the investment team assigned to the RFP listed above.

In addition, respondents must not discuss this RFP with any employee of SURS’s custodian, managers, legal counsel, or other advisors or persons/entities having contracts or other affiliations with SURS.

FAILURE TO OBSERVE THIS RULE IS GROUNDS FOR DISQUALIFICATION

SURS Quiet Period Policy:Please note the Quiet Period Policy that establishes guidelines by which the Board of Trustees and staff will communicate with prospective service providers during a search process. Please review Section VIII of the Investment Policy and observe the Quiet Period guidelines. The Quiet Period for this search was initiated on December 11, 2014.

Ex-parte Communications:The State Officials and Employees Ethics Act (5 ILCS 430/5-50) provides that all “ex parte communications” concerning investment, rulemaking or quasi-adjudicatory matters pending before a State agency must be documented and some must be reported. An “ex parte communication” is any written or oral communication by any person that imparts or requests material information or makes a material argument regarding potential action concerning an investment, a rulemaking process, or a quasi-adjudicatory matter. An “ex parte communication” does not include statements publicly made in a public forum or communications among employees of the State agency.

An “ex parte communication” from an “interested party” or his or her official representative or attorney to an employee or the agency must be memorialized and made a part of the record. An “interested party” is a person or entity whose rights, privileges, or interests are the subject of or are directly affected by an investment, regulatory or quasi-adjudicatory matter.

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An “ex parte communication” other than that described above must be reported by the staff member or Board Trustee immediately to the agency’s Ethics Officer. The communication must be memorialized and made a part of the record. The communication must be filed with the Executive Ethics Commission, accompanied by a memorandum from the Ethics Officer.

Rights Reserved:SURS reserves the right to amend any segment of the RFP prior to the announcement of a successful contractor. In such an event, all responders will be afforded the opportunity to revise their proposal to accommodate the RFP amendment.

SURS reserves the right without prejudice to reject any or all proposals submitted. There is no express or implied obligation for SURS to reimburse for any expenses incurred in preparing proposals in response to this RFP.

VII. Projected Schedule of Events:December 11, 2014 Quiet period beginsMarch 9, 2015 Dissemination of RFPMarch 24, 2015 Deadline for questions to SURSApril 3, 2015 Responses to questions submitted to SURSApril 9, 2015 RFP responses due by 4:30 pm CTMay/June 2015 Identify firms for further considerationJuly/August 2015 Interviews with selected firmsOctober 22, 2015 Finalist presentations to SURS Board of Trustees

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Appendix A

MINIMUM QUALIFICATION REQUIREMENTS AND CERTIFICATION

Proposers must satisfy each of the following minimum qualifications for this RFP, in order to be given further consideration by the Board of Trustees. Failure to satisfy each of the requirements will result in the immediate rejection of the proposal. Failure to provide complete information will result in the rejection of the proposal. Please circle “YES” or “NO” where indicated. If evidence is requested, please provide complete documentation.

1. Proposing firm must be SEC-registered or exempt from registration with the nature of the exemption provided. The firm must submit its full Form ADV (Parts I and II). (Yes/No):_____

2. Proposing firm must agree to serve as a “fiduciary” to the Fund within the meaning of Illinois legislation and to act in accordance with all requirements and standards of conduct applicable to fiduciaries. (Yes/No):_____

3. Proposer and its proposed team have all authorizations, permits, licenses and certifications required by federal and state laws and regulations to perform the services specified in this RFP at the time Proposer submits a response to the RFP. Proposer’s audited financial statements will be made available for review. (Yes/No):_______

4. Proposer will comply with all legislation regarding investment in Iran and Sudan, and all applicable State fiduciary, ethics, and diversity laws, including any additional disclosure requirements. (Yes/No):_______

5. Proposer must have an established track record of managing a diversified multi-strategy fund of hedge fund (commingled fund) that was incepted no later than January 1, 2008. Qualified Women, Minority, or Disabled Owned Businesses are exempt. (Yes/No/Exempt):______

6. Proposer must have a Minimum Firm Level AUM: $ 1 billion as of 12/31/2014. Qualified Women, Minority, or Disabled Owned Businesses are exempt. (Yes/No/Exempt):______

7. Proposer must provide performance track record (in managing non-proprietary capital) of the Proposed fund for the RFP: Fund Inception no later than January 1, 2008. Qualified Women, Minority, or Disabled Owned Businesses are exempt. (Yes/No/Exempt):______

8. Proposer must have a core competency and demonstrated track record in constructing diversified multi-strategy fund of hedge funds. A “Diversified multi-strategy” fund of hedge fund is described as a fund that does not historically display a dominant (>50%) allocation and/or attribution related to any one single sub strategy either individually or collectively with similar strategies. (Yes/No):______

IF PROPOSER PROVIDED A “NO” RESPONSE TO ANY OF THE MINIMUM QUALIFICATION REQUIREMENTS ABOVE, PROPOSER SHOULD NOT SUBMIT A PROPOSAL TO SURS.

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PLEASE CERTIFY THE PROPOSER’S SATISFACTION OF THE MINIMUMQUALIFICATIONS BY PROVIDING THE PROPOSER’S AUTHORIZED SIGNATUREBELOW.

Authorized Signer Name: ________________________________Title: ________________________________Respondent Firm: ________________________________Signature: ________________________________Date: ________________________________

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Appendix B

DISCLOSURES PER ILLINOIS PENSION CODE SECTION 1-113.21

Beginning January 1, 2015, section 1-113.21 of the Illinois Pension Code requires the following disclosure from the investment advisor, consultant or private market fund:

Name of investment advisor, consultant, or private market fund:

________________________________________________________________________

1. The number of its investment and senior staff and the percentage of its investment and senior staff who are (i) a minority person (ii) a female, and (iii) a person with a disability;

(If none, state “none”)

Staff Classification Number of Investment and Senior Staff Who Are

% Percentage of Investment and Senior Staff Who Are

MinorityFemalePerson with a Disability

2. The number of contracts, oral or written, for investment services, consulting services and professional and artistic services that the investment advisor, consultant, or private market fund has with (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; and

(If none, state “none”)

Contracts Number ContractsMinorityFemalePerson with a Disability

3. The number of contracts, oral or written, for investment services, consulting services, and professional and artistic services the investment advisor, consultant, or private market fund has with a business other than (i) a minority owned business, (ii) a female owned business or (iii) a business owned by a person with a disability, if more than 50% of services performed pursuant to the contract are performed by (i) a minority person, (ii) a female, and (iii) a person with a disability.

(If none, state “none”)

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Contract Number ContractsMinorityFemalePerson with a Disability

Supplemental Information (Optional):If desired, please include additional information on your firm’s diversity efforts to supplement the information provided above. This may include initiatives such as internal training and development programs, as well as recruitment and outreach efforts, etc.

INVESTMENT ADVISOR / CONSULTANT/ PRIVATE MARKET FUND:

Company Name:

Signature:

Printed Name

Title:

Dated:

Resources and DefinitionsSection 1-113.21 of the Illinois Pension Code website: http://www.ilga.gov/legislation/publicacts/98/PDF/098-1022.pdf

Definitions per Illinois LawIllinois Legislation & Laws website: http://www.ilga.gov/

"Contract" means all types of [State] agreements, regardless of what they may be called, for the procurement, use, or disposal of supplies, services, professional or artistic services, or construction or for leases of real property where the [State] is the lessee, or capital improvements, and including renewals, master contracts, contracts for financing through use of installment or lease-purchase arrangements, renegotiated contracts, amendments to contracts, and change orders.

 “Investment adviser”, "investment advisor", or "investment manager" with respect to a pension fund or retirement system established under Illinois Code if the person:        (1) is a fiduciary appointed by the board of trustees of the pension fund or retirement system in accordance with Section 1-109.1;        (2) has the power to manage, acquire, or dispose of any asset of the retirement system or pension fund;        (3) has acknowledged in writing that he or she is a fiduciary with respect to the pension fund or retirement system; and        (4) is at least one of the following: (i) registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment

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adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.

“Minority person” means a person who is a citizen or lawful permanent resident of the United States and who is a member of a minority.

"Minority owned business" means a business concern which is at least 51% owned by one or more minority persons, or in the case of a corporation, at least 51% of the stock in which is owned by one or more minority persons; and the management and daily business operations of which are controlled by one or more of the minority individuals who own it.

"Female owned business" means a business concern which is at least 51% owned by one or more females, or, in the case of a corporation, at least 51% of the stock in which is owned by one or more females; and the management and daily business operations of which are controlled by one or more of the females who own it.

"Business owned by a person with a disability" means a business concern that is at least 51% owned by one or more persons with a disability and the management and daily business operations of which are controlled by one or more of the persons with disabilities who own it. A not-for-profit agency for persons with disabilities that is exempt from taxation under Section 501 of the Internal Revenue Code of 1986 is also considered a "business owned by a person with a disability".

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