Once the decision was taken that the National Treasury Management Agency would look after the overall management of the National Pensions Reserve Fund, the need was to put together a specialist in-house team for the job.
John Corrigan of the NTMA (the former director of funding and debt management) was appointed director of the pension fund, with three units created to work with him.
The first team, responsible for manager selection, saw the arrival of Deborah Reidy, a former consultant with Mercer in Dublin, to head up the division.
Elaine Hudson, a former investment director of Irish funds for Standard Life Investments in Edinburgh, was brought in as a senior manager for investment manager selection and Susan McCarthy, a masters graduate, joined Reidy soon afterwards to complete the team.
Ronan O’Connor, a former university lecturer in finance, was hired to head up the second team, concerned with portfolio construction and risk management. Jim Golden, a senior treasury manager from the national debt management team was assigned to the team, and Sharon Kelly, a masters graduate, was recruited in the following months.
The third team – research – has yet to be filled on a permanent basis, but has been looked after by O’Connor to date.
Following Reidy’s arrival in March 2001, the NTMA set about tendering as quickly as possible for the consultant mandates that would enable the fund to appoint investment managers, custodian and a transition specialist.
As Reidy notes, the NTMA had reasons to move quickly: “We were subject to the EU Directive 92/52/EEC on public services, which significantly lengthens the process, and needed to get things up and running as soon as possible.
“2 April was the official inception date of the fund and we knew that the clock was ticking. The assets at that time were being held in a reserve and we knew we had to go about getting the money invested in markets as soon as possible.”
As a result, within the month, the agency had its four consultants in place.
Mercer would work on investment strategy and asset allocation for the fund with Frank Russell selected to advise on the manager selection process. Watson Wyatt would advise on the transition manager selection process, while Bacon & Woodrow was given the task of advising on the fund’s choice of custodian.
Reidy explains the rather odd scenario of having three of the main market consultants on the books at the same time: “All the consultants specialise in slightly different areas, so it is not so strange that they all figured in the tenders.”
In setting the fund’s asset allocation policy, the NTMA then began a series of intense strategy meetings with Mercer and the fund commissioners, before finally plumping for a two-day, off-site meeting in June 2001, when the asset allocation was finally decided on the basis of consensus among the commissioners.
Reidy talks about the ready meeting of the commissioners’ minds: “The consensus was reached fairly quickly, which was great, because I was afraid that this part of the process could last for weeks or maybe months as more information was requested by the commissioners to enable them to make a decision.”
Late in June last year, the NTMA was given the green light to begin operations and the commissioners instructed the agency to begin filling the agreed mandates.
To this end adverts were then placed in the official European (OJEC) Journal on 5 and 10 July for the investment manager and transition manager searches respectively.
The next stage for the NTMA was to begin looking at a potential mechanism for handling the predicted slew of applications for such a high-profile, globally oriented pot of assets.
Consequently, the agency began looking into the possibility of an electronic tender system, where managers would post their applications on-line, in a bid to avoid the deluge of paper involved in the early part of such a huge RFP.
The agency settled on the IPE-Quest.com on-line tender system, which Reidy says she was already familiar with.
Reidy comments: “We decided to go IPE-Quest for a number of reasons. One of these issues is that at the NTMA security is an overriding concern, therefore we wanted the information to reside on our own servers. In any event it had to be ultra-secure and our compliance department had to be able to say that no one could see or tamper with the data, due to the fact that it was a public tender. IPE-Quest allowed us to take the programme, put it on our servers and customise it to our needs.”
She adds: “I don’t know if we could have completed the project in the amount of time that we did without it.”
Another particular bonus of using the on-line site, she notes, came about through another requirement of the EU directive on public tenders.
“The directive states that if any applicant requests further information on an aspect of the RFP, then every applicant must get the benefit of the answer to that question. We put a question and answer page up on the site to deal with this and it worked well. Otherwise the potential logistics of getting out answers every time to some 600 applicants could have been a nightmare. Many managers complimented the site on this.”
Managers then began submitting their data on IPE-Quest to meet the deadlines for the RFPs at the end of August.
In keeping with the public tender legal status, the NTMA was not allowed to look at any of the submitted data until the deadline for the RFP had passed.
Once the data had been collated, the agency then put together a number of in-house software programs to enable it to take the data and score it on the basis of pre-agreed score sheets established by its compliance team.
Reidy explains exactly how the in-house manager ‘scoring’ system for stage one of the RFP worked.
“There were a number of points awarded to each manager on the basis of the size of the organisation, its performance record and its resources. The applications were fairly brief at this stage and very much quantitative in nature because we were looking for numbers, not qualitative factors. Basically, any manager had to qualify in stage one to reach stage two, where the quality aspects of the tender were to be introduced.”
An evaluation group was put together, made up of NTMA personnel under John Corrigan’s chairmanship with input from consultant Frank Russell, and with the agency’s compliance officer and an external lay assessor in attendance. The evaluation group validated the scores and spot-checked the figures before producing lists of, in most cases, around 20 managers that would be formally asked to submit tenders for stage two.
When the second round proposals went out on 11 September, managers then had 40 days to reply.
Once these hard copy replies had been received, the NTMA then had the task of sitting through and reading the 20 or so proposals for each mandate – a total of 178 tenders.
Elaine Hudson describes the room where the tenders were being kept as ‘wall to wall’ boxes, noting that one manager with a sense of humour had ‘gift-wrapped’ its tender with bows. It was hardly Christmas come early though for the team that then had to plough its way through the applications.
Stage two for the NTMA was to evaluate the managers primarily on a qualitative basis. This task fell to the same evaluation group that had determined which managers would be formally asked to submit tenders.
Reidy comments: “We came to a series of consensus scores, but they were by no means Russell’s own scores. We considered their input but there was also a lot of good debate and we challenged them on their views.”
The NTMA evaluation group then went on to eliminate those managers that would not make it into the next round.
Reidy adds: “As opposed to drawing a line under the managers who were successful, we worked the other way round – from the bottom up – and where there was a big gap in provision etc, we ruled those managers out.”
The final tally of managers called for the last stage of the tender process came to 51.
At this point the NTMA felt that it would change the normal process of manager presentations, instead opting for a system of interviews – with the NTMA asking the questions.
Hudson notes: “We felt that the interviews should be just that – interviews. We didn’t allow the managers to give presentations, the agenda was driven by us and questions were agreed beforehand that would be asked to every manager.
“A decision was then taken on the top manager for each asset class, with the number one house receiving a site visit.”
Hudson feels the switch to an interview process put the managers firmly on the spot. “A lot of managers said that it was a daunting experience.”
The NTMA manager selection team then went on a whirlwind tour in the space of a few weeks to carry out their site visits on the top-placed managers. “These visits were successful in all but one case, where we were not satisfied. In this case we made a site visit to the second highest-scoring manager, who we finally selected for the mandate.”
The NTMA team then had to submit their findings to the NPRF commission for ratification. The commission met and interviewed each of the managers recommended by the NTMA, all of which it was happy to ratify.
The passive managers were ratified by the commission on 16 November, while the global and pan-European active equity mandates (five in total) were confirmed on 10 December.
The remaining six active equity managers and one active bond manager were ratified over the course of the 21 January and 5 March commission meetings this year.
The final confirmation of the fund’s custodian, ABN Amro Mellon, was given by the commission at its January meeting.

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