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Special Report

Impact investing

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Manager selection: case studies

Daiwa SB Investments
e125m Japanese equities mandate
Where did you originally learn about the National Pensions Reserve Fund mandate?
Our company paid particularly close attention to the changes in Irish government legislation.
In addition to following legislation proceedings, we received official notification of the tender process through the web-based IPE-Quest electronic tender system. We have been subscribers to the IPE-Quest site for some time, and have participated in various tender processes through this site.

Please go through the different stages of the selection process and describe how you prepared for each of them
Stage 1: Expression of interest. We were required to submit an expression of interest via the IPE-Quest system, which outlined basic company and product-related information from which managers were selected to participate in the RFP phase. As part of the EOI phase, managers were required to satisfy a variety of pre-set qualification criteria.
Stage 2: RFP. The RFP phase lasted just over one month from receipt of the RFP to submission date in October 2001. Our response was a coordinated effort between our London and Tokyo offices. The comprehensive nature of the RFP meant that all areas of the business were involved in responding to the questionnaire in some capacity.
Stage 3: Presentation. Managers who met more detailed qualification criteria were invited by the commission to do a presentation to the board, which involved a detailed Q & A session, expanding on information as set out in the questionnaire. Our most experienced and senior investment and client relationship staff were dedicated to this phase of the selection process to show our commitment to winning the account.
Stage 4: Due diligence. From the shortlist chosen to participate in the ‘beauty parade’, a number of managers were chosen for a due diligence visit. The manager selection committee visited our offices in Tokyo.
Stage 5: Final presentation. From the managers remaining in the shortlist following due diligence, an undisclosed number of managers were invited to give a final presentation to the board for final approval. For our particular mandate two managers were chosen to manage assets for the NTMA.

Describe any parts of the selection process that impressed you
The electronic tender process was an effective and efficient way of communicating easily comparable data between the investment manager and the NTMA.
In addition to this, we were impressed by the professional attitude of the board of commissioners during our final presentation. In particular the variety and quality of questions asked during this presentation, ranging from investment-related questions to questions more related to Japan’s structural and economic problems, allowed the commissioners to draw in-depth information relating to our investment process and our thoughts on the future development of the Japanese economy.

What were the main points you made about your investment process/competitive advantage and other key strengths in your submissions to the NTMA?
Our consistent investment philosophy, which places emphasis on value, has achieved good performance under tough market conditions. Our investment process has been developed over 30 years, and is a combination of a quantitative (valuation) and judgmental (analyst/fund-manager evaluation) approach. Our team-based investment approach and investment philosophy is supported by our ability to retain high quality and highly experienced investment professionals, which is instrumental in achieving consistently good investment returns.

Have you been told the factors that led to your appointment by the NTMA on behalf of the fund? Can you describe these?
From our understanding, NTMA highly appreciated our consistently good performance and well structured investment approach.

How would you describe the approach taken by the NTMA during and after the search process?
In our opinion, the approach taken by NTMA was quite orthodox, paying particular attention to both performance and risk control. The fact that the Japanese equity mandate was shared between two investment managers perhaps indicates a diversification of investment styles, growth and value, in order to minimise volatility for total Japanese equity performance.

What is your reaction to winning this prestigious mandate?
We are delighted to have been chosen. Because of the continuing tough environment for the Japanese equity market, and its subsequent declining weight in global markets, there is less opportunities, as a competitive regional equity specialist, for our organisation to appeal to overseas pension sponsors. Winning this high-profile and prestigious mandate has given us a very good platform from which to leverage off, possibly improving our appeal amongst European plan sponsors.

What impact will it have on your business?
We anticipate that this win will have a very positive impact on our European business. Because of the high-profile nature of this account we are in a position to increase the exposure and awareness of our organisation and our products, particularly Japanese equities.
With the continuation of the long-lasting global bear market, there is no investment safe haven. More than ever, the importance of real asset management capability needs to be highlighted. Through winning a prestigious and high profile account such as NTMA, we hope that the European pensions marketplace will recognise our investment management capabilities.

INVESCO: e420m North American enhanced index equities
Where did you originally learn about the NPRF mandate?
Pensions & Investments Daily Newsletter in July 2001.

Please go through the different stages of the selection process and describe how you prepared for each of them
Stage 1: Initial submission through IPE-Quest. This stage required the careful preparation and submission of basic information about the mandate.
Stage 2: RFP. The RFP was very detailed. It therefore required a lot of work and thought about the answers we gave.
Stage 3: Interview with NTMA, site visit and commissioners’ ratification. The interview with the NTMA required a lot of preparation by everyone attending. This included knowing the exact contents of the answers given in the RFP, anticipating any potential questions, and preparing answers to them, and making a decision beforehand as to who was in the best position to answer any questions that came up on a particular topic. The site visit to New York was a case of ensuring that all the people that the NTMA might wish to speak to would be available. The commissioners’ meeting required the preparation of a presentation about our company and the investment process of the enhanced index product.

Describe any parts of the selection process that impressed you
There was no aspect in particular that stood out, but we found all parts of the process to be highly structured and conducted in a very professional manner.

What were the main points you made about your investment process/competitive advantage and other key strengths in your submissions to the NTMA?
We sought to explain our logical, disciplined and repeatable investment process.

Have you been told the factors that led to your appointment by the NTMA on behalf of the fund? Can you describe these?
The factors we were made aware of were the robustness and longevity of the investment process and the stability and strength of the team.

How would you describe the approach taken by the NTMA during and after the search process?
Highly professional, with high levels of communication at all times.

What impact will the win have on your business?
Of course an increase in funds under management is always welcome! We hope that this win will gain us wider recognition in the institutional marketplace for our expertise in the management of enhanced index mandates.

Are there ways in which the provision of information about the mandates and the selection process itself can be improved in your view?
We found the process clear and concise, any questions we had were answered

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IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

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