Emerging Investment Manager Policy

The Chicago Transit Authority Retiree Health Care Trust (the Trust) recognizes the importance of a commitment to ensuring the utilization of emerging investment managers.

The Trust has employed emerging managers in an effort to enhance the return of the Fund’s assets and to assist emerging investment management firms.

The Trust is now adopting this formal Policy on the utilization of emerging investment managers. (An emerging investment manager is a minority, women or disabled-owned firm that is a qualified investment adviser managing an investment portfolio of at least $10 million but less than $10 billion; see criteria below.)

Objectives and Goals

The goal of the program is to identify highly qualified, emerging investment managers who can be utilized by the Trust to enhance the return of the Fund’s assets and to assist emerging investment management firms. Toward that goal, the Trust will seek to have no less than 25% of Plan assets managed by emerging investment managers. Within the 25% goal, the Trust will seek to have no less than 14% of the assets managed by minority-owned firms, 10% of the assets managed by women-owned firms and up to 1% of assets managed by disabled-owned firms.

Emerging Manager Program Eligibility Criteria

To participate in the program managers must meet the following minimum criteria:

1. The firm must be a Registered Investment Advisor under the Investment Advisors Act of 1940.
2. The firm must have a certification as a minority-owned business, female-owned business or business-owned by a person with a disability preferably by the City of Chicago or the State of Illinois or the city or state in which the firm is based.
3. The firm must have experience in the management of institutional portfolios operated under prudent person standards;
4. The firm must have a minimum of $10 million in assets under management, but no more than $10 billion in assets under management, at the time of hire;
5. The firm and / or the firm’s principals in former associations must have a verifiable, historical 3-year performance record for the product being offered, preferably compliant with Global Investment Performance Standards (GIPS®), and the principals must have at least five years of related investment management experience;
6. The firm must have at least three separate, distinct clients;
7. At the time of hiring and with each additional funding, the Fund can comprise no more than 15% of the manager’s asset under management;
8. The manager must be willing to charge a fee that is similar to those charged by current Fund managers with similar characteristics in the corresponding asset class.

Manager Selection

Qualifying firms are selected based on the experience and qualifications of the firm’s principals, the depth and stability of the organization, the soundness of the investment philosophy and process and a satisfactory quantitative evaluation of the product’s risk and performance records.

Funding

The manager’s objectives will determine the source of funding and the emerging managers will be included in the overall asset allocation of the Fund.

Evaluation

Managers in the Emerging Manager Program will be evaluated in the same manner as those in the Fund’s general investment program, and will be held to the same rigorous performance criteria. Each emerging manager in the program will be assigned a performance benchmark and evaluated on an absolute and peer relative basis. Managers may be terminated for any reason, including, but not limited to, poor performance, personnel changes, organizational changes, deviation from their investment style and compliance violations. In addition, emerging managers whose assets under management exceed $10 billion are no longer eligible for participation in the program and will not be counted by the Trust as emerging investment managers.

Roles and Responsibilities

The Trust’s Investment Consultant, Investment Subcommittee and Staff shall be responsible for accounting for and monitoring the Emerging Manager Program assuring the implementation of this Policy and the management of this program in accordance with Board directives.

The Trust shall annually review the goals established within the Policy.