Introduction

Prudent administration requires the Board to diversify its investments and to regularly and thoroughly review each of the system's investment managers. This enables the Board to effectively monitor the performance of its portfolio, aiming to maximize the rate of return while minimizing the risk of loss. 

Due Diligence Activities

Due diligence shall be defined as those activities undertaken to determine: 

1. The suitability of prospective investment managers,
2. The continued suitability of current investment managers,
3. The accuracy of information provided,
4. Changes in the investment manager's personnel, ownership structure, strategies, or other attributes, which may affect the suitability of an investment manager in the future,
5. Appropriateness of fees, and
6. Adherence to contractual terms and services.

General Due Diligence Provisions 

1. The Executive Director, with the assistance and expertise of the Chief Investment Officer, shall be responsible for performing or causing to be performed all necessary due diligence activities in connection with current or prospective service providers in accordance with the policies of this Board. 
2. The Executive Director, with the assistance and expertise of the Chief Investment Officer, shall ensure due diligence activities are consistent with industry best practices for funds similar in size or, where feasible, exceed the practices of such funds. Due Diligence activities may include, and are not limited to:
   • Analysis of performance records, financial statements, technical standards and practices, and advisor reports filed with federal and state governments,
   • Meetings and interviews,
   • Research on industry trends and developments,
   • On-site due diligence visits, and 
   • Third-party evaluations. 
3. When appropriate, the Executive Director may authorize outside consultants or experts to conduct independent due diligence evaluations on the system's behalf, and to provide written reports of their findings to the Executive Director. 

Current Investment Manager Due Diligence 

1. Staff will initiate regular calls with each Investment Manager, keeping notes and reporting to the Board on any material developments.
2. Presentations from existing managers will be scheduled for Board meetings, particularly for managers who staff has concerns about performance or other factors.
3. Investment Due Diligence will encompass significant determinants of successful contribution to the system's portfolio including: 
   • Investment performance,
   • Experience and knowledge of staff,
   • Investment team interaction,
   • Process used to determine how, when, and why investments are made, 
   • Research process and capabilities,
   • Fees and liquidity provisions,
   • Ownership and leadership, and 
   • Adherence of actual investments to the manager's stated process and positioning.
4. In-person due diligence should take place no less frequently than on a three- to five-year rotational basis. Board members are encouraged to participate in these on-site meetings when possible.

Prospective Investment Managers Due Diligence

Due diligence for prospective investment managers will include the same processes used for current service providers, plus any other processes deemed appropriate by the Executive Director, in cooperation with the Chief Investment Officer. Upon completion of due diligence activities, the Chief Investment Officer will arrange for the recommended manager to present at the next available Board meeting. 

Approved by Police Officers Board of Trustees - July 12, 2023