Title
MOTION TO APPROVE THE FOURTH AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE CITY OF PEMBROKE PINES AND U.S. BANCORP ASSET MANAGEMENT, INC. D/BA PFM ASSET MANAGEMENT TO ADD MULTI-ASSET CLASS INVESTMENTS FOR THE CITY’S PORTFOLIO AND ESTABLISH THE APPLICABLE FEE SCHEDULE.
Summary Explanation and Background
SUMMARY EXPLANATION AND BACKGROUND:
1. On May 15, 2019, the City of Pembroke Pines (“CITY”) and PFM Asset Management, LLC entered into an Investment Management Agreement (“Original Agreement”), pursuant to the award of RFP # FN-18-02 “Investment Management Services”, for an initial five (5) year term through May 31, 2024.
2. On December 3, 2021, following the acquisition of PFM Asset Management, LLC, the parties executed a First Amendment to assign the Original Agreement to PFM Asset Management LLC, a wholly-owned subsidiary of U.S. Bancorp Asset Management, Inc., which in turn is a subsidiary of U.S. Bancorp.
3. On March 18, 2024, the parties executed a Second Amendment to the Original Agreement to renew the term for the first of two allowable five (5) year renewal options, extending the term to May 31, 2029.
4. On August 21, 2024, the parties executed a Third Amendment to the Original Agreement after PFM Asset Management LLC was dissolved and its registration with the U.S. Securities and Exchange Commission was withdrawn. U.S. Bancorp Asset Management, Inc., a subsidiary of U.S. Bancorp, became the continuing legal entity and registered investment advisor, servicing its public sector clients, including the City, under the fictitious name “PFM Asset Management” (“MANAGER”).
5. The CITY and MANAGER now desire to enter into a Fourth Amendment to the Original Agreement to add Multi-Asset Class investments for the CITY’s portfolio and establish a separate asset-based fee schedule applicable to those assets. As part of the City’s ongoing investment management strategy, the addition of Multi-Asset fund investments is intended to enhance portfolio diversification and provide the City with additional investment options.
6. Under the Fourth Amendment, the CITY appoints the MANAGER as investment manager with discretion and authority to invest and manage an additional portfolio designated the “Multi-Asset Fund Invested Assets.”
7. The Multi-Asset Fund Invested Assets will incur an annual fee, billed monthly based on net assets under management, as follows: for the first $50 million, 17 basis points (0.17%) for active/passive funds or 10 basis points (0.10%) for passive-only funds; for amounts thereafter, 15 basis points (0.15%) for active/passive funds or 8 basis points (0.08%) for passive-only funds.
8. The fee schedule set forth in Exhibit B to the Original Agreement will continue to apply to all other investment assets that are not Multi-Asset Fund Invested Assets, and all other provisions of the Original Agreement, as amended, shall remain in full force and effect.
9. The Finance Department recommends that the City Commission approve the Fourth Amendment to the Investment Management Agreement between the City of Pembroke Pines and U.S. Bancorp Asset Management, Inc. d/b/a PFM Asset Management to add multi-asset class investments for the City’s portfolio and establish the applicable fee schedule.
Financial Impact
FINANCIAL IMPACT DETAIL:
a) Cost: Fees are asset-based per the following schedule.
Multi-Asset Fund Invested Assets Fee Schedule
|
Multi-Asset Fund |
Active/Passive Funds |
Passive Only Funds |
|
Invested Assets |
Fee (in basis points) |
Fee (in basis points) |
|
First $50 million |
17 basis points (0.17%) |
10 basis points (0.10%) |
|
Thereafter |
15 basis points (0.15%) |
8 basis points (0.08%) |
b) Amount budgeted for this item in Account No: The investment management fees will be paid from the applicable Multi-Asset Fund Invested Assets account and will reduce the assets/investment earnings of the applicable investment portfolio. No additional appropriation from a City operating fund is required.
c) Source of funding for difference, if not fully budgeted: Not Applicable.
d) 5-year projection of the operational cost of the project: Not Applicable.
e) Detail of additional staff requirements: Not Applicable.
FEASIBILITY REVIEW:
A feasibility review is required for the award, renewal and/or expiration of all function sourcing contracts. This analysis is to determine the financial effectiveness of function sourcing services.
a) Was a Feasibility Review/Cost Analysis of Out-Sourcing vs. In-House Labor Conducted for this service? Not Applicable.
b) If Yes, what is the total cost or total savings of utilizing Out-Sourcing vs. In-House Labor for this service? Not Applicable.