Investment Management Services Selection Copyrig hted
October 19, 2020
City of Dubuque Consent Items # 12.
City Council Meeting
ITEM TITLE: Investment Management Services Selection
SUMMARY: City Manager recommending approval of Investment Management
Services to Dubuque Bank and Trust, Dana I nvestment Advisor, and
BTC Capital.
SUGGESTED Suggested Disposition: Receive and File;Approve
DISPOSITION:
ATTACHMENTS:
Description Type
MVM Memo City Manager Memo
Staff Memo Staff Memo
Dubuque
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TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Investment Management Services Selection
DATE: October 13, 2020
Director of Finance and Budget Jennifer Larson and the Investment Oversight Advisory
Commission are recommending approval of Investment Management Services to
Dubuque Bank and Trust, Dana Investment Advisor, and BTC Capital.
Investment Management Services are currently provided by Dubuque Bank and Trust,
First Community Trust, U.S. Bank, and Dana Investment Advisors. Investment
management services provided include cash flow/maturity analysis, advisory services
related to the City's investment portfolio, maximized portfolio performance within the
parameters of the adopted investment policy and lowa Code, technical and fundamental
market research, including yield curve analysis, credit analysis of investment
instruments, and monthly, quarterly and annual reporting on all government entity funds
detailing security holdings, portfolio composition and sector analyses, portfolio return
and weighted average maturity, and daily transaction activity.
The City of Dubuque released a Request for Proposals (RFP) for Investment
Management Services on July 28, 2020. Proposals were evaluated by Finance staff and
the Investment Oversight Advisory Commission. Insurance policy review assistance
was provided by Barry Lindahl, Senior Counsel, Tony Breitbach, Purchasing and
Contracts Coordinator, and Sue Miller, O'Connor and English Insurance (City's
insurance agent) in conjunction with a financial institution insurance specialist.
Eight firms submitted proposals:
1. Dana Investment Advisors
2. Dubuque Bank and Trust
3. First Community Trust
4. U.S. Bank
5. BOK Financial Securities, Inc.
6. BTC Capital Management
7. PFM Investment Management Services
8. UMB Financial
Proposals were evaluated based on municipal government experience, number of lowa
clients, investment strategy and performance, ability to meet insurance requirements,
and fees.
Proposals were then narrowed down to investment managers with lowa municipal
government experience:
1. Dana Investment Advisors
2. Dubuque Bank and Trust
3. First Community Trust
4. U.S. Bank
5. BTC Capital Management
The Investment Oversight Advisory Commission's recommendation for investment
managers included Dana Investment Advisors based on past perFormance, BTC Capital
Management due to their significant lowa municipal government experience, and
Dubuque Bank and Trust as a local institution. The Investment Oversight Advisory
Commission emphasized the importance of the investment managers meeting the City's
insurance requirements and reducing fees.
The minimum insurance requirements set by the insurance review committee included
$10 million financial institution bond, $10 million professional liability, and $5 million
cyber liability. Dubuque Bank and Trust and BTC Capital Management meet the
minimum insurance requirements. Dana Investment Advisors meets professional liability
and financial institution bond but only has $1 million in cyber liability insurance.
Dana Investment Advisor CEO Mark Mirsberger cited numerous controls in place that
they believe significantly reduce the need for higher insurance limits. With the additional
information provided by Dana Investment Advisors, as well as their total assets of$12.6
million, and average trades/sales by month of $400,000, the insurance review
committee consensus was that Dana Investment Advisors would have enough
insurance coverage to apply to each City of Dubuque transaction. The $1 million in
cyber liability coverage and the $12.6 million in assets to cover additional cyber breach
cost minimizes the risk to the City. Dana Investment Advisors is being recommended to
remain an investment manager of the City of Dubuque contingent upon the investment
manager contract language including a statement that the City of Dubuque is
indemnified for any cost related to a cyber breach that is out of the City's control.
Initially, the balance to be invested with the investment managers will be split evenly
(approximately $9.3 million each). The portfolios managed by each investment manager
will be reviewed on an ongoing basis and will be rebalanced between the investment
managers based on portfolio performance. Finance staff will also continue to manage
city funds not invested with the money managers in effort to maintain liquidity for short-
term needs.
2
The fees proposed by the recommended institutions are as follows:
Estimated Estimated
Financial Institution Fee Balance Annual Fee
Dana Investment 15 basis points first $5M $9.3 Million $18,250
Advisors 10 basis points next $5M
5 basis points over $10M
$7,500 minimum annual fee
Dubuque Bank and Trust 13 basis points of total $9.3 Million $12,090
assets
BTC Capital 10 basis points of total $9.3 Million $9,300
assets
Total Fees $39,640
The City is currently paying 25 basis points of total assets or approximately $70,500
annually. This recommendation would save $30,860 annually once all assets are
transferred to the designated investment advisors.
First Community Trust and U.S. Bank are current investment managers that are not
being recommended due to the amount of fees proposed. First Community Trust
proposed 25 basis points of total assets and U.S. Bank proposed 20 basis points for the
first $10 million of assets and 15 basis points for the balance of assets. The portfolios of
First Community Trust ($6.6 million) and U.S. Bank ($7.4 million) will be transferred to
the three other investment managers.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
�Jr/'vw'� �Gv�r
Michael C. Van Milligen
MCVM/jml
Attachment
cc: Barry Lindahl, Senior Counsel
Cori Burbach, Assistant City Manager
Jennifer Larson, Director of Finance and Budget
Cassie Ross, Assistant Director of Finance
Tony Breitbach, Purchasing and Contracts Coordinator
Paul Lassance, Investment Oversight Advisory Commission Chair
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Dubuque
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TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Director of Finance and Budget
SUBJECT: Investment Management Services Selection
DATE: October 8, 2020
INTRODUCTION
The City of Dubuque released a Request for Proposals (RFP) for Investment Management
Services. Proposals were evaluated by Finance staff and the Investment Oversight Advisory
Commission. Insurance policy review assistance was provided by Barry Lindahl, Senior
Counsel, Tony Breitbach, Purchasing and Contracts Coordinator, and Sue Miller, O'Connor
and English Insurance (City's insurance agent) in conjunction with a Financial institution
insurance specialist.
BACKGROUND
Investment Management Services are currently provided by the following financial institutions:
August 30, 2020
Investment Manager Balance
Dana Investment Advisors $6,224,968.60
Dubuque Bank and Trust $8,063,602.23
First Community Trust $6,555,764.08
U.S. Bank $7,361,915.84
Total Managed Funds $28,206,250.75
Investment management services provided include cash flow/maturity analysis, advisory
services related to the City's investment portfolio, maximized portfolio performance within the
parameters of the adopted investment policy and lowa Code, technical and fundamental
market research, including yield curve analysis, credit analysis of investment instruments, and
monthly, quarterly and annual reporting on all government entity funds detailing security
holdings, portfolio composition and sector analyses, portfolio return and weighted average
maturity, and daily transaction activity.
DISCUSSION
The City solicited proposals from financial institutions with municipal investment management
experience.
Eight firms submitted proposals:
1. Dana Investment Advisors
2. Dubuque Bank and Trust
3. First Community Trust
4. U.S. Bank
5. BOK Financial Securities, Inc.
6. BTC Capital Management
7. PFM Investment Management Services
8. UMB Financial
Proposals were evaluated based on municipal government experience, number of lowa
clients, investment strategy and perFormance, ability to meet insurance requirements, and
fees.
Proposals were then narrowed down to investment managers with lowa municipal government
experience:
1. Dana Investment Advisors
2. Dubuque Bank and Trust
3. First Community Trust
4. U.S. Bank
5. BTC Capital Management
The Investment Oversight Advisory Commission's recommendation for investment managers
included Dana Investment Advisors based on past perFormance, BTC Capital Management
due to their significant lowa municipal government experience, and Dubuque Bank and Trust
as a local institution. The Investment Oversight Advisory Commission emphasized the
importance of the investment managers meeting the City's insurance requirements and
reducing fees.
The City had initially requested $20 million in insurance coverages (professional liability, cyber
liability, financial institution bond, and wire transfer liability) in the RFP to address the amount
of funds held and risk involved with the services. The insurance review committee felt that
given the exposures this would be an amount that protects the City's interest while keeping in
consideration all other factors (market coverage availability, best practices, and rates). In the
first addendum of the RFP, it was noted that if a firm could not meet the minimum insurance
limits, the firm could still submit an RFP for consideration but the City reserved the right to
reject such proposal for not meeting the minimum requirements. This was done to allow more
firms to participate and allow potential flexibility if deemed warranted by the insurance review
committee.
2
After obtaining insurance documentation from the three finalists (Dana Investment Advisors,
Dubuque Bank and Trust, and BTC Capital Management), it was determined that BTC Capital
Management was the only firm that met the minimum insurance requirements, including cyber
liability insurance.
A meeting was held with the City Manager to discuss the investment manager
recommendation of BTC Capital Management as the only investment manager and why the
investment managers were narrowed down to just one. The sole reason for reducing the
investment managers to one was due to the minimum insurance requirements. After the
meeting, Dana Investment Advisors, Dubuque Bank and Trust, and First Community Trust
were contacted to inquire if they would be willing to purchase cyber liability insurance to meet
the minimum insurance requirement of $5 million.
After being contacted on October 1, 2020, both First Community Trust and Dubuque Bank and
Trust both submitted a certificate of insurance for cyber liability in the amount of$10 million.
Incorrect information was provided in the proposals submitted, which indicated that they did
not carry cyber liability insurance. Based on the updated insurance coverage information
provided, Dubuque Bank and Trust meets the minimum insurance requirements and is
recommended as an investment manager.
First Community Trust only carries a $4 million Financial Institution Bond, which is below the
required coverage of$10 million. In addition, First Community Trust proposed an annual fee of
25 basis points, which is much higher than the fees proposed by BTC Capital Management
(10 basis points), Dubuque Bank and Trust (13 basis points), and Dana Investment Advisors
(15 basis points on first $5 million, 10 basis points on next $5 million, and 5 basis points on
balance over $10 million).
After Dana Investment Advisors' was contacted, CEO Mark Mirsberger reached out to City
Manager Mike Van Milligen and provided information on why their insurance limits of$1 million
cyber insurance, $5 million D&O, $25 million Financial Institution Bond, and $10 million
Professional Liability is sufficient coverage for the City's accounts. Dana cited numerous
controls in place that they believe significantly reduce the need for higher insurance limits.
With the additional information provided by Dana Investment Advisors, as well as their total
assets of$12.6 million, and average trades/sales by month of$400,000, the insurance review
committee consensus was that Dana Investment Advisors would have enough insurance
coverage to apply to each City of Dubuque transaction. The $1 million in cyber liability
coverage and the $12.6 million in assets to cover additional cyber breach cost minimizes the
risk to the City. Dana Investment Advisors is being recommended to remain an investment
manager of the City of Dubuque contingent upon the investment manager contract language
including a statement that the City of Dubuque is indemnified for any cost related to a cyber
breach that is out of the City's control.
The revised recommendation for investment manager is as follows:
1. Dubuque Bank and Trust (local)
2. Dana Investment Advisors (Milwaukee, WI)
3. BTC Capital (Des Moines, IA)
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Initially, the balance to be invested with the investment managers will be split evenly
(approximately $9.3 million each). The portfolios managed by each investment manager will
be reviewed on an ongoing basis and will be rebalanced between the investment managers
based on portfolio performance. Finance staff will also continue to manage city funds not
invested with the money managers in effort to maintain liquidity for short-term needs.
The fees proposed by the recommended institutions are as follows:
Estimated Estimated
Financial Institution Fee Balance Annual Fee
Dana Investment Advisors 15 basis points first $5M $9.3 Million $18,250
10 basis points next $5M
5 basis points over$10M
$7,500 minimum annual fee
Dubuque Bank and Trust 13 basis points of total assets $9.3 Million $12,090
BTC Capital 10 basis points of total assets $9.3 Million $9,300
Total Fees $39,640
The City is currently paying 25 basis points of total assets or approximately $70,500 annually.
This recommendation would save $30,860 annually once all assets are transferred to the
designated investment advisors.
RECOMMENDATION
I recommend awarding the Investment Management Services contract to BTC Capital
Management (Des Moines, lowa), Dana Investment Advisors (Milwaukee, WI) and
Dubuque Bank and Trust (Dubuque, lowa). This would result in an annual savings of
approximately $30,860 once all investments are transitioned to the investment managers.
Most investments are held in Federal Home Loan Mortgage Corp Bonds, U.S. Treasury
Bills, and U.S. Treasury Notes.
First Community Trust and U.S. Bank are current investment managers that are not being
recommended due to the amount of fees proposed. First Community Trust proposed 25
basis points of total assets and U.S. Bank proposed 20 basis points for the first $10 million
of assets and 15 basis points for the balance of assets. The portfolios of First Community
Trust ($6.6 million) and U.S. Bank ($7.4 million) will be transferred to the three other
investment managers.
ACTION REQUESTED
I respectfully request your approval to award the Investment Management Services to BTC
Capital Management, Dana Investment Advisors, and Dubuque Bank and Trust.
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