The Financial Committee of Sovereign Wealth Funds (FC) met for the sixth time this year on Monday November 12th, 2018. On this opportunity, the FC members met with a delegation from the Central Bank of Chile (CBC) that presented the results of the External Managers’ selection process for the new asset classes added to the Pension Reserve Fund (PRF), specifically US Agency MBS and High Yield Bonds.
The CBC delegation, led by the Manager of the Financial Markets Division, informed the FC about the different stages of the selection process followed for both asset classes. The CBC indicated that the first stage consisted of sending a Request for Information to 147 asset managers. Based on the information provided by the firms that expressed interest in participating in this process, both the CBC and the consulting firm, RVK, Inc., preselected fifteen companies for the US Agency MBS mandate and twenty-five for the High Yield Bonds mandate that continued to the next stage.
Next, the CBC explained that a Request for Proposal was sent to each of the preselected companies, which were then ranked. The six best evaluated firms for each mandate were interviewed by the CBC, RVK, Inc. and Ministry of Finance staff in New York in October of 2018. In addition, the CBC reported that the consulting firm did a due diligence visit to each of the firms that were interviewed.
The CBC proposed three finalist firms to the FC for each asset class. This proposal was based on the score obtained after weighting the responses to the Request for Proposal, the round of interviews, and the due diligence visits made by the consulting firm.
After a series of questions about the selection process, the finalists and their investment strategies, the FC agreed with the CBC’s proposal and thanked the excellent work made by the entity.
In this context, the CBC informed the FC that the next stage of the selection process would be the opening of the economic proposals for the finalists. For each asset class the two managers with the lowest fees will be selected. The CBC also informed that the communication of these results to the selected companies will be done before the end of November.
The Financial Committee, which is external and autonomous, is composed of six professionals and experts with vast experience: Jose De Gregorio (Chairman), Cristian Eyzaguirre (Vice Chair), Ricardo Budinich, Jaime Casassus, Martín Costabal and Paulina Yazigi.